Friday, February 22, 2008

Why The Free Market and Walmart Are Responsible for Our Problems (JM)

Dear God,

I am feeling bitter and snarky today. Please send me an incredibly vapid article to mock mercilessly.



Presidents Can't Manage the Economy

By John Stossel

Thank you.

The presidential candidates have been repeatedly asked how they would "manage the economy." With the exception of Ron Paul, every candidate has accepted the premise that this is something the president of the United States should do.

Wellity, wellity, wellity, wellity, if every single candidate but Ron Paul agrees, along with every POTUS in the history of our country, you, John Stossel must be right.

Or can do.


I just like to picture John Stossel. Sitting as his computer, shaking his head slowly as he types. He looks up and the giant portrait of Milton Friedman sitting a top his fire place, smiles knowingly, and thanks the free market that saw fit to make him a professional political commentator.

Democrats act like the president is national economic manager. Republicans pay lip service to free markets, tax and spending cuts, and less regulation -- before proposing big programs to achieve "energy independence," job training and a cooler climate.

These seem like eminently laudable goals. Goals that are perfectly within the scope of government and goals there is little to no market incentive to achieve.

John McCain says it's important for government to do something "to sustain our leadership in manufacturing". Why? Manufacturing jobs are no better for America than other jobs. Some argue that they are worse. How many parents want their children to work in factories rather than offices? Increasing service jobs in medical, financial and computer sectors while importing manufactured goods doesn't hurt America. It helps America.

There are so many problems with this scenario that I am baffled as to where to begin. It’s kind of like the Mt. Everest of wrongheaded, idiotic, free-marketeeringism. Okay, so I guess let’s tackle this manufacturing jobs comment, the thing is that it’s not like these are hypothetical future jobs we are ordering out of a catalog. These are jobs that we are losing right now or have lost in the recent past. As lovely as it would be to replace boxmaker with doctor, it just does not work that way. What happens instead is communities get devestated and other businesses in these areas begin to dry up (see Michigan). I can see the Stossel response already: “Well move and get retrained. Ridiculous. Do I need to think of everything?” Of course, this is insane as these people rarely have the money to get retrained and there is no market incentive to retrain them as there is no need for service jobs in the local economy if there is no money to pay for them. Also moving is not quite an option, as the likely don’t have the money needed to relocate and they’ll already be at a competitive disadvantage.

Market forces are notoriously cruel. The problem with free market analysis (aside from the fact that it doesn’t consider distribution an important factor in comprehending overall wealth) is that people aren’t figures on a ledger. I agree, service oriented jobs are better than manufacturing jobs. But the market can’t magically turn people in to doctors and also there are some people who simply do not have the capacity to work in these higher end industries.

The candidates see the global economy as an arena in which countries compete against one another -- an economic Olympiad with winners and losers. Politicians love to promise they will keep America No. 1, as if that matters in a worldwide marketplace.

Umm… I think it does. Ridiculous. There, I can be dismissive with no arguments too Stossel.

America as a nation does not compete against China or South Korea or Japan. American companies compete against companies in other countries, but that's something else. The purpose of production is consumption, and American consumers prosper when foreigners compete successfully with American companies.

Except for those who are making no wages because America has no more jobs for which they are qualified. You can’t consume a whole lot without the means to purchase things to consume. The purpose of production is both consumption and achieving a means to consume. It’s actually a balance of these two things, a factor you just seem to ignore in your constant worship of Pope Free Market III.

A president who sees the global economy as a competition among nations will be tempted to intervene on behalf of the "United States" and create "good American jobs." That's how governments mess up economies.

Yeah, screw you government intervention. The free market keeps economic disasters from happening. Cough.. subprime, cough.. Enron, cough.. WorldCom. Seriously, do you only get your financial news from corporate press releases and The Heritage Foundation?

McCain says, "It is government's job to help workers get the education and training they need for the new jobs". Mike Huckabee (who glories in public-works projects as a job-creation machine) and Barack Obama talk in similar terms.

That hardly shows confidence in the free market, which, if allowed, would train and educate workers just fine. But it shows misplaced confidence in the federal government, which, as journalist Jim Bovard has shown, has an unbelievably bad track record at doing it. The endless list of programs, like the Manpower Development and Training Administration, Comprehensive Employment and Training Act, Job Training Partnership Act, STIP, BEST, YIEPP, YACC, SCSEP, HIRE, etc., wasted billions and "distorted people's lives and careers by making false promises, leading them to believe that a year or two in this or that program was the key to the future. ... Federal training programs have tended to place people in low-paying jobs, if trainees got jobs at all.".

Evidence, my friend, is more than a list of programs and an assertion that they were bad. Also the New Deal definitely helped the economy, much like a massive public works/infrastructure project would be totally perfect for the economy and our society right now. Also maybe federal job training led to many low paying jobs, but its not like we expected people in federal job training to become the CEO of Starbucks. At least they have jobs, federal training vs. no training, I’ll take some training. Seriously, it’s amazing how Stossel just asserts that the free market will create training and education. Where and how does this ever happen? What about times when the cost is not worth it to these companies, oh well, you can be jobless until the market needs you. Also there is a giant collective action problem in the market. Government training is more likely to fill job roles, especially in smaller companies that cannot afford to run massive job training programs and educational initative.

Sen. Hillary Clinton told The New York Times recently, "I want to get back to the appropriate balance of power between government and the market. ... You try to find common ground, insofar as possible. But if you really believe you have to manage the economy, you have to stake a lot of your presidency on it."

Notice that she equates government power and market power. That is absurd. "Power" in a free market means success at creating goods and services that your fellow human beings voluntarily choose to buy. Government power is force: the ability to fine and imprison people.

Sweet sassy molassy!!! “Power” in the free market means having the money to crowd out your neighbors, out market them, undercut salaries and have rockbottom prices to drive your competitors out. Walmart is the canonical example of market “power” that has nothing, nothing in the world to do with “success at creating goods and services”. Market “power” is being able to afford attorneys and legal infrastructures to protect you from litigation when you cut corners or violate regulations. Even if we assume perfect information, the market is totally distorted in favor of the bigger players and power and inevitably moves further in that direction.

On the other hand, yes, the government has coercive power. But the particular nature of the power is way less important than the end to which that power is used. When a company like Walmart exercises its power it is specifically and only towards the end of promoting Walmart’s interest. In general, this will be good for the narrow community of stockholders and those people in society to whom their beneficence randomly trickles down. Instead, the governments goal is, or at least ought to be, the protect and support of the people at large. One of the main reasons this goal is ever distorted is because of market interventions within the governmental process: lobbying, campaign donations and the like. People wonder when “liberal” came to be synonymous with “big government”, the answer is it happened when big corporations became an overwhelm force. Big government protects against the vagaries and selfishness of the free market. In the aggregate, government protects our liberty, it doesn’t restrict it.

Politicians who talk about managing the economy ignore the fact that, strictly speaking, there is no economy. There are only people producing, buying and selling goods and services. Keep that in mind, and one realizes that government action more often than not interferes with the productive activities that benefit everyone. When politicians propose regulations to fix some problem, they should ask if some earlier intervention created the problem and if the new regulations will make things worse. The answer to both questions is usually yes.

Again, this is totally insane. I agree there are good market forces we should allow to do their thing. But the places where the market “goes wrong” are rarely places where the government has intervened. In fact, it’s usually in places where the economy is so complex it’s like a Rube Goldberg machine. Places where we have such complex and opaque mechanisms, like in objects like OTC derivatives, cry out for transparency regulations. Instead, we far too often see regulations that the market calls for, regulations that protect creditor’s interests. The truth is the free-marketites already cry out for regulation when it comes to the protect of property rights. That’s something they are totally down with. However, when it comes to any other rights conception they want us to stay out of the way and let the market do its magic.


The economy is far too complex for any president -- no matter how smart -- to manage. How can politicians and bureaucrats possibly know what hundreds of millions of individuals know, want and aspire to? How can government employees fathom what trade-offs to make in a world of scarce resources?

These are well trained smart people, reflecting on the needs of general society instead of the needs of an individual corporation.

They can't. That's why free people are more prosperous than unfree people.

Of course, this assumes that we are all starting from an equal playing field. I am sure individuals do have a pretty good idea of what they want and need. But usually they can’t afford it or they are not intellectually equipped to do it. This is where the government needs to step in, not out.

Presidential candidates should promise to keep their hands off the economy.

Just like perennial winner Ron Paul or maybe President Stossel.

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