The economy is in the doldrums primarily because of the socialist wealth-redistribution agenda of the Obama administration. Socialism kills prosperity.
The Pope, who is directly informed by an omniscient god so that what he utters is infallibly right, recently demanded world-wide redistribution.
Milton Friedman argues brilliantly against the idea (rotten whether invented by mortals or divinity) of redistribution in general.
And against 100% inheritance tax in particular:
Today is the anniversary of the birth of the great Austrian economist and political philosopher, F.A.Hayek.
This tribute to him comes from Investor’s Business Daily, by Gerald P. O’Driscoll Jr., senior fellow at the Cato Institute:
Hayek’s work, whether on economics, politics or law, focused on the ineluctable problems of uncertainty and incomplete information. In economics articles going back to the 1930s, he analyzed the price system as a mechanism for communicating information to buyers and sellers about the intensity of preferences for goods and their relative scarcity. He concluded that the information does not exist anywhere in its entirety and could not be centralized. … Socialist (really communist) societies relying on centralized planning would be characterized by gross economic inefficiencies.
Hayek was vindicated by subsequent events. The power of this argument is lost today on policymakers engaged in “planning lite,” attempts to allocate credit to favored industries and pick winners.
The Great Recession was in large part the consequence of such a policy. The Fed’s balance sheet is loaded up with housing finance paper. In “Ben Bernanke Versus Milton Friedman,” historian Jeffrey Rogers Hummel argues that the Fed has evolved from monetary authority to a credit allocator.
Hayek first began evolving his information argument in his monetary analysis. In 1932, he questioned whether deliberate monetary management could avoid economic fluctuations.
Friedman later developed the argument against discretionary monetary policy in a series of articles that detailed the information problems confronting a central bank. His argument later became encapsulated as the “lags” in monetary policy — i.e., the unpredictability of when the effects of monetary policy actions will be felt. Monetary policymakers give lip service to Friedman’s arguments, but ignore them in practice.
Hayek deftly summed up his argument on information in his 1988 book, The Fatal Conceit:
The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
A market economy is a complex order, the outcome of societal evolution that confounds efforts to redesign it. The central tenet of classical liberalism was summed up by George Smith in his brilliant book, The System of Liberty:
Laissez faire in all spheres, personal, social and economic, was the fundamental presumption of liberalism — its default setting, so to speak — and all deviations from this norm stood in need of justification.
In America, by linguistic legerdemain, progressives transformed the meaning of liberalism into nearly the opposite of what it originally meant. Progressives became liberals, and true liberals lost their identity. Hence, we have the peculiar use of conservative to denote in America what had once been liberal thought.
So when Hayek wrote a famous essay on “Why I Am Not a Conservative,” he confabulated some American conservatives. He was not attacking American conservatism. Instead, he was combating the transplantation to America of a “European type of conservatism, which (is) alien to the American tradition.” That European conservatism upheld tradition and status over liberty and innovation.
Hayek argued there, and elsewhere, that liberalism must be the political philosophy of principles. Its central principle is individual liberty. …
Hayek provided a much-needed program for American conservatives today. They must stand for free markets and free people. Free markets and free trade must be seen as the economic core of an opportunity society that provides hope for all. …
Hayek was born in Vienna at the high point of the global liberal economic order comprising free markets, free trade and capital movements, and the classical gold standard. That glorious edifice ended with World War I. So for decades he was arguing against the tide of history. Yet he lived long enough to be vindicated. His words, written over the course of much of the 20th century, constitute a message for today.
On the centenary of Hayek’s birth, May 8, 1999, Barun S. Mitra wrote a tribute to him, published by the Liberty Institute, India.
We quote from it:
Today, a wide range of people has acknowledged his contribution all over the world. From philosophers like Karl Popper, Robert Nozick … to political leaders like Ronald Reagan, Margaret Thatcher and Vaclav Klaus, to Nobel laureate economists like Milton Friedman, James Buchanan … and countless others. As the iron curtain was being built in the aftermath of World War II, Ludwig Erhard, the finance minister of West Germany turned to Hayekian ideas to rebuild his country. Half a century later when the iron curtain collapsed, leaders in many countries in Eastern Europe again turned to Hayek in their attempt to rebuild their societies. And Hayek is reportedly available on the bookshelf of even the Chinese Prime Minister.
If today, the world is witnessing a perceptible change in thinking, it is in no small amount due to the legacy of Hayek. …
No wonder commemorative events are being organised in London, Paris, Vienna, Washington, D.C., Montreal, Eastern Europe, and Central America. The Adam Smith Institute in the United Kingdom has named him the man of the century. …
Hayek was more than a Nobel Prize winning academic. He was an intellectual giant, who was also a gentleman to the core. The man, who went on to become one of the greatest champions of liberty, had begun his life as a young soldier in the Austro-Hungarian Empire and sent to the Italian front in 1917. An academic, whose “controversial ideas” were eventually recognised by the Nobel committee in 1974, Hayek was also an activist who was among the founders of the Mont Pelerin Society in 1948. This was an organisation dedicated to pursuing the intellectual battle against all forms of authoritarianism and tyranny at a time when it was fashionable to call oneself socialist. Today, it has hundreds of members, including many Nobel laureates, spread across all the continents. He inspired many to take up intellectual activism like the late Sir Anthony Fisher, the British businessman who founded the Institute of Economic Affairs in London in 1955. Over the years, IEA, an independent think tank, has produced countless policy papers and books on contemporary issues, and is recognised to have contributed to changing the popular perception that made the Thatcher revolution possible in Britain in the 1980s
Hayek was born in Vienna, Austria, on May 8, 1899, to August Edler von Hayek & Felicitas von Hayek. Even as a teenager, he was interested in philosophy, economics and ethics. But his studies were interrupted as he was called for military duty in 1917, and saw action on the Italian front. On his return from service he went back to college. In the 1920s Hayek was part of that heady circle in post-war Vienna, a group which featured some of the greatest minds of the century. He earned two doctorates, one in law and another in political science. He studied economics under Ludwig von Mises, one of the greatest exponents of the Austrian School. He left for England in 1931 worried about the rise of the Nazis in Germany. Hayek mainly taught at the London School of Economics, but had short spells at universities around world including, Cambridge, Chicago, Stanford, Tokyo, and Freiburg.
Hayek was one of those few fortunate people who lived to see the tumultuous events that shook the socialist empire, and be vindicated. In a letter written in 1989, he noted, “the ultimate victory of our side in the long dispute of the principles of the free market.” He must have been saddened at the enormous cost, both human and material, that was paid in pursuit of a doomed experiment.
Hayek died in Freiburg on 23 March 1992.
In the 1930s, Hayek was the principal opponent Keynes. In various scholarly publications – Monetary Theory of Trade Cycle (1933), The Pure Theory of Capital (1941) – he had pointed out that business cycles are caused by monetary mismanagement in [government]. This contribution of Hayek was noted by the Nobel committee. Subsequent events have completely vindicated Hayek. Concerned about the stability of value, he wrote a radical essay in the 1976, “The Denationalisation of Money”, where he argued that it was a serious mistake to allow governments to monopolise the legal tender. He called for the freedom of the individuals to trade in whatever media of exchange they thought best. …
Hayek emphasized that division of labour and division of knowledge were complimentary. Every individual possessed some specialized and local knowledge that was particular to his situation and preferences. Yet, the market, through the competitive price system, successfully coordinated all these bits of knowledge. Prices provide the incentive to invest in certain areas, and the information regarding the possible opportunities. Hayek explained, “We must look at the price system as such a mechanism for communicating information if we want to understand its real function… … The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action.” …
Hayek also developed the idea of “spontaneous order” to describe the progress of civilizations. Language, customs, traditions, rules of conduct, have all evolved without any conscious design, and without that freedom societies may not have evolved beyond primitive levels, he held. Advancement of society was dependent upon no one overall “plan” being imposed over the actions and plans of the individuals making up the society. Building on Adam Smith’s “invisible hand”, Hayek showed that planning need not necessarily lead to order and lack of a guiding hand need not degenerate in to chaos. …
It is largely because civilization enables us constantly to profit from knowledge which we individually do not possess, and because each individual’s use of his particular knowledge may serve to assist others unknown to him in achieving their ends, that men as members of civilized society can pursue their individual ends so much more successfully than they could alone.
This characteristic of the market where order seemed to develop quite spontaneously, along with dispersed nature of knowledge, raises one of the most fundamental questions on the utility of government intervention in the economy to achieve a particular end. The institutions created by government decree to provide direction to such intervention would under the best of circumstances simply be overwhelmed by the sheer volume of knowledge that they will need to process.
In contrast, the market routinely brings to order millions of evaluations undertaken by each individual participant. Hayek showed that progress arises from a continuous process of “discovery” wherein a variety of producers and consumers experiment with a wide range of possible opportunities to make profit. Most such experiments fail in the marketplace, and the innovators bear the cost taking the risk. But some succeed, and the benefits are enjoyed by all. That is the reason why in a free market, voluntary trade creates a win-win situation for all participants. …
The Road to Freedom
Hayek also published works more accessible to a wider public, which included books such as The Road to Serfdom (1944) and The Constitution of Liberty. The former has been nominated by journals like London’s Time Literary Supplement as one the noteworthy books of this century. Dozens of unauthorised editions of it were known to be in circulation among the underground activists in the Eastern block during the cold war. This book has now been published in many languages across the world. …
Then Mitra, looking at Hayek’s ideas from an Indian perspective, points out that India would have done well to have learnt what he taught:
We are concerned that after fifty years of independence, poverty is so wide spread, and as a measure to speed up the process of redistribution of wealth, we thought it prudent to abolish right to property as a fundamental right. Hayek had cautioned all those years ago that “The system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not.”
We want “social justice”, while Hayek warned that “There is all the difference in the world between treating people equally and attempting to make them equal”, and to attempt otherwise would only contribute to social collision. “Equality before the law and material equality are therefore not only different but are in conflict which each other; and we can achieve either one or the other, but not both at the same time”, wrote Hayek.
The world has had a bitter experience in the 20th Century. The dreams of a socialist-collectivist utopia were shattered by economic collapse and degenerated into tyrannical police states. According to historian Thomas Sowell, if one was to mark the time when the intellectual tide began to turn against the ideal of socialism then it was with Hayek’s [The Road to] Serfdom. …
While the world is marking his centenary now, the next century could well belong to him. And ideas do change the world. Let us hope that the intellectual tide in favour of Hayek will become a tidal wave in the next millenium. Hayek’s Road to Serfdom may actually help pave the road to freedom for all of us.
A young idealist has a formula for ending poverty and achieving economic equality: 100% inheritance tax and redistribution of wealth by government. He thinks – as the Left does – that there is a fixed quantity of wealth in the world – “the capital” he calls it . (Why can’t or won’t the Left understand that wealth is created?)
Milton Friedman explains how the formula would destroy a society.
And here he talks – inter alia – about the importance of limiting government power to preserve the freedom of the individual.
“Stalin was a banner of creativity, of humanism and an edifying picture of peace and heroism!” declared Salvador Allende during a eulogy in 1953 to the Soviet mass-murderer.
Allende became the Communist president of Chile in November 1970. Fortunately, he was thrown out of power on September 9, 1973.
Now the triumph of capitalist Chile needs to be celebrated, and its economic ways emulated throughout the world.
This is from Investor’s Business Daily, by Monica Showalter:
By the looks of the bright, shiny Chilean capital, where it’s possible to shop at Starbucks, H&M or Banana Republic, dine at globally ranked restaurants … or marvel at the world-class architectural engineering of the continent’s tallest skyscrapers that escaped Chile’s 2010 8.8-scale earthquake unscathed, it’s hard to believe that 40 years earlier Chile was a tottering democracy in ruins, well on its way to becoming a Soviet-Cuban satellite.
The country changed course by a legislatively ordered military coup in 1973, which to this day remains globally reviled as if it were a destruction of democracy that came out of a vacuum. …
But the hard fact is, the military action led by Gen. Augusto Pinochet on Sept. 11, 1973, effectively turned back the global ambitions of an emboldened Moscow-Havana communist axis, which sought to take over South America as an enfeebled U.S reeled from the Vietnam War.
That strategy was to create a sort of “red sandwich” on the South American continent, with Cuba in the northeast and Chile in the southwest, and both sides training terrorists and revolutionaries to move inward and northward until they could reach the final prize: Mexico.
Pinochet turned it back … He [eventually] stepped down as promised …
Yet, instead of being seen as a hero who saved his country from a totalitarian fate, both the global and Chilean establishment, taking their propaganda cues from an embittered Cuba, continue to paint Pinochet as a villain and his action to save his country as a tragedy.
In reality, Pinochet was, as historian Paul Johnson noted, “the most misunderstood man of the 20th century”.
See, Chile’s story might not have ended in skyscrapers, OECD membership, a per capita income of more than $18,000, the region’s highest transparency, lowest infant mortality, least corruption and negative net debt had Pinochet just sat there and held the fort. And even that would have been a huge improvement over communism.
But besides blowing out a communist beachhead, Pinochet instituted the world’s first genuine free-market reforms. They effectively transformed his country from a messy Latin American semi-democracy into a first-world country with a booming economy.
Years before Reagan and Thatcher began their earth-shaking revolutions, which finished off communism as a cause and put even leftist politicians on the defensive around the world, Pinochet turned his nation’s fiscal matters over to a group of young economists trained by Milton Friedman.
Known as “Los Chicago Boys”, they had the decree powers of a military regime but the ideas of free markets. Using both, they effectively privatized state-owned industries, broke up crony capitalist cartels, enacted airtight property rights, cut red tape, opened Chile’s markets to the world — bringing its wines, seafood, fruits, timber, copper and, now, high-tech to the West in quantities never before seen — reformed social security, and, after a few miscues, restored the integrity of the country’s currency, credit rating and fiscal discipline.
What’s more, their reforms stuck, even as the country continued to re-elect socialist governments, because the institutions were so strong and the culture of ownership was so great. …
The left’s effort to revile Pinochet out of all proportion to the crimes of the era — while excusing the far more severe crimes of Cuba’s Castro and the Nicaraguan Sandinistas — ultimately amounts to an angry left’s effort to discredit Pinochet’s most lasting legacy: the free market revolution.
And this is from Townhall, by Humberto Fontova (also quoted at the top of this post):
On September 11, 1973 the Chilean military led by General Augusto Pinochet slapped Fidel Castro so smartly that his Stalinist regime (and its dutiful U.S. Media minions) are still sniveling and sniffling and wiping away tears of shock, pain and humiliation.
We feel your happiness, Humberto!
True to form, The New York Times leads the sniveling. They just published an article decrying the Chilean “tragedy” (i.e. Chile saving itself from Castroism with a military coup and is today the richest and freest nation in Latin America.) The article’s author Ariel Dorfman is a former advisor to Chile’s Marxist president and Castro acolyte Salvador Allende. …
“Without the help of the New York Times, the Revolution in Cuba would never have been,” … beamed Fidel Castro during a visit to the New York Times offices in April 1959 to decorate their star Latin America reporter with a newly-minted Cuban medal.
“We’re following the example of the Cuban Revolution and counting on the support of her militant internationalism represented by Fidel Castro and Che Guevara!” boasted Chilean president Salvador Allende’s minister Carlos Altamirano in January 1971. “Armed conflict in continental terms remains as relevant today as ever!” he declared.
And he wasn’t bluffing. By the time of Pinochet’s coup, an estimated 31,000 Cuban and Soviet bloc operatives and terrorists infested Chile …
By 1973, 60% of Chile’s arable land had been stolen by Allende’s Marxist regime, often with the aid of Cuba-trained death squads. “In the final analysis only armed conflict will decide who is the victor!” added Allende’s governmental ally, Oscar Guillermo Garreton. “The class struggle always entails armed conflict. Understand me, the global strategy is always accomplished through arms!”…
Then, in September 1973, the military, led by General Pinochet, made a strike with arms against Allende. It was a successful coup d’etat. Allende committed suicide. Pinochet came to power.
Although he had acted with arms, and although he took tyrannical actions against his enemies, the Left did not think he was “a banner of creativity, of humanism and an edifying picture of peace and heroism.” Perhaps because those tyrannical actions of his were not remotely on the same scale as Stalin’s.
Allende and Castro’s media minions claim 3000 people were “disappeared” during this anti-Communist coup and its aftermath, collateral damage and all. Well, even if we accept the Castroite figure, compared to the death-toll from our interventions/ bombing- campaigns in the Mid-East (that have yet to create a single free, peaceful and prosperous nation) Pinochet’s coup should be enshrined and studied at West Point, Georgetown and John Hopkins as the paradigm for effective “regime–change” and “nation-building.” Granted, Pinochet had much better raw-material to work with.
But the Castroite –MSM figure is mostly bogus, as many of those “disappeared” kept appearing, usually behind the iron curtain.
More importantly, Pinochet and his plotters were scrupulous in keeping U.S. State Dept. and CIA “nation-builders” and other such egghead busybodies out of their plotting loop. (This probably explains Pinochet’s success.) Then two years after the coup they invited Milton Freidman and his “Chicago Boys” over for some economic tutelage. And as mentioned: today Chile is the freest and richest nation in Latin America.
The forthcoming presidential election in the US is about socialism versus capitalism.
“Capitalism” was Karl Marx’s word for what Adam Smith called “the natural order of liberty”. To be for capitalism is to be for individual freedom.
Obama, whether he admits it or not, is a socialist, and his agenda is to change America into a socialist welfare state. As the collapse of one after another of such states in Europe demonstrates, that is the road to economic ruin.
Romney is a capitalist. He would keep America the free market country it has always been. The free market is the only road to general prosperity.
Here’s Milton Friedman on Socialism versus Capitalism – as the short video clip is titled – in a 1979 Phil Donahue show:
The way to keep the poor poor, is to keep them dependent on government.
The compassioneers of the Left need to keep the poor poor, or they’d lose not only their pretext for empowering the state to control our lives, and all those voters whom they make dependent on big government, but more dreadfully for them the cause in the name of which they claim moral superiority.
The name of their ideology of forced dependence is Socialism. It’s imposition on a nation is the tried and tested way to create poverty and keep the poor poor.
Capitalism, or what Adam Smith called “the natural order of liberty”, is the tried and tested way to create prosperity and bring people out of poverty.
Whenever socialist states and other tyrannies relent to free markets, their per capita income rises. This has been happening steadily over the last thirty years or so, despite the fervid efforts of Environmentalists and world government fanatics to establish a global socialist economy. The Third World has measurably benefitted.
This is from Townhall by Steve Chapman:
[According to] a new World Bank report, “the data indicate a decline in both the poverty rate and the number of poor in all six regions of the developing world.”
In 1981, 70 percent of those in the developing world subsisted on the equivalent of less than $2 a day, and 42 percent had to manage with less than $1 a day. Today, 43 percent are below $2 a day and 14 percent below $1.
“Poverty reduction of this magnitude is unparalleled in history: Never before have so many people been lifted out of poverty over such a brief period of time,” write Brookings Institution researchers Laurence Chandy and Geoffrey Gertz.
Just as important as the extent of the improvement is the location: everywhere. In the past there has been improvement in a few countries or a continent. Not this time.
China has continued the rapid upward climb it began three decades ago. India, long a laggard, has shaken off its torpor. Latin America has made sharp inroads against poverty. “For the first time since 1981,” says the World Bank, “we have seen less than half the population of sub-Saharan Africa living below $1.25 a day.”
The start of most global trends is hard to pinpoint. This one, however, had its big bang in the early 1970s, in Chile. After a socialist government brought on economic chaos, the military seized power in a bloody coup and soon embarked on a program of drastic reform – privatizing state enterprises, fighting inflation, opening up foreign trade and investment and unshackling markets.
It was the formula offered by economists associated with the University of Chicago, notably Milton Friedman, and it turned Chile into a rare Latin American success. In time, it also facilitated a return to democracy.
Chile was proof that freeing markets and curbing state control could generate broad-based prosperity, which socialist policies could only promise.
If that experiment weren’t sufficient, it got another try on a much bigger scale when China’s Deng Xiaoping abandoned the disastrous policies of Mao Zedong and veered onto the capitalist road. The result was an economic miracle yielding growth rates that averaged 10 percent per year.
The formula was too effective to be ignored. Over the past two decades, poorer nations have dismantled command-and-control methods and given markets greater latitude. Economic growth, not redistribution, has been the surest cure for poverty, and economic freedom has been the key that unlocked the riddle of economic growth.
Over the past 30 years, notes the libertarian Cato Institute in the latest edition of its “Economic Freedom of the World,” the average country’s economic freedom score has risen from 5.53 (on a 10 scale) to 6.64 — a significant improvement that has paid off in higher growth and earnings. The evidence indicates a reliable pattern: the freer the economy the faster the growth. …
The latest cover story in The Economist magazine is: “Cuba hurtles toward capitalism.” Cuba! Even communists eventually have to make peace with reality.
But as they do, the country that has grown to be the richest ever because of its freedom – the USA – is being turned into a socialist welfare state by a leader raised and trained as a communist.
President Obama calls capitalism, the magic formula for prosperity, “You’re-on-your-own economics”, and insists that it doesn’t work.
This is from Investor’s Business Daily:
“You’re-on-your-own economics” doesn’t work, President Obama asserted Friday, just as the World Bank reported a halving of world poverty due mainly to — you guessed it — you’re-on-your-own economics. …
Perhaps he didn’t try free-market economics himself in the past decade, but all six global regions observed by the World Bank did try it — and the stunning result is that global poverty has been slashed in half … It started with the advent of free markets in Chile in 1975, gained speed with the Reagan and Thatcher revolutions, took off with the Asian Tiger states and has been crescendo-ing around the globe ever since. …
Anyone who travels to countries like Peru, Poland, Indonesia, Colombia, Thailand, Hungary, South Africa, Chile, Tanzania and India knows very well that things aren’t what they used to be. Vast middle classes have formed, education is booming, business is up and many of their cities no longer resemble the Third World.
More to the point, people have growing access to jobs, education and a future. Mexico’s rate of illegal immigration has plunged since 2009 as average incomes there approach $7,000 — the threshold that makes staying in Mexico more attractive than living abroad illegally.
Technology has helped; they all have Facebook, cellphones and ATMs to make living more efficient.
The World Bank cites generally stronger political institutions — the kind that enforce one set of laws for all, respect property rights and don’t reward crony capitalists or stacked courts — something Obama might learn from. …
The big Goliath of this revolution is the embrace of free markets. Against the president’s claims that free markets don’t work, note that all six regions of the world are making big progress by embracing markets. …
President Obama’s ambition to keep the poor poor is not limited to turning America into an economically depressed, heavily indebted socialist state; he takes whatever active steps he can to establish a globally centralized control-and-command economy.
He has appointment a new head of the World Bank, Jim Yong Kim, who will no doubt try to prevent such a report as Steve Chapman sums up ever coming out again: a man in whose dogma such truths need to be suppressed.
This is by Jacob Laksin at Front Page:
Imagine if President Obama appointed radical Noam Chomsky, who has denounced capitalism as a “murderously destructive catastrophe,” to head up a committee on economic growth. That’s less of a stretch than it may seem, considering Obama’s nominee to head the World Bank, current Dartmouth College President Jim Yong Kim.
Kim’s expertise is in health policy, so little is known about his views on economic development, the World Bank’s primary purpose. What is on the public record, however, is deeply troubling. A case in point is a collection of studies that Kim co-edited in 2000, Dying for Growth: Global Inequality and the Health of the Poor. The grim title accurately reflects the book’s radical central premise, namely that capitalism and economic growth is bad for the poor across the world. The introduction, which Kim co-authored with several other academics, states the point bluntly: “The studies in this book present evidence that the quest for growth in GDP and corporate profits has in fact worsened the lives of millions of women and men.”
A barefaced lie, as the statistics in the World Bank’s report demonstrate.
In this vein, the authors go on to dismiss “neoliberalism” – the preferred left-wing academic pejorative for free trade and free markets – as a failure, particularly for the world’s poor. “Even where neoliberal policy measures have succeeded in stimulating economic growth, growth’s benefits have not gone to those living in ‘dire poverty,’ one-fourth of the world’s population,” the authors assert.
If economic growth hurts the poor, especially in the Third World, what helps their cause? The book answers that question with a chapter touting what it considers a true success: communist Cuba’s health-care system. As the chapter’s author tells it, Cuba’s health care is supposedly on par with that of the United States, an achievement made “possible because of a governmental commitment not only to health in the narrow sense but to social equality and social justice.” Relying on bogus statistics from the Cuban government and distorting the extreme inequities of Cuban health care, where few of Cuba’s poor can either afford or obtain either medicine or doctors’ treatment, the study is revealing mostly of the ideological extremism of its author. Indeed, it might well have been written by Chomsky, which in fact it was: the author is Aviva Chomsky, Noam Chomsky’s eldest daughter. Noam Chomsky himself is quoted in the book’s conclusion, which cites his dismissal of economic growth as “efforts to make people feel helpless.” The book’s authors, including Jim Yong Kim, seem to agree.
They could hardly be more wrong.
(For confirmation of how they could hardly be more wrong, see our post Any old pills?, October 29, 2010.)
In fact, there is overwhelming evidence that economic growth raises income levels, which in turn reduces poverty and improves the lot of the global poor. Much of that evidence has been documented by the World Bank, the very institution that Kim has been tapped to lead. Earlier this month, for instance, the World Bank released a report documenting a decline in the poverty rate of the poor in all the regions of the developing world. The finding is especially striking because it comes amidst a global downturn. Economic growth accounts for much of this astounding progress.
He too quotes statistics:
And that progress is truly impressive. In 1990, 52 percent of the population in the developing world lived below the poverty rate of $1.25 a day. That number was halved by 2008, when 22 percent lived below the poverty rate. Progress has been most dramatic in East Asia, particularly China, which has seen the greatest surge in economic growth. In the 1980s, according to the World Bank report, East Asia had the world’s highest poverty rate, with 77 percent of the population living below the poverty rate as recently as 1981. By 2008, that number had plunged to 14 percent. The report points out that in China alone, 662 million people are no longer living poverty. Not only is no one “dying” due to economic growth, but literally millions of lives have been bettered thanks to economic gains.
China may be the most spectacular example of economic growth’s unmatched capacity to improve the lives of the poor, but it is not an exception. Africa, so long associated with extreme poverty, is also making strides on poverty reduction thanks to economic growth. … As a result of sustained economic growth over the past 15 years …
Africa’s success is especially noteworthy because it has not been limited to countries with natural resources, such as South Africa’s diamonds or Nigerian oil. On the contrary, the authors note that poverty has fallen “for both landlocked and coastal countries, for mineral-rich and mineral-poor countries, for countries with favorable and unfavorable agriculture, for countries with different colonizers, and for countries with varying degrees of exposure to the African slave trade. The benefits of growth were so widely distributed that African inequality actually fell substantially.”
Poverty reduction through economic growth is thus one of the great success stories of recent decades. And that work is not done. … Achieving sustained reduction in poverty will remain the great cause of the 21st century.
Yet it’s hard to see how the World Bank will help that cause if led by an open critic of economic growth like Jim Yong Kim. … It’s hard to see how its reputation will be redeemed by a World Bank president who seems to believe that the greatest danger to the global poor comes from the only proven strategy to improve the quality of their lives.
A case for debate
Milton Friedman – why drugs should be legalized
Milton Friedman, champion of the Consumer, delights an audience and confounds TV host Phil Donahue, with his explanation of how Ralph Nader did harm by trying to do good, and why the free market ought to be allowed to work. The video was made way back in 1979, but what the great economist says will never become outdated.
The following extracts are from an essay on the failure of the welfare state in Europe by James Roberts and J.D. Foster:
Europe’s socialist (or “social democratic”) welfare state is collapsing under the load of unsustainable debt. There is no chance European politicians will ever make good on the many costly and unfunded entitlements they have promised their citizens.
The fundamental problem in the European Union is a monetary policy failure. In conjunction with the debilitating effects of the social welfare state, this has led to a broad economic collapse among the lesser states — notably the PIIGS (Portugal, Ireland, Italy [though not really a a "lesser state" - JB] , Greece, and Spain), but also some of the EU’s newer members — and it threatens to envelop the greater states.
For years, this collapse among the lesser states was disguised by debt accumulation — countries would borrow (at de facto concessionary interest rates) to overcome their inability to generate adequate income by producing and selling. The lack of actual and prospective growth combined with growing debt burdens has led to a long-term solvency crisis, which has been bubbling up of late into a series of liquidity crises.
The monetary and fiscal situation in the EU is increasingly unmanageable, as the debt burdens grow and growth prospects diminish further. …
The vision of a “euro zone” was ill-conceived from the start. It is now increasingly acknowledged that Brussels’ lack of control over social spending, especially in the PIIGS, doomed it from the beginning. Agreements (e.g., the Maastricht Treaty) to stay within EU member government spending targets were routinely flouted, even by the largest EU countries. …
The strong got stronger, while others, like Italy and Greece, stood still or even retreated on policies that would have sustained their international competitiveness. …
Southern Europeans kept borrowing in low-interest-rate euros (which simultaneously inflated housing bubbles in their countries) until, in Margaret Thatcher’s words, their socialist governments “ran out of other peoples’ money!” As a result, some of Europe’s large private banks now hold toxic quantities of sovereign debt issued by the PIIGS and are threatened with extinction through serial defaults …
For decades now, one of the most tragic costs of the European welfare state has been Europe’s structural unemployment, especially among the young, combined with welfare payments that turned unemployment into an acceptable — even desirable — status, while stripping those affected of their dignity and sense of responsibility. The recent riots in the U.K. are an ominous reflection of this failure.
One of the key questions now is: How much longer will workers and taxpayers in Germany and other relatively more fiscally prudent countries in northern Europe be willing to work into their late 60s to subsidize (via eurozone bailouts and managed defaults) their neighbors in southern Europe so that the latter can retire early in their 50s on generous state-funded pensions and go to the beach?
How many times does it have to be proved that socialism does not work?
Free-market economists – the giants among them, von Mises, Hayek, Milton Friedman – demonstrate in theory that socialist economics cannot work. Their reasoning is not hard to follow, and entirely convincing. We human beings can use our faculty of reason – unique to our species – to save ourselves from having to try out risky ideas in reality. But millions among us want to keep trying out the failed redistributive policies of socialist economics, experimenting with real lives, courting disaster over and over again.
Roberts and Foster grimly point out:
For the U.S., Europe is the ultimate object lesson — a warning of what happens when government is allowed to run wild, with the resulting loss of liberty, and fiscal debt.
An object lesson. A warning. But Obama, his circle of advisers and appointees, and the millions who persist in voting for socialism – aka “stimulus”, “entitlements”, “taxing the rich” – remain obstinately deaf and blind to it.
Today, July 31, is the 98th anniversary of the birth of the great free-market economist, Milton Friedman. He died four years ago.
This is how he and his co-author wife Rose conclude their book Free to Choose, first published in England in 1980 [when and where they both signed a copy for me, of which I am still the proud owner - JB].
The two ideas of human freedom and economic freedom working together came to their greatest fruition in the United States. Those ideas are still very much with us. We are all of us imbued with them. They are part of the very fabric of our being. But we have been straying from them. We have been forgetting the basic truth that the greatest threat to human freedom is the concentration of power, whether in the hands of government or anyone else. We have persuaded ourselves that it is safe to grant power, provided it is for good purposes.
Fortunately, we are waking up. We are again recognizing the dangers of an overgoverned society, coming to understand that good objectives can be perverted by bad means, that reliance on the freedom of people to control their own lives in accordance with their own values is the surest way to achieve the full potential of a great society.
Fortunately, also, we are as a people still free to choose which way we should go – whether to continue along the road we have been following to ever bigger government, or to call a halt and change direction. [Emphasis mine]
That could have been written today, and needs to be remembered always.
The choice is still with us. May the American electorate use it well in November and with every election to come.