The American system of market-based capitalism is in trouble. And the reasons are not the ones commonly cited. The trouble is not that the financial system came close to collapse in the fall of 2008: We have experienced panics before, and the ability of the political and regulatory authorities to cope proves that the financial system is resilient and capable of being coaxed back from the brink of disaster.Read more
In one of his gag appearances, this one as a 2000-year old man, Mel Brooks was asked to name the greatest invention he had witnessed in his long life. “Saran wrap,” he shot back. A useful product, surely, but if environmentalists had the power they now have, unlikely to have emerged from the lab into lunch boxes.Read more
They are men, mostly. They are young, mostly. They are visionaries on a mission -- to systematize and make all the world’s knowledge accessible (Google); to connect all the world’s people with each other (Facebook); to change the way books are read and the sound of music is heard (Apple, Amazon); to reorganize urban transportation in 55 countries (Uber); to make brevity mandatory (Twitter); to create a more literate world and, not to be ignored, elevate free delivery to a right (Amazon).Read more
Free trade is a huge benefit if you are a Walmart shopper. All those microwave ovens, lamps, sneakers, and other stuff available for a relative pittance. It’s a tragedy if you are a domestic manufacturer or worker attempting to compete with cheap labor and subsidized Chinese manufacturers pouring those goods onto supermarket shelves. Consumers are dispersed and unaware of their interest in free trade; workers and manufacturers know their interest in protection. So freer trade is always a difficult political proposition.Read more
At long last we are emerging from the blind alleys down which the debate about income inequality seems to have wandered. The first such dead end was marked “fairness.” The top tenth of one percent of earners feel the tax system unfairly expropriates too large a portion of their incomes, bloated though those after-tax incomes are with special tax advantages.Read more
Conservatives of the world, unite! You have nothing to lose but your corporate sponsors. We must save capitalism from the capitalists. We must persuade our corporate and political classes that it is difficult for people to retain their belief that market capitalism works for them when they are struggling to find work, or to keep their homes, or to avoid declines in their living standards as their real wages stagnate and their taxes disappear into bailouts of banks and subsidies for solar millionaires.Read more
Two recent news items highlight the issue of income inequality in America. First, a study by the Pew Research Center found that the net worth of the upper 7 percent has risen by 28 percent since 2009 while the net worth of everybody else has dropped by 4 percent. Second, a recent poll conducted by Gallup found that 52 percent of Americans—an all-time high—think the government should “redistribute wealth by heavy taxes on the rich.”Read more
Last week I wrote a long exegesis on microtasking and the future of temporary, remote workers. I only dabbled in microtasking on Amazon's Mechanical Turk exchange, but reader D. Bush uses it often and writes in about her experience:Read more
President Obama, envious of China’s economic model, proclaimed his admiration for the high-speed railways, bridges, skyscrapers, and solar panels that China is building. (“That used to be us,” he famously said – a line apparently so powerful it became the title of a book.) But even the Chinese know that Obama’s envy is misplaced.Read more
Remembering Friedrich Hayek, whose birthday is today. He was a philosopher and economist and wrote many wise things, including this:
There is all the difference in the world between treating people equally and attempting to make them equal.
George Orwell, no fan of capitalism, writing in 1944, made this point in a review of Hayek's The Road to Serfdom:Read more
"We have no plan” and “we are unable to act” have become common refrains among influential Americans who grumble about the decline of U.S. power in the 21st century. On both fronts, they lament, China is doing better.Read more
America’s more or less free-market capitalism is not under threat from Marxist-Leninism: That system’s demonstrated failures have consigned it to the ash-heap of history. Nor is it under threat from China’s system of managed economy plus political repression: We can’t even abide police breaking up a disease-infested occupy-something-or-other encampment. It is not even under threat from socialism, the hysterical charges of some anti-Obama extremists notwithstanding.Read more
There’s a lot of silliness on all sides of the Bain Capital debate.
On the one hand, Newt Gingrich’s attacks (and the follow-on assaults by Jon Huntsman and Rick Perry) on Mitt Romney’s career at Bain Capital have been unfair, over the top, and, for that matter, all over the place. Gingrich, Perry, and Huntsman deserve much of the criticism they’ve received from conservative commentators.
On the other, Mitt Romney’s claim throughout his campaign that his private sector experience almost uniquely qualifies him to be president is also silly. Does he really think that having done well in private equity, venture capital, and business consulting—or even in the private sector more broadly—is a self-evident qualification for public office? One assumes Mitt Romney would agree that Chris Christie is a better chief executive of New Jersey than Jon Corzine, and that Rudy Giuliani was a better mayor of New York than Mike Bloomberg. But Romney’s biography looks a lot more like Bloomberg's or Corzine's (leaving aside Corzine's recent misadventures) than like that of Giuliani (pre-mayoralty) or Christie. Past business success does not guarantee performance in public office. Indeed, Romney sometimes seems to go so far as to suggest that succeeding in the private sector is intrinsically more admirable than, e.g., serving as a teacher or a soldier or even in Congress. This is not a sensible proposition, or a defensible one.Read more
There’s a line of thinking you often hear from Republican-types about how markets are never wrong. You think a certain CEO’s lavish compensation is ridiculous? Nonsense, those types tell you. You think that a CEO’s VORP—that’s a baseball stat that translates, in this case, to the CEO’s marginal value versus the average replacement CEO—couldn’t possibly be so high? They simply counter that he’s worth the money because there’s someone willing to pay it. The results in a market triumph considerations of value.Read more
Two very important changes have occurred in America, and indeed in other Western economies. My guess is that they will prove to be permanent phenomena, just as permanent as the changes introduced by Franklin Delano Roosevelt’s New Deal.Read more
Newt Gingrich has adopted an anti-free market argument—a favorite of the political left—to criticize Mitt Romney. Gingrich accused his rival of making money by “bankrupting companies and laying off employees” in his years at Bain Capital.Read more
As Iranian president Mahmoud Ahmadinejad’s prepares to speak at the United Nations, it is tempting to dismiss his anti-American rants as just another propaganda stunt. But what makes his remarks difficult to ignore is that large segments of the Iranian population will buy into them. And that Ahmadinejad, along with Supreme Leader Ayatollah Khameini and Iran’s clerical leadership, appear to believe what they are saying – fueling a narrative that drives Iran’s reckless international behavior.Read more
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