Missing Milton Friedman

Who Will Speak For Free Markets?

By STEPHEN MOORE

I would rank Milton Friedman, next to Ronald Reagan, as the greatest apostle for freedom and free markets in the second half of the 20th century. I used to find great joy in visiting him and his wife and co-author, Rose, at their home in San Francisco. We'd have dinner at their favorite Chinese restaurant and chat about the latest silliness out of Washington.

I've been thinking a lot lately of one of my last conversations with Milton, who warned that "even though socialism is a discredited economic model and capitalism is raising living standards to new heights, the left intellectuals continue to push for bigger government everywhere I look." He predicted that people would be seduced by collectivist ideas again.

He was right. In the midst of this global depression, rotten ideas like trillion-dollar stimulus plans, nationalization of banks and confiscatory taxes on America's wealth producers are all the rage. Meanwhile, it is Milton Friedman and his principles of free trade, low tax rates and deregulation that are standing trial as the murderers of global prosperity.

When the University of Chicago wanted to create a $200 million Milton Friedman Institute last year, Sen. Bernie Sanders of Vermont, an avowed socialist and Chicago alum, fumed that "Friedman's ideology caused enormous damage to the American middle class and to working families here and around the world."

At academic conferences it has been open season on Friedman and his philosophy of limited government. Joseph Stiglitz, a Nobel Prize winner, says that Friedman's "Chicago School bears the blame for providing a seeming intellectual foundation" for the now presumably discredited "idea that markets are self-adjusting and the best role for government is to do nothing." University of Texas economist James Galbraith is even more dismissive: "The inability of Friedman's successors to say anything useful about what's happening in financial markets today means their influence is finished," he says. And pop author Naomi Klein says triumphantly: "What we are seeing with the crash on Wall Street . . . should be for Friedmanism what the fall of the Berlin Wall was for authoritarian communism: an indictment of ideology." One left-wing group is even distributing posters in Washington and other cities that proclaim: "Milton Friedman: Proud Father of Global Misery."

The myth that the stock-market collapse was due to a failure of Friedman's principles could hardly be more easily refuted. No one was more critical of the Bush spending and debt binge than Friedman. The massive run up in money and easy credit that facilitated the housing and credit bubbles was precisely the foolishness that Friedman spent a lifetime warning against.

A few scholars are now properly celebrating the Friedman legacy. Andrei Shleifer, a Harvard economics professor, has just published a tribute to Friedman in the Journal of Economic Literature. He describes the period 1980-2005 as "The Age of Milton Friedman," an era that "witnessed remarkable progress of mankind. As the world embraced free market policies, living standards rose sharply while life expectancy, educational attainment, and democracy improved and absolute poverty declined."

So the Bernie Sanders crowd has things exactly backward: Milton's ideas on capitalism and freedom did more to liberate humankind from poverty than the New Deal, Great Society and Obama economic stimulus plans stacked on top of each other.

At one of our dinners, Milton recalled traveling to an Asian country in the 1960s and visiting a worksite where a new canal was being built. He was shocked to see that, instead of modern tractors and earth movers, the workers had shovels. He asked why there were so few machines. The government bureaucrat explained: "You don't understand. This is a jobs program." To which Milton replied: "Oh, I thought you were trying to build a canal. If it's jobs you want, then you should give these workers spoons, not shovels."

But in the energy industry today we are trading in shovels for spoons. The Obama administration wants to power our society by spending three or four times more money to generate electricity using solar and wind power than it would cost to use coal or natural gas. The president says that this initiative will create "green jobs."

Milton knew how to create real wealth-producing jobs. Once, when he visited India in the early 1960s, John Kenneth Galbraith, the U.S. ambassador, welcomed him by only half-joking, "I can think of no place where your free-market ideas can do less harm than in India." Talk about irony. India has adopted much of the Friedman free-market model and has moved nearly 200 million people out of destitution and despair.

I recently phoned Rose Friedman and asked her what she thought about the attacks on her husband. She was mostly dismayed at how far off-course our country has veered under President Obama. "Is this the death of Milton's ideas?" I hesitantly asked. "Oh no," she replied, "But it is the death of common sense."

Life goes on in the Islamic world

News in Brief

A quick scan of the news out of the Muslim world over the past week :

In Syria -- whose government lately has been paying less attention to the diabolical nature of Israeli children’s songs and more attention to torturing and killing its own citizens -- the death toll in the popular uprising now exceeds 2,700. Included in that number are at least 100 children.

In Pakistan, 26 Shiite pilgrims were ordered off a bus and gunned down, in the latest incident of Muslim-on-Muslim violence there. In Indonesia, a suicide bomber detonated himself in a church, wounding more than 20 worshippers, in the latest incident of Muslim-on-Christian violence that is a considerable problem in several Muslim-majority states, including Egypt.

In Somalia, al-Shabaab, an Islamist terrorist group, is refusing to allow food donations to reach drought-stricken areas. Aid groups estimate that 300,000 children may die if supplies don’t reach them soon. In Turkey, a bomb attack in Ankara killed three people and wounded more than 30. The bombers were probably Kurdish terrorists, seeking to free their homeland from the hold of the central government.

In Yemen, more than 70 people were killed by security forces while protesting the dictatorial rule of Ali Abdullah Saleh. In Libya, rebels discovered a mass grave holding the bodies of 1,270 prison inmates massacred in 1996. And, of course, Burhanuddin Rabbani, a former president ofAfghanistan and head of the country’s High Peace Council, was assassinated Sept. 20.

Read It and Weep

Obama’s Jobs Bill

An infernal mish-mash of taxes, subsidies, and regulations.

By Richard A. Epstein 

The dim news about the current economic situation has prompted the Obama administration to put forward its latest, desperate effort to reverse the tide by urging passage of  The American Jobs Act (AJA), a turgid 155-page bill. The AJA’s only certain effect is to make everything worse than it already is by asking Congress to tighten the stranglehold that government regulation has already placed on the economy.

That sad fact would certainly elude anyone who accepted the president’s justification for the AJA when he sent the bill to Congress. This bill, he said, will "put more people back to work and put more money in the pockets of working Americans. And it will do so without adding a dime to the deficit." How? Why, by closing "corporate tax loopholes" and insisting that the wealthiest American’s pay their "fair share" of taxes.

What is so striking about Obama’s shopworn rhetoric is its juvenile intellectual quality. His explanation for how the AJA will create jobs is a non-starter because he does not explain how we get from here to there. As in so many other cases, the president thinks that waving a wand over a problem will make his most ardent wishes come true, even when similar earlier efforts have proved to be dismal failures. This dreadful hodgepodge of a bill will likely be dead-on-arrival in Congress, but it remains a patriotic duty to explicate some of its worst provisions.

The most evident feature of the AJA is that it is a combination of ill-conceived, disparate measures. The wandering quality of the bill makes it impossible to cover all of its silliness, but it is possible to focus on some of the core job provisions, all of which kill the very jobs that the AJA is supposed to create.

One does not have to dip very far into the bill to find trouble. Section 4 of the AJA imposes "Buy American" restrictions on the use of funds appropriated under this statute for work on public buildings. "[A]ll the iron, steel and manufactured goods" used on such projects are to be fabricated in the United States. There are obvious administrative difficulties in deciding what counts as a "manufactured good" for the purposes of the act. But don’t sweat the small stuff. The fatal problem with this form of jingoism is that, in the name of economic efficiency, it forces American taxpayers to pay more for less. That upside down logic may seem sensible to a die-hard Keynesian, but not to ordinary people who realize that deliberate overpayment for inferior goods makes no more sense in the public sector than in the private one.

A last, autumnal reprieve

The genius of Vladi­mir Putin

By Ralph Peters

There is one incontestably great actor on the world stage today, and he has no interest in following our script. Russian Prime Minister Vladimir Putin — soon to be Russia’s president again — has proven remarkably effective at playing the weak strategic hand he inherited, chalking up triumph after triumph while confirming himself as the strong leader Russians crave. Not one of his international peers evidences so profound an understanding of his or her people, or possesses Putin’s canny ability to size up counterparts.

Putin’s genius — and it is nothing less — begins with an insight into governance that eluded the “great” dictators of the last century: You need control only public life, not personal lives. Putin grasped that human beings need to let off steam about the world’s ills, and that letting them do so around the kitchen table, over a bottle of vodka, does no harm to the state. His tacit compact with the Russian people is that they may do or say what they like behind closed doors, as long as they don’t take it into the streets. He saw that an authoritarian state that stops at the front door is not only tolerable but also more efficient.

As for the defiant, he kills or imprisons them. But there are no great purges, no Gulag — only carefully chosen, exemplary victims, such as anti-corruption activist  Sergei Magnitsky, who died in police custody, or the disobedient billionaire Mikhail Khodorkovsky, imprisoned on charges Russians regard as black humor. Western consciences may be briefly troubled, but Putin knows the international community won’t impose meaningful penalties. Seduced by Kremlin policies — from oil and gas concessions to cynical hints of strategic cooperation — Western leaders have too many chips in the game. And at home, the common people, the chorny narod, don’t mind. Instead, they gloat when the czar cuts off the beards of the boyars — or humbles an envied oligarch. As for gadfly journalists, Putin wagered that they could be eliminated with impunity, as in the case of Anna Politkovskaya. Our outrage is pro forma and temporary.

Domestically, Putin’s tactile sense of his people is matchless. His bare-chested poses seem ludicrous to us, but Russians see a nastoyashi muzhik, a “real man.” And his sobriety makes him the fantasy husband of Russia’s beleaguered wives.

Not least, Putin has renewed Russian confidence in the country’s greatness. Consistently playing an international role far greater than Russia’s capabilities warrant, he reawakened the old Stalinist sense that while the people may suffer, they do so in service to a greater destiny.

Internationally, he sizes up interlocutors with the deftness of the skilled agent-handler he was in the bad old days. His outbursts of temper and brutal language make news (while, again, appealing to his base), but his policies are cold-blooded, ruthless — and strikingly successful.

It’s worth noting how much Putin has achieved: Like his hero, Peter the Great, he tamed the new nobility (of wealth) and consolidated the power of the state. He returned Russia to great-power status — largely through bluff. He steamrolled a one-sided  new START agreement over American negotiators who desperately wanted a deal. His manipulation of Europe has given him virtually every pipeline agreement he wanted while sidelining NATO’s new members in the east and keeping Ukraine weak and disunited. He dismembered Georgia but paid no price for it. He has even achieved a grip over supplies for our troops in Afghanistan second only to the chokehold we granted Pakistan in a fit of strategic ineptitude.

If Putin has a weakness, it’s his disdain for economics. Russia relies on oil and gas exports to a potentially fatal degree. Yet that, too, stems from calculated policy: A diversified economy and consequent diffusion of wealth would make Russia far more difficult to control. Today’s relative handful of oligarchs fit perfectly into the mold of the old czarist nobility (if with fewer social graces): They spend ostentatiously, party abroad and remain politically docile. Putin would rather risk a monopoly economy than a proliferation of power bases.

For centuries Moscow called itself the “Third Rome,” after the cities of St. Peter and Constantine. The allusion may be particularly apt, since Putin has done what a series of strong emperors did after the first fall of Rome or the Fourth Crusade’s sack of Constantinople: He has restored, if briefly, a fallen glory.

Demographically, economically, developmentally, militarily, even educationally, Russia appears doomed to fierce decline. But one man of genius has brought his people a last, autumnal reprieve. Vladimir Putin is a dangerous man, but a splendid czar.

Rats in a Social Engineering Lab

Taylorism, Progressivism, and Rule by Experts

By Kevin A. Carson

The Progressive movement at the turn of the twentieth century—the doctrine from which the main current of modern liberalism developed—is sometimes erroneously viewed as an “anti-business” philosophy. It was anti-market to be sure, but by no means necessarily anti-business. Progressivism was, more than anything, managerialist.

The American economy after the Civil War became increasingly dominated by large organizations. I’ve written in The Freeman before about the role of the government in the growth of the centralized corporate economy: the railroad land grants and subsidies, which tipped the balance toward large manufacturing firms serving a national market (“The Distorting Effects of Transportation Subsidies,” November 2010), and the patent system, which was a primary tool of consolidation and cartelization in a number of industries (“How ‘Intellectual Property’ Impedes Competition,” October 2009, tinyurl.com/lqzehv)

These giant corporations were followed by large government agencies whose mission was to support and stabilize the corporate economy, and then by large bureaucratic universities, centralized school systems, and assorted “helping professionals” to process the “human resources” the corporations and State fed on. These interlocking bureaucracies required a large managerial class to administer them.

According to Rakesh Khurana of the Harvard Business School (in From Higher Aims to Hired Hands), the first corporation managers came from an industrial engineering background and saw their job as doing for the entire organization what they’d previously done for production on the shop floor. The managerial revolution in the large corporation, Khurana writes, was in essence an attempt to apply the engineer’s approach (standardizing and rationalizing tools, processes, and systems) to the organization as a system.

And according to Yehouda Shenhav (Manufacturing Rationality: The Engineering Foundations of the Managerial Revolution), Progressivism was the ideology of the managers and engineers who administered the large organizations; political action was a matter of applying the same principles they used to rationalize their organizations to society as a whole. Shenhav writes (quoting Robert Wiebe):

Since the difference between the physical, social, and human realms was blurred by acts of translation, society itself was conceptualized and treated as a technical system. As such, society and organizations could, and should, be engineered as machines that are constantly being perfected. Hence, the management of organizations (and society at large) was seen to fall within the province of engineers. Social, cultural, and political issues . . . could be framed and analyzed as “systems” and “subsystems” to be solved by technical means. . .

During this period, “only the professional administrator, the doctor, the social worker, the architect, the economist, could show the way.” In turn, professional control became more elaborate. It involved measurement and prediction and the development of professional techniques for guiding events to predictable outcomes. The experts “devised rudimentary government budgets; introduced central, audited purchasing; and rationalized the structure of offices.” This type of control was not only characteristic of professionals in large corporate systems. It characterized social movements,the management of schools, roads, towns, and political systems.

The managerialist ethos reflected in Progressivism emphasized transcending class and ideological divisions through the application of disinterested expertise. Christopher Lasch (The New Radicalism in America) wrote:

A bizarre parallel

They had to burn the village to save it from global warming

by Anthony Watts

From Wikipedia:

One of the most famous quotes of the Vietnam War was a statement attributed to an unnamed U.S. officer by AP correspondent Peter Arnett. Writing about the provincial capital, Bến Tre, on February 7, 1968, Arnett said: “‘It became necessary to destroy the town to save it,’ a United States major said today. He was talking about the decision by allied commanders to bomb and shell the town regardless of civilian casualties, to rout the Vietcong.”The quote was distorted in subsequent publications, eventually becoming the more familiar, “We had to destroy the village in order to save it.”

In a truly bizarre parallel, the New York Times writes:

“They said if we hesitated they would shoot us,” said William Bakeshisha, adding that he hid in his coffee plantation, watching his house burn down. “Smoke and fire.”…But in this case, the government and the company said the settlers were illegal and evicted for a good cause: to protect the environment and help fight global warming.
The case twists around an emerging multibillion-dollar market trading carbon-credits under the Kyoto Protocol, which contains mechanisms for outsourcing environmental protection to developing nations.
The company involved, New Forests Company, grows forests in African countries with the purpose of selling credits from the carbon-dioxide its trees soak up to polluters abroad. Its investors include the World Bank, through its private investment arm, and the Hongkong and Shanghai Banking Corporation, HSBC.
In 2005, the Ugandan government granted New Forests a 50-year license to grow pine and eucalyptus forests in three districts, and the company has applied to the United Nations to trade under the mechanism. The company expects that it could earn up to $1.8 million a year.But there was just one problem: people were living on the land where the company wanted to plant trees. Indeed, they had been there a while.“He was a policeman for King George,” Mr. Bakeshisha said of his father, who served with British forces during World War II in Egypt.

All of this, for something not worth a nickel in America anymore…

Note the flatlined final price of 5 cents per ton of CO2…

…because the Chicago Carbon Exchange closed, as nobody wanted to buy carbon credits that had no tangible value.

And yet people are being burned out of their homes in Africa to plant trees for carbon credits. It is madness.

In the meantime, it appears the existing trees are responding to increased CO2, so planting new stands may not even be needed:

Trees: sucking up the carbon

Forests in many regions are becoming larger carbon sinks thanks to higher density, U.S. and European researchers say in a new report.In Europe and North America, increased density significantly raised carbon storage despite little or no expansion of forest area, according to the study, led by Aapo Rautiainen of the University of Helsinki, Finland, and published in the online, open-access journal PLoS One.

New occupation forces arriving at USA

EPA Wants to add 230,000 MORE Bureaucrats

By the AFP BLOG

We've always said the EPA's extra-legal attempt to rewrite the 1970 Clean Air Act to twist it into a greenhouse gas law -- cap-and-trade by other means -- would be a disaster. Up to now, EPA tried to claim it would only apply permitting requirements to large industrial facilities. Now it is finally telling the truth -- that applying the Clean Air Act as written will force permitting for even small commercial facilities, schools, hospitals, churches, restaurants that use natural gas as a cooking fuel, and even larger single family homes.

In a court filing last week, EPA quantified the vast new army of federal bureaucrats it will need to process millions of new permits under the Prevention of Significant Deterioration and Title V permitting process. A shocking 230,000 new EPA bureaucrats at a cost of $21 billion -- more than tripling the EPA's total budget. In the filing EPA says it will reach these levels by April 30, 2016.

Based on the historical relationship between the number of federal regulators and private sector employment recently quantified by the Phoenix Center the addition of 230,000 federal bureaucrats would destroy 22.5 million private sector jobs.

The EPA doesn't have to do this. The EPA and Obama White House have falsely claimed they were ordered to act by the Supreme Court in Massachusetts v. EPA, but the court in that case only ruled that the EPA had to decide whether to act based on the language of the statute. The same rationale they offered for phasing the rules in under the tailoring rule -- administrative necessity and absurd results -- are the valid legal reason they should have declined to act and left the political question of whether to act on greenhouse gases up to Congress.

Since they seem intent on moving forward, Congress must step in and stop them. As soon as possible.