h/t Ambrose Evans-Pritchard

Robert Remini’s Andrew Jackson and the Bank War (New York: W.W. Norton & Company, 1967) has the following excerpt explaining part of Jackson’s opposition to the Second Bank of the United States:

Jackson seriously contended that the Bank was dangerous to the liberty of the American people because it concentrated enormous power in private hands and used this power to control legislation, influence elections, and even manipulate the the operation of the government to get what it wanted. The Bank, said Jackson, was a monopoly with special privileges granted by the government; it exercised formidable sway over the affairs of the American people yet it was independent of presidential, congressional, or popular regulation. And because Jackson was a man who was exceedingly conscious of power, as well as jealous of his own presidential prerogatives, he was resentful of the Bank and conditioned even before he took office to demand changes in its operations.

The similarities between the moral and political issues regarding central banking then and central banking today never cease to amaze.

Thanks to Bob Wenzel and his smart and spunky (and thoroughly Austrian) EconomicPolicyJournal for sharing an excerpt from Joseph Stiglitz’s recent commentary updating his and Linda Bilmes’ research on the full costs of the wars in Iraq and Afghanistan. Stiglitz writes:

Indeed, when Linda Bilmes and I calculated America’s war costs three years ago, the conservative tally was $3-5 trillion. Since then, the costs have mounted further. With almost 50% of returning troops eligible to receive some level of disability payment, and more than 600,000 treated so far in veterans’ medical facilities, we now estimate that future disability payments and health-care costs will total $600-900 billion. But the social costs, reflected in veteran suicides (which have topped 18 per day in recent years) and family breakups, are incalculable.

I would add that in my reading Stiglitz on this issue, he believes that the wars would have been somewhat more acceptable if only Bush was a slightly more effective redistributionist. So he writes:

Even if Bush could be forgiven for taking America, and much of the rest of the world, to war on false pretenses, and for misrepresenting the cost of the venture, there is no excuse for how he chose to finance it. His was the first war in history paid for entirely on credit. As America went into battle, with deficits already soaring from his 2001 tax cut, Bush decided to plunge ahead with yet another round of tax “relief” for the wealthy.

To be sure, wars would be much less likely, to say nothing of military-industrial complexes, if they had to be funded out of current savings by current generations. The political support for the last decade’s wars would have been much reduced if voters saw capital that would otherwise have been mixed with labor to produce jobs at home instead sent to wreak havoc in faraway places such as Fallujah, Basra, Kandahar, and Jalalabad. It’s not clear if that’s Stiglitz’ point.

Nonetheless, Stiglitz on war is well worth reading. His entire commentary is here. If Stiglitz was consistent, he’d note that arguments for expansion of the welfare state are at least as duplicitous as those for expanding the warfare state. I blogged on the Bilmes-Stiglitz research here. Bob Wenzel’s full post is here.

As municipal projects play out across China, spending on so-called fixed-asset investment — a crucial measure of building that is heavily weighted toward government and real estate projects — is now equal to nearly 70 percent of the nation’s gross domestic product. It is a ratio that no other large nation has approached in modern times.

Even Japan, at the peak of its building boom in the 1980s, reached only about 35 percent, and the figure has hovered around 20 percent for decades in the United States.

There is more here.

The Minnesota state government has been shut down, and the consequences are potentially devastating to the average Minnesotan who (according to this article in the Minneapolis Star Tribune) can no longer check a state web site to verify whether his barber has a valid license to practice.

The horror!

Of course, the primary focus in the media coverage is on the inconvenience and uncertainty a government shutdown foists upon public-sector workers:

Throughout a long day of negotiations Thursday, anxiety was palpable across the Capitol.

Legislators coming to the building were greeted by hundreds of union protesters, urging the two sides to break the deadlock.

Gathering on the Capitol steps, some protesters held signs saying “I am a Proud Public Worker” and “Government Shutdown — Harming Countless Minnesotans Is Not OK.” Some held babies and others umbrellas to protect them from the burning summer sun. They chanted and held other signs like “Great wealth = Great responsibility.”

Let’s set aside the Star Tribune’s portrayal of proud public workers using babies to protect themselves “from the burning summer sun,” or, for that matter, the protestors’ assumption that Minnesotans are “countless” — so why fund censuses in the first place? The fact is that the overwhelming majority of Minnesotans are OK with the shutdown and are happy to continue going about their lives, even if only temporarily, with one less layer of coercion and compulsion to contend with. Surely this is true — otherwise the two major state parties would not have allowed the shutdown to occur in the first place.

Just don’t wait for the Star Tribune to report on it. If it did, it would support the perception that this fight is not Minnesota-centric. I think it is mostly fueled by the growth of the federal government since 2001 that has increased burdens on productive classes that today find it more effective to fight back on the state-level than the federal-level. As a result, whether in Minnesota, Wisconsin, California, or New Jersey, we see statehouses characterized by factions made up of those who produce wealth and those who depend on its transfer. Rothbard called them net taxpayers and net tax consumers. The path to a freer society depend on friction between them.

When they operate outside of the market, workplaces by nature become focused on priorities other than profit. So it is not surprising that to see this headline on the front page of today’s New York Times:

At I.M.F., Men on Prowl and Women on Guard

It turns out that notwithstanding its scandalous everyday practices that no one seems to notice — the transfer of conscripted capital to foreign regimes that promise to transfer it back to politically well-connected firms in the West — the I.M.F. is probably not the kind of place at which you’d want your daughter to work. And it didn’t start with Dominique Strauss-Kahn. Even Carmen Reinhart noticed the I.M.F.s “implicit sexual culture” when she worked there from 2001 to 2003: “It’s sort of like ‘Pirates of the Caribbean’” she said. “The rules are more like guidelines. That sets the stage, I think, for more risk-taking.”

It’s hard to think that if a similar culture was uncovered at, say, IBM, the New York Times wouldn’t be clamoring for federal investigations, lawsuits, and arrests of its senior leadership, all while decrying a sick nature inherent in capitalism. That we tend not to see such cultures arising in the private sector reflects the different incentives created when organizations are focused on profit first. In the private sector, a firm’s continued existed is tied to whether it satisfies customers today, and the firms that lose that focus tend to fail. Successful managers in the private sector have strong incentives to root out cultures that can arise and hinder focus from the firm’s primary goals.

Not so at the I.M.F. An internal review conducted there three years ago found that “the absence of public ethics scandals seems to be more a consequence of luck than good planning and action.”

In 2003, an I.M.F. study of itself, coauthored by Harvard economics professor Ken Rogoff, concluded that its policies rarely work. Countries that follow its economic reform plans (in exchange for conscripted capital) often suffer a “collapse in growth rates and significant financial crises,” with open currency markets merely serving to “amplify the effects of various shocks.”

So the I.M.F.’s continued existence is a scandal in itself. Its ostensible justification for existing ended with the collapse of Bretton Woods anyway. It is run by people who earn bloated, tax-free salaries that are much higher than they could ever earn if their salaries were based on their own productivity in the market. It’s like the post office, only sexier. And like the post office, its policies seldom work.

The New York Times reports on a Nevada company that “finds newspaper material that has been republished on the Web — usually an article, excerpts or a photograph — and obtains the copyrights.” Then it sues.

First the great Larry Summers pronounced that the earthquake and tsunami will bring positive economic benefits to Japan. Now this morning’s New York Times greets us with the headline, “Japan’s Strict Building Codes Saved Lives”. Not property rights and the desire of property owners to protect the value of their property. Not institutions that awarded wealth creation over time — wealth that enabled the Japanese to make the trade-offs between safer construction and other goods they valued. Just better building codes. It’s as if the Times trumpeted food sales because of laws requiring people to buy food, or education because of laws requiring school-attendance, or any activity people do anyway — especially activities people tend to do more of when per-capita incomes rise.

One anticipates the economics papers coming out on Japan, similar to the many that followed Katrina in New Orleans, suggesting state regulations and codes had the effect of making the region less prepared for a disaster like this, if only due to the moral hazard created when the state ensures a minimum level of safety and promises to socialize losses in the event of a catastrophic event.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, from a speech given yesterday in Anniston, Alabama:

The Fed, like every other central bank, is powerless to prevent fluctuations in the cost of living and increases of individual prices. We do not produce oil. Nor do we grow food or provide health care.

Italians love cash and avoid credit and debit purchases at the highest rate of all the euro region. As a result, they are among the region’s least indebted and biggest savers. It’s estimated that the government loses 100 billion euros of revenue a year in untaxed transactions, while its banking cartel loses out on billions of possible fee revenue when the average Italian makes only 26 credit card purchases a year. Needless to say, the government and banks are joining forces in a war on cash, cash salaries, and cash transactions.

Good luck! A cash-based culture is what one would expect from a people who have seen practically every form of government come and go over centuries. No wonder Italians, embracing a practice endorsed last year by economist Joe Salerno, tend to place their faith in private networks and associations whenever possible. “Italians have a strong family tradition that leads them to avoid debt and save a lot to ensure their kids a future,” says Bocconi University’s Carlo Alberto Carnevale-Maffe. “They like solid investments such as houses. And for renovations or purchases made under the table, what better way than cash?”

For more information, see Bloomberg.

John Tierney did it, and won $5000.

Andrew Cusack remembers this courageous political philosopher, historian, and author of The Counter-Revolution, who died last week in Richmond, Virginia. Molnar, who worried about the consequences when intellectuals allowed themselves to become the tools of ideology (and not the other way around), would be ignored by a modern conservative movement that had no truck for thinkers who defended the natural rights of individuals over the prerogatives of the State — even when those thinkers, like Molnar, once helped define conservatism in venues such as Modern Age and National Review.

Molnar was much like Mises. A refugee of European statism in his native Hungary — first of the Nazis, then of the communists — Molnar would escape to New York where he would first receive a Ph.D. from Columbia University and then spend a good portion of his teaching career at Brooklyn College. Also like Mises, Molnar became a voluminous writer in a second language, authoring over 40 books and many more academic and popular articles. Molnar centered his intellectual approach around the human person, whom he would defend against “manipulators of ideas and images, writers, professors, artists, journalists” and others who would dehumanize for causes based in ideology and national greatness. Later in life, Molnar would say (quoted by Cusack) that the modern media had

become more than a new Caesar, indeed a demiurge creating its own world, the events therein, the prefabricated comments, countercomments—and silence. … The more I saw of universities and campuses, publishers and journals, newspapers and television, the creation of public opinion, of policies and their outcome, the less I believed in the existence of the freedom of expression where this really mattered for the intellectual/professional establishment. For the time being, I saw more of it in Europe, anyway, than in America: over there, institutions still stood guard over certain freedoms and the conflict of ideas was genuine; over here the democratic consensus swept aside those who objected, and banalized their arguments. The difference became minimal in the course of decades.

Men like Molnar — including Erik von Kuehnelt-Leddihn, Russell Kirk, and Murray Rothbard — took William F. Buckley seriously in the 1950s when he called for an intellectual battle that stood “athwart history, yelling stop.” But Buckley embraced this history, and his death was recorded prominently in the New York Times. Thomas Molnar received a blurb in the Richmond Times-Dispatch. Something tells me he would have preferred it that way.

The Independent‘s Johann Hari reviews Daniel Okrent’s Last Call: The Rise and Fall of Prohibition this morning in Slate. An excerpt:

One insight, more than any other, ripples down from Okrent’s history to our own bout of prohibition. Armed criminal gangs don’t fear prohibition: They love it. He has uncovered fascinating evidence that the criminal gangs sometimes financially supported dry politicians, precisely to keep it in place. They knew if it ended, most of organized crime in America would be bankrupted. So it’s a nasty irony that prohibitionists try to present legalizers—then and now—as “the bootlegger’s friend” or “the drug-dealer’s ally.” Precisely the opposite is the truth. Legalizers are the only people who can bankrupt and destroy the drug gangs, just as they destroyed Capone. Only the prohibitionists can keep them alive.

That’s the subtitle of my op-ed, published today. Here’s an excerpt:

None of these developments occurred because of unrestrained market forces. They happened because of policies designed to thwart the market’s tendency to punish excessive risk-taking, translating into short-term economic growth that the political class especially valued when expanding welfare and warfare spending in the years following 9/11.

Today, such factors are being placed in the memory hole by the very people who created this situation. It’s politically expedient to blame greed, as if basic human nature somehow changed from 1995 to 2005. Such strategies deflect responsibility while justifying the continued socialization of capital markets.

From Franklin Foer’s How Soccer Explains the World: An Unlikely Theory of Globalization comes this description of the Ukrainian approach to soccer:

More than almost any other county in the world, the Ukrainians have an idiosyncratic approach to the game. The man behind the approach was a coach, trained as a plumber, called Valeri Lobanovsky. Applying the logic of scientific Marxism to the game, he believed that soccer could be mastered by uncovering the game’s mathematical underpinnings. He created a system of numerical values to signify every “action” in a game. As he envisioned it, a group of “scientists” would tally passes, tackles, and shots. These scientists would note “successful actions” and “unsuccessful actions.” Their data would be run through a computer, which would spit back an evaluation of the player’s “intensitivity,” “activity,” “error rate,” and “effectivity.”

Lobanovsky intermittently coached the club Dynamo Kiev for decades and later headed the Ukrainian national team. His system became gospel, internalized by generations of coaches and players. Even after his death in 2002, the national federation continues to send scientists to every single Ukrainian professional game. His system rewards a very specific style of play: physical and frenetic. Players work tirelessly to compile points. They play defense more aggressively than offense, because that’s where points can be racked up. In a way, Lobanovsky’s system mimicked the Soviet regime under which it was conceived. Like the Soviets, it stifles individual initiative. Nothing in Lobanovsky’s point valuation measures creativity or daring. A vertical pass receives the same grade as a horizontal pass; a spectacular fake means nothing.

Compounding the stultifying effect of Lobanovsky, Ukrainians have made a fetish of coaching. Managers play a role akin to the Communist Party, imposing rigid strategic formations and an authoritarian culture. Ukrainian players commonly glance at their coach, trying to glean whether they have won his approval. Human agency has no place in this world.

That’s from Foer, Franklin, How Soccer Explains the World: An Unlikely Theory of Globalization. New York: Harper Perennial, 2005 (pp. 159-160).

Addendum: I almost titled this post, “If Oskar Lange Coached Soccer”.

I will be participating again in this annual event, sponsored by the Birmingham Business Journal. If you will be near the Birmingham, Alabama, area this Tuesday morning (Jan. 5), please come to the Brock Recital Hall at Sanford University, 800 Lakeshore Drive. More details here.

…is transforming “health care in India through a simple premise that works in other industries: economies of scale. By driving huge volumes, even of procedures as sophisticated, delicate and dangerous as heart surgery, Dr. Shetty has managed to drive down the cost of health care in his nation of one billion.” In the process, he and his doctors are making health care affordable to some of the poorest people in India.

Read the whole article HERE.

A healthy recovery this year, and even more a healthy economy in the future, cannot be measured simply on the basis of jobs figures, because not all jobs produce wealth. FULL ARTICLE

Quentin Letts on a “scruffy little man” who cheerleads for the forced redistribution of “our hard-earned cash to distant dictatorships.” Peter Bauer would agree.

I’m no Crunchy Con, but I confess to being sympathetic to the organic food movement in the United States. Although I do not always buy organic, I am glad that the market caters to the segment of the population that does. Locally-grown and otherwise farm fresh meat, vegetables, milk, and eggs often taste better and are healthier than the output of the mega-farm operations in other parts of the country, although you pay a premium for them.

Friends of ours–farmers from outside of Birmingham–often complain to me about USDA regulations that favor their big-farm competition and force naturally grown and organic foods to become relatively more expensive, and I agree with them that the output from mega-farms is greater than it would be without government interference. Nonetheless, I am sure that, absent the USDA, we would still have a preponderance of large farm operations. By creating economies of scale and maximizing output, these operations have made food so inexpensive that we have moved from being a society that 30 years ago was concerned with hunger to one today that is concerned about obesity. This shift is welcomed. It is nothing short of miraculous.

But there are activists who would snuff it out if they could, and who would use the state to require locally-grown and organic food as the only food option. People like Boston University’s Ellen Ruppel Shell are shocked–shocked!–that the poor pay less for food than they did in decades past, and would force them to pay more, even in serious economic times such as these. Indeed, they condemn any effort on the part of the market, not only in the area of food production, to exploit economies of scale and mass production techniques in ways that help the poor. Economic output with lower costs and higher quantities? How dare they!

Thankfully, Charlotte Allen has an eye on the situation, and in a recent article in the Los Angeles Times, she delightfully skewers such efforts. An excerpt:

In an online debate with the Atlantic’s economics writer, Megan McArdle, Shell observes with disapproval that, when prices are adjusted for inflation, Americans today spend “40% less on clothes, 20% less on food, more than 50% less on appliances, about 25% less on owning and maintaining a car” than they did during the early 1970s. Over that same period, Census Bureau tables show, U.S. median household income rose by at least 18% in constant dollars — despite the much-lamented (by Shell and others) decampment of “once flourishing” manufacturing jobs to China and elsewhere. That’s why even America’s poorest people nowadays can afford automobiles, cellphones and TVs.

Yet a significant number of social critics wish they couldn’t. Robert Pollin, an economics professor at the University of Massachusetts-Amherst — cited approvingly by Shell — has argued for higher clothing prices and steep taxes on fossil fuels in the name of various social and green causes, even though, as he conceded in a January article in the Nation, the latter measure would “impose higher energy prices on businesses and individuals.”

The most zealous of the spend-more crowd, however, are the food intellectuals who salivated, as it were, at a steep rise in the cost of groceries earlier this year, including such basics as milk and eggs. Some people might worry about the effect on recession-hit families of a 17% increase in the price of milk, but not Alice Waters, the food-activist owner of Berkeley’s Chez Panisse restaurant, who shudders at the thought of sampling so much as a strawberry that hasn’t been nourished by organic compost and picked that morning at a nearby farm — and thinks everyone else in America should shudder too. “Make a sacrifice on the cellphone or the third pair of Nike shoes,” Waters airily informed the New York Times in April.

Read the whole article here. As with most of Allen’s writings, It is well worth chewing on.