Rearden Koch Speaks Out

Charles Koch, CEO of Koch Industries, tells it like it is.

In spite of looming bankruptcy, President Obama and many in Congress have tiptoed around the issue of overspending by suggesting relatively minor cuts in mostly discretionary items. There have been few serious proposals for necessary cuts in military and entitlement programs, even though these account for about three-fourths of all federal spending.

Yes, some House leaders have suggested cutting spending to 2008 levels. But getting back to a balanced budget would mean a return to at least 2003 spending levels—and would still leave us with the problem of paying off our enormous debts.

Federal data indicate how urgently we need reform: The unfunded liabilities of Social Security, Medicare and Medicaid already exceed $106 trillion. That's well over $300,000 for every man, woman and child in America (and exceeds the combined value of every U.S. bank account, stock certificate, building and piece of personal or public property).

The Congressional Budget Office has warned that the interest on our federal debt is "poised to skyrocket." Even Federal Reserve Chairman Ben Bernanke is sounding alarms. Yet the White House insists that substantial spending cuts would hurt the economy and increase unemployment.

Plenty of compelling examples indicate just the opposite. When Canada recently reduced its federal spending to 11.3% of GDP from 17.5% eight years earlier, the economy rebounded and unemployment dropped. By comparison, our federal spending is 25% of GDP.

Government spending on business only aggravates the problem. Too many businesses have successfully lobbied for special favors and treatment by seeking mandates for their products, subsidies (in the form of cash payments from the government), and regulations or tariffs to keep more efficient competitors at bay.

Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.

The purpose of business is to efficiently convert resources into products and services that make people's lives better. Businesses that fail to do so should be allowed to go bankrupt rather than be bailed out.

If you want to read as close to Henry Rearden as you're likely to find today, read the whole thing.

Bravo, Mr. Koch!

The Case for Legalizing Capitalism

Someone I've never heard of, Kel Kelly, has written a book with the title of the post. (That's not intended as a slam; I'm sure he's never heard of me either.)

I haven't read it - and given the current length of my reading list it will be 10 years before I can even crack its cover - but I have to salute one of the best book titles I've ever seen.

From the review on Mises.org:

He considers every important topic: banking, education, taxation, labor, environment, trade, war and peace, safety, medicine, drugs, and far more. He presents the reader with a basic explanation of how capitalism is supposed to work and how society functions when commerce is free. He then turns to all the areas of life that are distorted and destroyed by the great "helping hand" of government.

Hmmm... maybe I'll bump this up on the list.

New Biography of Cornelius Vanderbilt

The New York Times reviewer snarks his way through the column (you'd expect something else?), but this new biography by T.J. Stiles of the great Cornelius Vanderbilt sounds like a helluva good read.

“His admirers saw him as the ultimate meritocrat, the finest example of the common man rising through hard work and ability. ... His critics called him grasping and ruthless, an unelected king who never pretended to rule for his people.” But Mr. Stiles plainly gets a charge out of Vanderbilt’s raw nerve.

Cornelius Vanderbilt grew up on Staten Island, the son of a modest farming family. He attended school for only a few months, developing what Mr. Stiles calls “a lasting contempt for the conventions of written English.” He was born in the right place at the right time.

“Unlike most country folk,” Mr. Stiles writes, “the Vanderbilts lived within sight of the place of the most densely concentrated possibilities in North America: the city of New York.”

As a young man, Vanderbilt began working on ferries and schooners and then, with their increasing popularity in the 1820s and ’30s, steamboats. He made a name for himself in business for his “elbows-out aggressiveness.”

He made a name for himself, too, with his imposing appearance. A contemporary described him as “a man of striking individuality, as straight as an Indian, standing six feet in his stockings and weighing about 200 pounds.” Frugal and abstemious, Vanderbilt had one vice: the constant presence of a lighted or unlighted cigar.

The most flat-out enjoyable sections of “The First Tycoon” are those that deal with New York’s great steamship wars of the first half of the 19th century. Vanderbilt began to build and operate his own fleet, picking up the nickname the Commodore in the process. He engaged in price wars, cutting fares until competitors went out of business or paid him to go away. He slowly developed a chokehold on commerce.

By the late 1840s, Mr. Stiles writes, “almost everyone who traveled between New York and Boston took a Vanderbilt boat or a Vanderbilt train.”

Naturally, there is the requisite 'robber baron' bashing:

Mr. Stiles is clear-eyed about his subject’s nearly amoral rapacity. He writes that Vanderbilt “exacerbated problems that would never be fully solved: a huge disparity in wealth between rich and poor; the concentration of great power in private hands; the fraud and self-serving deception that thrives in an unregulated environment.”

But it's generally not too hard to separate the wheat from the feces in these types of biographies.

More after I've read it...

Scary Stats and Good Advice

From an Arthur Brooks editorial in the WSJ (who have obviously been stealing my material):

The scary stats --

Voices in the media, academia, and the government will dismiss this ethical populism as a fringe movement -- maybe even dangerous extremism. In truth, free markets, limited government, and entrepreneurship are still a majoritarian taste. In March 2009, the Pew Research Center asked people if we are better off "in a free market economy even though there may be severe ups and downs from time to time." Fully 70% agreed, versus 20% who disagreed.

Free enterprise is culturally mainstream, for the moment. Asked in a Rasmussen poll conducted this month to choose the better system between capitalism and socialism, 13% of respondents over 40 chose socialism. For those under 30, this percentage rose to 33%. (Republicans were 11 times more likely to prefer capitalism than socialism; Democrats were almost evenly split between the two systems.)

So, clearly, the only solution is to kill everyone between 10 and 30, wait ten years for the females to mature, then get busy to help make up for the population dip. (I know a few middle-aged guys who will go for this idea.)

But, there is hope, because Mr. Brooks has been reading my blog for good advice:

Advocates of free enterprise must learn from the growing grass-roots protests, and make the moral case for freedom and entrepreneurship. They have to declare that it is a moral issue to confiscate more income from the minority simply because the government can. It's also a moral issue to lower the rewards for entrepreneurial success, and to spend what we don't have without regard for our children's future.

Enterprise defenders also have to define "fairness" as protecting merit and freedom. This is more intuitively appealing to Americans than anything involving forced redistribution. Take public attitudes toward the estate tax, which only a few (who leave estates in the millions of dollars) will ever pay, but which two-thirds of Americans believe is "not fair at all," according to a 2009 Harris poll. Millions of ordinary citizens believe it is unfair for the government to be predatory -- even if the prey are wealthy.

If true, and I'm inclined to be skeptical here, there may be hope for America yet. Otherwise, a lot more than just the 10-30 crowd are going to have to go.