Creating Jobs versus Creating Value

Creating jobs is easy; it’s creating value that’s hard

By Steven Horwitz

Picking on New York Times columnist Paul Krugman is one of the largest participation sports on the Internet. And rightfully so, since he often says ridiculous things that demand a response from those who understand basic economics better than he does, despite his having won a Nobel Prize. His January 26 column, “Jobs, Jobs and Cars,” has him once again making such an argument. This time it’s on the subject of job creation.

The miracles of the Free Market

"Mr. Gorbachev, tear down this wall!"

East Germany - before and after.

The Keynesian Cure for Hunger

Eat More

By Richard W. Fulmer

Sylvia Nasar, author of the New York Times bestseller, A Beautiful Mind, has a new book: Grand Pursuit: The Story of Economic Genius, which reviews the lives and ideas of a dozen economists from Marx to Keynes and Hayek to India’s Amartya Sen. It begins with a description of life in Jane Austen’s England (1775–1817). Briefly, it was a Malthusian world in which any improvement in living standards was quickly followed by an increase in population that drove living standards back down to the subsistence level—a level at which nine-tenths of the population was constantly at risk of death from disease and starvation. Nasar assures us that as grim as this world was, life was far worse on the Continent.

Shock and Awe in Stockton

The town the housing boom broke

By Michelle Conlin and Jim Christie

For decades, Stockton, California suffered a civic inferiority complex. Los Angeles had celebrities and sunny beaches. San Francisco was awash in tech futurism and post-pubescent billionaires. Stockton was the polyester, buy-generic cousin, a dingy commercial hub for Central Valley farms that was just far enough from the San Francisco Bay area to be an irrelevance for the state's coastal elites.
But then came the housing boom, and sorry Stockton practically started to strut. Its loamy farmlands - among the most fertile in the United States - gave way to shiny subdivisions. Middle-class families, priced out of the Bay area housing market, snapped up the new homes, happily trading extreme commutes for the suburban niceties of four bedrooms and a yard.

Europe's Crisis

A Roadmap From the Past

Hayek and Röpke saw it all coming

By Peter B. Doran & P. Bracy Bersnak

These are rough days for the European Union (EU). What began as a sovereign debt crisis has now metastasized into a political debacle for the leaders left holding the bag. Nicolas Sarkozy's electoral defeat in France, the ouster of an austerity-minded government in Greece; and last month's collapse of the governing coalition in the Netherlands are all symptoms of a deeper problem for Europe: bloated governments are hard to tame, even when there is no money left to pay for them.

This is bad news for Europe. But the political tumult on the continent is also a stunning vindication of the post-War thinkers who anticipated this outcome. These individuals, men like Friedrich von Hayek and Wilhelm Röpke, would become founding intellectual fathers behind the modern conservative movement in Europe and the United States. Even today, their foresight provides a defining roadmap for navigating away from Europe's current crisis and offers a chilling warning to the United States about repeating the same mistakes.

Dream deterred

Α defense system that turns out to be a mirage

By Kennette Benedict 

The dream of a shield against nuclear bombs has been around since the earliest days of the nuclear age. The idea has always been deceptively simple: Build missiles that can shoot down nuclear-tipped intercontinental ballistic missiles as they come across the ocean from the Soviet Union toward the United States (or vice-versa). Although this would be the equivalent of trying to hit a bullet with a bullet or an arrow with an arrow, there have always been political and military leaders who feel sure it can be done. The most recent efforts began 27 years ago with the Strategic Defense Initiative of the Reagan administration -- and have been pursued by missile defense agencies ever since.

A Seedy Business

You have to feed the government pig first

By Joseph Salerno

A Brooklyn bagel shop owner was assessed  $1, 650 in fines by a New York City Health Inspector because–get ready for this–poppy and sesame seeds fall to the floor as he makes his bagels.  Alex Gormakh, the owner and a recent immigrant from Russia, opened  B & B Empire Bagel Cafe in June 2011.  Gormakh’s deli passed inspections both before and after he was cited for violations in October, and in the most recent inspection it received the highest cleanliness grade of “A.”   Nevertheless, his appeal of the fine has been denied at two separate hearings.   As a fellow Brooklyn bagel shop owner, whose establishment did pass inspection, points out, no matter how many times a day you sweep there will always be an accumulation of seeds on the floor.  To avoid future citations, Gormakh and his son have now invested almost $900,000 in larger stainless steel preparation tables in the hope of avoiding seed fall out and a water-filter vacuum to suck up any wayward seeds.

But Gormakh has learned a valuable lesson in doing business in the American mixed economy:  

“If you want to work you have to pay.  In Russia, they call it corruption.  Here they call it something else.  Either way, you have to pay.”

The petty politics of the anti-inequality brigade

False premises and radical politics

by Daniel Ben-Ami 

It is easy to make the mistake of assuming there is a big drive towards equality in the world today. Politicians, pundits and even billionaire financiers rail against the dangers of inequality, excess and greed. A handful of Occupy protesters claiming to represent the ‘99 per cent’ against the super-rich ‘one per cent’ are widely lauded in influential circles. Parallel campaigns slate the wealthy for failing to pay their fair share of tax. Officially sanctioned campaigns promote fairness, social justice, social equality, equal access to education and the like.

Europe’s voters say ‘No’ to economic reality

Kicking the can down the road is increasingly not an option as the end of the road is now in sight

by DETLEV SCHLICHTER

“Europe fights back against austerity” was how The Daily Telegraph headlined its weekend election coverage. “Anti-austerity movements are gathering pace across Europe following political earthquakes in France and Greece. A total of 12 European governments have now been dismissed in three years.”


As the European welfare state is officially in its death-throes none of us should be surprised if political strife gets cranked up to eleven. I firmly expect that we will see much more of this in the future. While I can understand the anger of the electorate and sympathize with the sense of desperation and foreboding, I can, however, not consider the electoral choices of the weekend particularly enlightened, and I do not think that they reflect a coherent, let alone intelligent strategy as the Daily Telegraph headline seems to imply. If those who ‘won’ the election deliver on their promises, economic disintegration will only accelerate. What is being offered in terms of ‘solutions’ is a dangerous assortment of economic poisons, more suitable to describe the European disease than provide a recipe for stronger growth.

Recovery through early retirement and infrastructure spending? – C’mon. Nobody can take that seriously.

"Mr. Tsipras' bluff will be called"

After that, Athens could literally be sitting in the dark

           The Germans are not prepared to pay for anyone's 'vacation from reality'

German news magazine 'Der Spiegel' occasionally puts together an overview of  voices from the German press to give readers the overall flavor of editorial opinion in Germany when important events occur.

It has just done so again after the Greek election and the Kabuki theater that followed in their wake.  The entire article is well worth reading, and we bring a pertinent excerpt below, from an editorial that appeared in the conservative daily newspaper 'Die Welt'.

“The election results are also a defeat for Germany. The Greeks and the French have rejected what they see as a German austerity and reform diktat. That is certainly unfair, given the massive obligations and risks that Germany took on to save the EU's problem countries from bankruptcy. And Germany's capability is being greatly overestimated by those who say Berlin should shell out even more money for things such as growth programs. But in the end, the results are also proof that Europe doesn't work.

France also takes a permanent vacation from reality

Socialism In France

Another country that is chock-full of politicians and trade unionists that are apparently on a permanent vacation from reality is France. We have just come across an article that explains why there are so many companies with precisely 49 employees in France. Read it and weep (of course this nonsense is not going to be rescinded by Mr. 'Pro Growth' Hollande).

“Here’s a curious fact about the French economy: The country has 2.4 times as many companies with 49 employees as with 50. What difference does one employee make? Plenty, according to the French labor code. Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

Italy takes a 'vacation from reality'

Monti's Growth Fantasies

Another reality vacationer is found in Rome - Italy's prime minister Mario Monti, who increasingly looks like a zombie, which is to say his outward appearance is beginning to reflect that state Italy is in.

In order to get 'growth' going in the euro area, Monti now wants to change the way in which budget deficits are calculated. No, we're not pulling your leg.

He's also still going on about 'euro bonds', which is a complete waste of time and effort. Germany's constitutional court has already put paid to the idea, as this would make Germany liable for the debts of other nations. It's just not going to happen.

“Prime Minister Mario Monti on Tuesday set out Italy's priorities for growth in the euro zone, calling for changes in the way budget deficits are calculated and urging the EU Commission to be more active in setting a growth agenda.

Rome Didn't Fall in a Day either

At some point we will find that the road is a dead end

by Chris Sullivan

Back in the '70s, I used to expect the government to suffer a financial collapse at which time it would have to quit doing most of the things it's doing because it would run out of money. That isn't what has happened. Instead of cutting spending it has printed more money and tried to increase taxes on various things.

Like many things historical, there's a precedent for this. There's a proverbial saying that "Rome wasn't built in a day," but it didn't collapse in a day either. Probably most of the Romans who lived as the Empire was collapsing didn't realize that was what was happening, but plenty of them realized they weren't living in the good old days.

New Democracy and Pasok destroyed Greece in an attempt to escape responsibility.

How a Radical Greek Rescue Plan Fell Short

By MARCUS WALKER

Above all, Greece's example illustrates the conflict between Germany's tough terms for aiding other euro members and the amount of pain other societies can bear. Greece's fate shows that what it takes to sell bailouts to a skeptical German public can be politically calamitous in Europe's indebted south.

"The program is suicidal, not only for Greece but for the euro," says Louka Katseli, a former Greek economy minister. "In Spain, Portugal, Italy—everywhere, the same mistake is being made," she says, referring to the European Union's insistence on slashing spending in a recession.

Stimulus Spending Keeps Failing

If austerity is so terrible, how come Germany and Sweden have done so well?

By Robert Barro

The weak economic recovery in the U.S. and the even weaker performance in much of Europe have renewed calls for ending budget austerity and returning to larger fiscal deficits. Curiously, this plea for more fiscal expansion fails to offer any proof that Organization for Economic Cooperation and Development (OECD) countries that chose more budget stimulus have performed better than those that opted for more austerity. Similarly, in the American context, no evidence is offered that past U.S. budget deficits (averaging 9% of GDP between 2009 and 2011) helped to promote the economic recovery.

Google's Revolutionary Self-Driving Car

Google's breakthrough truly is a game-changer

By John C. Dvorak

Google has managed to get its self-driving car licensed in Nevada, though someone must still be in the car at all times. Essentially, the automobile was not given a license, but rather a learner's permit. It's a start.

Google's whole robocar idea has been overlooked in general. This is probably one of the greatest inventions of the last 100 years and people are fairly ho-hum about it. In fact, it addresses numerous transportation issues and is simply revolutionary. Google is poised to make more money with this device someday than it ever has with search.

I predict that at some point in the future, nobody will drive cars. We'll get into these things and program (or tell) the car where we want to go. Fleets of cars could actually be shared the way limousines are shared. You could have your car drop you off at the airport and go home, then return to pick you up at a later date.

Keynesianism Is The New Black Death

Keynesianism may wipe out a third of Europe’s GDP

By Louis Woodhill

One election at a time, voters in Europe are tossing out politicians associated with “austerity”.  This week, it was national elections in France and Greece, and state elections in part of Germany.  Nicolas Sarkozy became the eighth leader of a eurozone member country to lose his job in a little over a year.

The voters of Spain, Greece, France, etc., understand that their governing elites have pushed their economies into austerity death spirals, and they have been expressing their unhappiness at the ballot box.

No hope for Europe

France rejects austerity without trying it

By Nita Ghei

The victory of socialist Francois Hollande in France on Sunday and the resounding defeat of the parties trying to push through bailouts in Greece amount to a clear rejection of austerity in Europe. That’s particularly troubling because the Continent has never actually tried to reduce its spending.

Europe is the epicenter of the debt crisis because it has built a lavish welfare state that feeds off the private sector’s productivity. Lightening the burden on private enterprise would free up some growth potential, but European politicians refuse to cede control. The result has been predictable: shrinking economies and higher unemployment.

On Europe, Paul Krugman Seeks to Rebut Keynes!

The actual alternatives are “reality” and “fantasy

By Kyle Smith

Casting our gaze over the history of World War I, it’s easy to see the horrible insanity that accompanied the forging of each link in the chain of causation. The horrible insanity, and also the horrible logic. Once it got started, how could it have happened any differently? Internally, it all made sense. And so did the resolution, which would unleash far greater horrors, and which was built on three words: Make Germany pay.

It’s ironic that the Nobel-winning economist Paul Krugman is today’s great defender and apostle of John Maynard Keynes, because Krugman’s prescription for the disease ravaging Europe is Make Germany Pay. Yet Keynes made his name by exposing the folly of that phrase in his monumental work “The Economic Consequences of the Peace.” Not that Krugman’s ideas much matter, because Germany isn’t going to pay again, the Euro will fall apart as a result and nobody can say exactly what the consequences will be, except that they will be dire.

Greece: Voting Itself Out Of The Eurozone?

Hoping for an orderly structured default

By Marco Vicenzino

The Greek election exposed an inherent contradiction. When polled, most Greeks favor remaining in the Eurozone. Yet the election results amounted to a clear rejection of austerity and the means necessary for remaining part of monetary union. Furthermore, the convoluted result and ensuing ambiguity on the next government’s composition, and viability, increases the risk of another election.

This political uncertainly increases the potential for Greece’s Eurozone exit and threatens the next tranche of international financial assistance due in June. The probability of renegotiating its terms remains low. In particular, Germany will not agree to concessions anytime soon. At most, rhetorical amendments may be introduced but fundamentally the plan’s core will not change.