Bill Clinton spoke on Friday at Harvard’s John F. Kennedy School of Government. Here’s the opening paragraph of an AP report on this event:
Former President Bill Clinton said Friday that disasters such as worldwide famine and an obesity
epidemic threaten the country’s stability unless politicians begin to
look ahead and cooperate.
I know that there’s a sensible spin to put on this pronouncement — persons in poor countries will starve to death while "poor" persons in America will kill themselves by overeating — but beyond the immediate irony of Clinton’s pronouncement is the frightening possibility that politicians and pundits are becoming even more fixated on the mistaken notion that Congo, Niger, North Korea, and other dirt-poor countries are mired in poverty only because the U.S. and Canada and the U.S. and France and the U.S. and Australia and the U.S. consume too much.
(HT: Roger Meiners)
Podcast RSS Feed
Full EconTalk Text
{ 50 comments }
When he can't find another way to make a living, a politician has to invent a need for him and his ilk to "solve" a problem by use of more government — when the real solution lies eslewhere.
So let me guess the realsolution is the "free market" and LESS regulation.
So how does the Congo or North Korea spontaneously convert to free markets?
How do unhindered markets respond to rising levels of CO2?
How do free markets prevent energy monopolies from dictating which fuel sources we use?
How do free markets work to prevent corruption of government or prevent the undermining of democracy?
True Liberal,
(1)Not likely the Congo or North Korea will "spontaneously" convert. At least no more than European countries or yore, who did NOT depend on foreign aid but the proliferation of less internal control and more security of de facto property rights. Look to Botswana has for a success story in recent times.
(2)The question about CO2 is a good one, and may be the free market's achilles heel. But that presumes the nigthmare scenarios are all true and that tradeoffs are not an issue.
(3)Energy monopolies have everywhere and always been the product of state privelege toward nominally private entities or states themselves.
Look at this recent blog post, "Thirst for Power", about how Uganda has preferred large dams in an effort to concentrate – monopolize – energy power, and the more decentralized and free market alternative:
http://africaunchained.blogspot.com/
(4)James Tooley has documented how the vast network of rarely talked about but quite substantial private schools throughout Africa have been a bulwark against the corruption and unaccountability of state schools.
You really would not have much to say if you did not insist on putting words in peoples mouth, would you?
"How do free markets prevent energy monopolies from dictating which fuel sources we use?"
There are dozens of independent oil producers in addition to the integrated companies in the US alone. They are all price-takers. The US broke that monopoly when we busted up Standard Oil.
Gas stations are mostly independently owned by thousands of Moms and Pops. Where's the monopoly?
Even the oil cartel has a hard time “dictating” price because of cheating by their members and market conditions that are beyond their control (like the fact that all of the world’s oil supply and potential oil supply is not under its control, for example).
You know what entity does do more to “dictate which fuel source we use”? Not the free market – Our government. Our tax dollars go to subsidize corn production for ethanol. Unfortunately, for every unit of corn ethanol energy output we have to use at least one unit of energy input. That is, we have to use as much energy to produce it as we get out of it. Brazilian sugar ethanol is cheaper because it’s actually more efficient to produce and burns cleaner, but it’s more expensive than corn ethanol in the US. Why? US-imposed tariffs. There’s your government – not free market – created monopoly.
http://209.85.165.104/search?q=cache:OUs5CNriNTwJ:en.wikipedia.org/wiki/Ethanol_fuel_in_Brazil+%22brazilian+ethanol%22&hl=en&ct=clnk&cd=1&gl=us
Government can both create and prevent monopolies. With few exceptions, government should only prevent and destroy monopolies – but that’s no way for a politician to win in Iowa.
"How do free markets work to prevent corruption of government or prevent the undermining of democracy?"
read "Capitalism and freedom" by Milton Friedman.
Someone who asks "How do free markets…" has no intention of reading a book like "Capitalism and Freedom."
If they said "I understand the free market response to these things, but I don't like the free market solution, the gov'ts solution is better" is a resonable thing to say.
But too many can't fathom and don't want to learn how free markets work.
I understand how government works to solve problems, even though I almost always oppose the gov't solution. I wish more people on the other side understood free markets enought to say the oppsite. Public debate would be better.
Back in Adam Smith's time, monopolies didn't mean a market of only one supplier, but a specifically a patent letter protected industry, because they recognized that under free market there is always an entrepreneur to challenge the big guys. I think this anecdote is significant to understand the current fear of huge monopolies taking over the world and dictating their way..
I agree with that former President Bill Clinton said. See what happend recently, because of warfare, many places in the world suffered terribly. Moreover, because of warfare, goverment fail to act disaster even when disasters are anticipated. Nowdays, American's economy is stagnant. Thus, I think the government should know what is the biggest problem, and then act to solve it.
P.s I do not agree author to say "dirt-poor countries".
"Government" operates by means of extortion, the market operates by means of the profit motive.
A free market is one devoid of government extortion.
Marxist's regard the profit motive as evil but political extortion as acceptable.
The main flaw of Marxist thought is the idea that an environment can be created wherein individuals no longer act from self interest.
Modern "liberals" deny that they are Marxists', and I will they are not true Marxists, but they have inherited many of the sentiments of the progressive era's infatuation with Marxism including the belief that profit making is evil, self interest is bad, and government is our only remedy for these evils.
Yuman Peng,
"See what happend recently, because of warfare, many places in the world suffered terribly."
Nearly all places in the world that have people suffering terribly are not from warfare – or at least not from nations fighting nations.
I would list the worst countries (in terms of standard of living) in the world to be most of the sub-saharan African nations, N. Korea, Myanmar, Cambodia, Laos, Tajikistan, Yemen, Afghanistan, Haiti.
All of those countries are badly off due to awful governments and/or civil wars. Afghanistan was clearly an awful place to be well before Americans came to remove its rulers.
And secondly there is absolutely nothing "recent" about warfare.
"dirt-poor" is an expression that applies very accurately to some of the countries in the list above. It is not meant to be pejorative, but a descriptive way to suggest utter poverty.
"'poor' persons in America will kill themselves by overeating" That's because U.S. government pay for they eat. But the poor person in poor country can not get enough food to eat. U.S. government need more think about those countries. For "poor" people in U.S. may need to think about education and unemployment. To create more job opportunities are better than give them food.
Someone who asks "How do free markets…" has no intention of reading a book like "Capitalism and Freedom."
If they said "I understand the free market response to these things, but I don't like the free market solution, the gov'ts solution is better" is a resonable thing to say.
But too many can't fathom and don't want to learn how free markets work.
Posted by: dave smith
First I've ordered 2 books that have been recommended here. I will also read "Capitalism and Freedom".
That said I'm pretty sure I understand the basic idea of "free markets" but I bet you I could make a pretty good argument that no such thing exist in modern society. In fact the very idea is incompatible with any form of democracy or even any other form of government…..strictly speaking.
To put it another way markets can't exist without regulation. The degree of regulation is what is to be decided democratically.
"Government" operates by means of extortion, the market operates by means of the profit motive.
A free market is one devoid of government extortion.
Posted by: Sam Grove
Sam,
At least for me I don't think of profits as a bad thing and I think most liberals and progressive support a mixed economy and not socialism.
The problem I have is combining the worst of the two. When government irresponsibility/corruptabilitymixes with capitalist money and bribery uniform both systems fail the people.
IMO we've spent half a trillion dollars placating to the military industrial complex and energy interest in fighting this war in Iraq. And the true goal has been to get scummy politicians elected and to maximize corporate profits by raiding the public treasury.
The capitalist profit mode needs it umbilical cord severed from the womb of government hand outs.
Capitalist go make profits and government set up fair and reasoned rules for the economy. But don't let the two mix…they ARE terrible partners.
In short the problem is not just with government over regulation. Business interest need to earn their money not steal it from the rest of us.
Muir:
"The capitalist profit mode needs it umbilical cord severed from the womb of government hand outs.
Capitalist go make profits and government set up fair and reasoned rules for the economy. But don't let the two mix…they ARE terrible partners."
This isn't meant as a slam or anything, but you really do not understand basic economics.
A free market, by definition, does not receive its profits from govt hand-outs.
What a free market does need however is a stable govt that provides a legal infrastructure to protect private property rights, a police capability to protect citizens from force and fraud, and a national defense capability to protect from outside hostilities.
If an economic system is relying on govt handouts, that is not a free market.
But in one breath you bemoan the capitalists with their uncut umbilical cords i.e. the free market, and in another you seem to be in favor of a mixed system of capitalism and socialism. That is a contradiction as you are advocating more govt involvement with private business.
I know your answer will be something to the effect that in the former example, only the CEO's and board members get rich, and the latter, the workers receive more profit, but real world examples have shown this not to be the case.
Industrialized social democracies as you seem to be advocating have much higher overall unemployment rates, they still produce fantastically wealthy "capitalists" and in general, their economies suffer far more from the govt imposed rigidity.
As long as you're reading all of these suggested sources, an easy one to start with is http://www.freetheworld.com.
They rank the globe on economic freedom, and have great explanatory texts that accompany their data.
And then there's "The Mystery of Capital" where they show how the supposed failure of capitalism outside of the west is largely due to a lack of real private property rights.
…I bet you I could make a pretty good argument that no such thing exist in modern society.
You won't find any any argument here on that one. My main complaint is when anyone blames the non-existent free market on any manner of evil.
The problem I have is combining the worst of the two. When government irresponsibility/corruptabilitymixes with capitalist money and bribery uniform both systems fail the people.
Whenever a govenment regulates business, beyond the prohibition of fraud and aggression (which applies to EVERYONE), the incentive to influence such regulation is created…by those already in business. You might call it a law of political economy.
…I bet you I could make a pretty good argument that no such thing exist in modern society.
You won't find any any argument here on that one. My main complaint is when anyone blames the non-existent free market on any manner of evil.
The problem I have is combining the worst of the two. When government irresponsibility/corruptabilitymixes with capitalist money and bribery uniform both systems fail the people.
Whenever a govenment regulates business, beyond the prohibition of fraud and aggression (which applies to EVERYONE), the incentive to influence such regulation is created…by those already in business. You might call it a law of political economy.
the incentive to influence such regulation is created…by those already in business
Let me rephrase that, the incentive is created by the establishment of regulatory power, the influence is effected by business interests.
Beyond the Irony
I feel strongly about this new epidemic that is hitting our nation its not fair for other countries poor citizens to starve and see their children develop diseases because they have no food, when out country’s poor citizens gorge them selves with empty calories and pass their habits on to their children. Essentially doing the same thing but also wasting money.
"What a free market does need however is a stable govt that provides a legal infrastructure to protect private property rights, a police capability to protect citizens from force and fraud, and a national defense capability to protect from outside hostilities."
RayG
First Ray you are right, I have little formal training in economics but I've read a fair amount and have a bit of common sense.
Anyhow you admit above that "free markets" require a government to set up the rules for their function. So what rules do we as a society decide on? What form of government do we go with? Do we allow for patent laws? Should we allow for corporations to exist? Should we allow property owner so dump toxic materials into the local river upstream from some other property owners?
So you tell me what form of government you choose and what laws you choose to set up your ideal "free market " economy?
Muir:
Well, that's nice that you kind of see my point, but we can't honestly advance from here because you are still operating on a very flawed premise.
You may have truck loads of common sense, but you lack any real knowledge of basic economics. So if we go any farther in this discussion, we're only building on a cracked foundation, so to speak.
If you go to econlib.org, you can begin to read some basic articles on what the various mechanism of economics are.
Just because someone is making money doesn't mean that the system is capitalist.
Just because a govt is required to provide a legal infrastructure, doesn't mean there is govt dependence.
After all, without a govt to provide a commonly recognized legal infrastructure, we would have something akin to anarchy wherein private property rights only go as far as how well armed you are.
This is so scary. I think the situation will become worse and worse. If there is no food in those poor countries, there will be no development in economy. If there are no development in economy, there will be no food. Rich countries will become richer and poor countries will become poorer. We should get together to eliminate this situation. The government should think some solutions to recover those countries' economy.
Can someone explain to me please what "HT" stands for, it is at the very end of the blog? And I apologize for being completely off topic.
It seems superfluous thought to add anything, because some of the posters are extremely knowledgeable. Someday I'll get there, I'm extremely interested.
Muir, I was greatly impressed by Man, Economy and State by Murray Rothbard and blown away after reading Human action, but the first one may be a little easier.
Nadia:
"HT" means "Hat Tip", an acknowledgement to the source of an idea or link to another website.
Xi Lin:
The poorest countries have a common problem: The lack of stable property rights and a free market, because the power structure prohibits it.
With very few exceptions, the power structure does not voluntarily change; it must be overthrown by force.
(Interesting exception: Pinochet in Chile stepped down to permit free elections, and now Chile is a booming economy!)
Dain:
I believe you have me confused with muirgeo. You might also ponder why I use the handle "True_Liberal", a hat tip to the etymology of the word "liberal".
(Hint: Tom Jefferson considered himself BOTH liberal and conservative, and saw no conflict between the two)
RayG,
I think my questions WERE all about the foundations of an economy. Keeping it simple, What form of government? Do we have patent laws or not? Who decides?
Your conclusion WAS my point. The only real free market WOULD be anarchy. As soon as you tell me we need some rules for business to operate I'll tell you that people get to decide those rules not "businesses". That's my simple-minded foundation, so where's the crack?
I think you'll have a very hard time supporting YOUR ideas of free markets with any ideas that support Democratic forms of government and thus my point that the notion of Democracy implies that all economies will be "mixed" and can not have free markets…. strictly speaking.
Thanks for the link. I will go through it as I can.
As soon as you tell me we need some rules for business to operate I'll tell you that people get to decide those rules not "businesses".
Not rule for "business" to operate under, but rules for EVERYONE to operate under, so there need be no special rules that apply only to business.
Government should act as a limiter, and not as a regulator.
My thought here is that honest and peaceful relations among people do not require any government intervention. In this sphere, we might say there is, or realistically speaking, there could be, a free market. Outside of this sphere, we would be referring to human behavior that I think we would agree that, there purpose of a proper government, is to prohibit persons from violating the rights of other persons.
Remembering that corporations are only a legal fiction, we see that what we refer to as corporations are collectives of person cooperating for the purpose of making money by creating value to trade with others. As long as the people involved in this do not act fraudulently or violently against others, what need is there for government to intervene in any way?
I don't see how the US cinsuming less will help. Just becasue poeple here produce less doesn't mean that other countries will automatically be able to produce more.
n my opinion, I think there are two reasons why some dirt-poor countries such as N. Korea, Congo and Niger are mired in poverty. One is the problems from their own country, such as natural disaster, civil war; the other reason is from the negative effect from other countries.
Sam Grove,
I total agree with you. The US consuming less will not help the dirt-poor counties to produce more. I think maybe to offer some favorable policies in tariff between the counties is a good idea.
This blog format can be a bit confusing in that one's posting sign-off is seperated from the body by a dashed line which tends to give the impression that content follows the sign-off leading wen lu to think I had written the post by Julie Southall.
wen lu,
Your point on the blog format being confusing is a good one.
I wonder what Sam's gonna say in his next post.
I'm kind of with Bill on this one. Well, his linking famine with politicians, anyway. Us sending food does little to help the third word. It is political reform that they need.
Can't find Bill's post but I also agree with Tom.
In fact, sending food to these countries often has the opposite effect.
For, example: Most impoverished African economies are agrarian. If we send our subsidized corn as "food aid" to, say, Ethiopia, we kill any chance for Ethiopian corn farmers to make living. How do you compete with free? Thus, their best chance to create wealth is undermined by the US aid system. An unintended consequence.
At the same time, financial aid gets confiscated by corrupt governments. Since all NGOs and foreign government aid organizations have to work through local government (otherwise it would be known as an invasion), this is unavoidable.
Muirgeo,
The more I read your posts, the more I recommend "Captialism and Freedom". Friedman covers this inter-play between government and free markets very well in that book.
If only slightly better than Sam Grove on this blog
Methinks,
I received that recommendation one too many times. I just ordered it along with The Road to Serfdom. I'll read them then I'll get back to you on just where Milt and Fred got it wrong.
From what I know their main point would be that socialism is bad. Well duh, that's a no brainer… but what they'll need to do is convince me that a free market system is better then a mixed economy with well planned and fair regulation. I'm not convinced that a free market economy has EVER existed except for back when we lived in caves. Even then club size may often served an over-regulatory roll.
but what they'll need to do is convince me that a free market system is better then a mixed economy with well planned and fair regulation.
Now you are getting idealistic…well planned and fair indeed. Who decides what is fair and since when are politicians and/or bureaucrats able to plan much well? You have to remember that they are just human beings with the same wants, needs, and failings of other humans except that they are now in a position of power over others.
What makes the people that populate the agencies of govenment different than those managing corporations?
The problem with a mixed economy is that government interventions disrupt the price feedback machanism that is the very thing that enables the market to adjust to changes in supply and demand.
The resulting problems bring about a demand for government to do something about the disruption as people are not aware of the connection between the previous intervention and the disruption. Eventually things get so out of balance that the demand for increased socialism grows, hence the shift from Medicare to calls for single payer.
"What makes the people that populate the agencies of govenment different than those managing corporations?"
Ideally the voting public. In a corporation if you don't vote that counts as a vote for those in power…as I understand it.
Ideally the voting public.
Most voters don't understand the cause of inflation, nor do they decide who populates bureacracies. Every election they are given many reason to keep the "other side" from getting into power, but what do they actually get to vote FOR?
Polls have consistently shown that most people think the government is too big and too expensive, yet year after year, the government grows and grows, consuming more and more resources (with attendant pollution BTW).
So consider again, what make humans in government any different than people in business?
"Ideally the voting public."
Yeah…so why not just allow people to vote with their dollars for what they want more of and what they want less of?
The problem with central planning of any kind is that it cannot take into account individual prefrer
UGH! Sorry. Don't even ask me how the above post was sent!
Heres' the post I meant to send:
Ideally the voting public."
Yeah…so why not just allow people to vote with their dollars for what they want more of and what they want less of?
The problem with central planning of any kind is that it cannot take into account individual tastes and preferences, thus it’s incapable of optimizing resource allocation. If government attempts efficiency in this task, it mimics the free market – only less efficiently – and is redundant to it.
Some government regulations are good – anti-trust regulation and regulation FD. The first fosters a competition and the second helps insure information efficiency in the financial markets. Most government regulation – like the attempt to regulate hedge funds and force them to register, for example – serve only to expand government bureaucracy with no benefit to anyone but have lots of unintended consequences.
Another book I would recommend to you is “Alienation and the Soviet Economy” by Paul Craig Roberts.
Some government regulations are good – anti-trust regulation and regulation FD. The first fosters a competition and the second helps insure information efficiency in the financial markets.
You might be surprised how the inverse results of government regulation apply here. Established industries regularly used inti-trust provisions to squash start-up competition. The whole thing was begun to attack the competitive endeavors of Standard Oil, an attack brought on by existing oil companies that found themselves being outclassed in production efficiency by Rockefeller. So he went along with the break-up by establishing trusts to manage things.
Sam,
I'm far more familiar with the mostly crap regulation in financial markets.
So, would you rewrite the anti-trust laws or scrap them altogether?
Antitrust laws should be scrapped altogether.
Antitrust is special, perhaps unique, in that it can be employed discriminately against a single company. Say, Standard Oil, Alcoa or Microsoft. This makes for excellent case studies in Public Choice.
Muir,
I share some of your sentiments, and you get brownie points for giving me a good laugh
I have come to the conclusion, though, that government — even a popularly elected one — is not a fair or effecient arbiter of the exasperations of the market. Regulation feeds a culture of corporatism that mostly benefits the extremely wealthy.
Remember this: Political power always caters to the influence of wealth just as wealth caters to the influence of political power. The government does not give a damn about you or me any more than does a corporation. In fact, "the government" is a corporation, the biggest one of all and the mother of all other corporations.
You're afraid of corporate rule?
Sorry, that's what we've got.
Sam/Henri,
Well stated.
That you guys recognized the dangers and effects of corporate influence on government and vice-versus as well as the over regulatory roll of government on business is something new to me.
I've debated right wing blogs and those guys just won't even admit to the corruption of markets through the illicit relationship of government with the "private" sector. These last 6 years have been just ridiculous with corruption and revolving door graft.
I thank you guys for shining a little light on the ideas of Libertarianism. Indeed I did vote for the Libertarian candidate, Browne, for President in 1996. But I'm still not convinced it wouldn't lead us back to a Feudal system or even fascism.
"These last 6 years have been just ridiculous with corruption and revolving door graft."
The cozy relationship between government and big business is not new and didn’t get worse in the past 6 years. Your perception may be skewed because that’s when you decided to start paying attention. Corporations are just another special interest engaged in rent seeking.
Something to remember: Karl Marx generally approved of the feudal system because it was not free market system and Hayek pointed out that that socialism leads directly to fascism. This alone should set off alarm bells for you.
If you’re not convinced that a free market would not lead back to feudalism or fascism, how do you think a free market would lead to either of those? What sort of progression will occur for this to happen?
"These last 6 years have been just ridiculous with corruption and revolving door graft."
The cozy relationship between government and big business is not new and didn’t get worse in the past 6 years. Your perception may be skewed because that’s when you decided to start paying attention. Corporations are just another special interest engaged in rent seeking.
Something to remember: Karl Marx generally approved of the feudal system because it was not free market system and Hayek pointed out that that socialism leads directly to fascism. This alone should set off alarm bells for you.
If you’re not convinced that a free market would not lead back to feudalism or fascism, how do you think a free market would lead to either of those? What sort of progression will occur for this to happen?
The cozy relationship between government and big business is not new and didn’t get worse in the past 6 years.
Posted by: Methinks
Well obviously this strong of a statement is based on an objectivist evaluation of the facts such as……….?????….such as…….