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The Political Overlords Try To Force People To Ride Buses – And Fail Miserably.

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LOS ANGELES—Arianna Williams spends 90 minutes each way riding the bus about 10 miles to her job in a hair salon.

The commute is particularly frustrating when she considers about how long it would take by car: about half an hour

“It’s crazy, the number of times I’ve been on the bus and thought, ‘I could’ve been there three times by now,’” the 36-year-old said while inching along Wilshire Boulevard, one of Los Angeles’s largest thoroughfares, on a recent morning.

Bus ridership in America’s second-largest city is plummeting as more commuters, fed up with journeys that can be painfully slow due to frequent stops and indirect routes, use growing incomes from the healthy economy to buy a car. The switch saves them time but worsens the overall traffic that buses are caught in, making buses even less appealing to the remaining riders.

There were about 276 million total bus rides in the system run by the Los Angeles County Metropolitan Transportation Authority, known as LA Metro, last year. That is down 24% since 2013, significantly bigger than drops in public-transit usage in other major cities like New York, Chicago, Denver and Phoenix. Ridership on L.A.’s rapidly expanding but significantly smaller rail system declined 5% in the same period.

The drop is particularly tough news for city leaders to swallow given that LA Metro is in the midst of a 40-year, $120 billion expansion project, funded by a sales-tax increase passed in 2016. The measure was meant to alleviate the region’s long-overcrowded roads that cause the average Angeleno to spend more time in traffic than do drivers in any other city—about 119 hours in 2017, according to a recent study by Texas A&M University.

“It’s too easy to drive in this city,” said Phil Washington, the chief executive of LA Metro. “We want to reach the riders that left and get to the new ones as well. And part of that has to do with actually making driving harder.”

Ride-sharing services operated by Uber Technologies Inc. and LyftInc. have only made it easier for people to keep traveling in cars, though the services remain cost-prohibitive for many working-class commuters.

Enabling buses to avoid traffic and reach destinations faster than cars is the most important step needed to turn around the ridership decline, said Conan Cheung, who is leading a study for LA Metro expected to be completed next year. The results of the study could lead to the first major overhaul of bus routes in 25 years.

The easiest way to make buses faster, experts like Mr. Cheung say, is to give them their own dedicated lanes on busy roads. A high-speed bus lane in the city’s San Fernando Valley has been one of LA Metro’s few success stories in recent years.

LA Metro’s CEO says bus-only lanes are needed to help change behavior in a city whose culture is largely built around driving. But selling communities on bus-only lanes has been difficult, as car owners oppose steps that would make roads slower for them and for drivers who shop at local businesses.

At a meeting this month in the Northeast L.A. neighborhood of Eagle Rock, residents booed when a Metro representative mentioned a proposal for a “bus rapid transit” lane. Some held up signs saying “save the trees,” a reference to medians that might be eliminated, while others passed out pamphlets accusing LA Metro of corruption.

“Eagle Rock is flourishing,” said Divina Lombardo, one of hundreds of people who turned out in opposition. “The people coming here won’t come because of the buses and construction.”

Mr. Washington said bus lanes like the one proposed in Eagle Rock are just one of numerous steps needed to change behavior in a city whose culture is largely built around driving.

The city is also expanding a rail system that currently serves only a fraction of the city. The process has been slow, however. While LA Metro has held public hearings to develop a rail system to help alleviate traffic on the notoriously clogged I-405 freeway that connects the San Fernando Valley to L.A.’s west side, there aren’t any concrete plans yet.

In addition, Mr. Washington is also pushing for congestion pricing, similar to that used in cities like London, which would impose charges for driving cars in crowded neighborhoods at peak times. Proposals for a pilot congestion-pricing program in L.A. have yet to gain much political traction.

He said he also wants to explore partnerships with the private sector. Public-private partnerships encouraging workers to take public transit have helped Seattle buck the national trend and increase bus and rail ridership 11% since 2009, according to the city’s transit authority.

Passengers wait to board a bus at Patsaouras Transit Plaza at Union Station in L.A.
Those types of changes would require a shift in many Angelenos’ attitudes toward the road, which Mr. Washington said city leaders need to try to make happen.

“Sometimes you have to tell people what’s good for them,” he said.

Meanwhile, many Angelenos are doing the exact opposite of what Mr. Washington would like. Hugh Brockington, a musician who lives in the L.A. suburb of Pasadena, rode buses to auditions all over the city after his car was repossessed two years ago. But they were often so slow he realized he could travel faster by bike. Since showing up to auditions sweaty wasn’t an option, however, the 34-year-old saved his money and bought a car again.

“I just couldn’t do it anymore,” he said of the frustration of riding buses.

This article appeared in wsj.com on Aug 25, 2019

 

 

Central Planning Is Poisonous To Innovation.

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“The more things change, the more they stay the same” is the best way to describe the lack of original thinking that is prevalent in politics. Take the recent resurgence of calls from politicians on both sides of the aisle to implement industrial policy.

These calls are motivated to address the (mythical) decline in American manufacturing — and because other countries are doing it. These policies are tired, utterly uninspiring schemes that governments around the world have tried and, invariably, failed at.

The latest example is a proposal by Sen. Gary Peters, D-Mich., to create a new federal agency called the National Institute of Manufacturing. Not to be confused with the National Institutes of Health, the senator explains, “This will be an executive branch agency that will house our national manufacturing programs under one roof,” and effectively coordinate a strategic vision for manufacturing.

But let’s examine the problems this scheme is supposed to address. The first is the supposed decline of American manufacturing. In reality, while manufacturing employment has gone down significantly over the last 40 years, U.S. manufacturing output is now near an all-time high. Ironically, it recently dipped a bit because of the trade war now being waged by the same government Peters thinks is necessary to revive manufacturing.

Industrial capacity — the existing ability of American factories and workplaces to produce industrial output — is also higher than at any time in the past, thanks to productivity growth brought about by labor-saving innovation. Contrary to popular belief, this transformation is beneficial, as the increased productivity fuels the significant wage growth enjoyed by those still employed in manufacturing.

As for the notion that “other countries are doing it,” I’m curious to hear what great successes have come out of, say, China’s industrial policies. In his latest book — “The State Strikes Back: The End of Economic Reform in China?” — Nicholas Lardy of the Peterson Institute for International Economics shows that China’s growth since 1978 has actually been the product of market-oriented reforms, not state-owned programs.

Lardy notes that in 2012, about 70% of China’s GDP was produced by private firms. He details the toll taken on the Chinese economy by the recent increase in ambitious industrial policies and the growth of the state-owned sector. His conclusion is that unless China reverses course and the growing weight of state-owned enterprises, government debt and malinvestments, China’s growth will wither away.

Why should we want America to become more like China? Here’s yet another politician thinking that somehow, the same government that started a war in Iraq on faulty intelligence, botched the launch of HealthCare.gov, gave us the Solyndra scandal and can keep neither Amtrak nor the Postal Service solvent, can effectively coordinate a strategic vision for American manufacturing.

There are already 58 existing federal programs that offer manufacturing funding through 11 federal agencies. These programs include the crony Export-Import Bank, which props up the bottom line of large domestic companies by offering taxpayer-backed loans to equally large, often state-owned, foreign firms. The senator believes that these agencies’ apparent failures are due merely to the fact that they aren’t all in the same place. Somehow, moving them all under the care of a manufacturing czar is supposed to unleash their magical powers.

U.S. industrial policies launched in response to the rise of Japan in the 1980s and the USSR before that failed, not because American policy mavens weren’t smart enough to do things right. The real problem with industrial policy, economic development strategy, central planning or whatever you want to call these interventions is that government officials are inescapably plagued by ignorance of localized knowledge. Government officials cannot outperform the wisdom of the market at picking winners. In fact, government intervention in any sector creates distortions, misdirects investments toward politically favored companies and hinders the ability of unsubsidized competitors to offer better alternatives. Central planning in all forms is poisonous to innovation.

As Peters notes, “If you go on the factory floor in Michigan, it’s not your father’s or grandfather’s factory.” Indeed! American companies are in fact fantastically innovative and productive on their own. They have evolved to produce more of what consumers want at lower costs — most of them without a central planner directing them from Washington. Old ideas that have never worked are no way to foster more innovation. Lighter regulations, a better tax code, more immigrants and freedom to do what they do best are what entrepreneurs need.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. 

 

The Most Fatal Conceit Is That Of A Politician Who Says, “I Have A Plan For That”.

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Nobel Laureate Friedrich Hayek’s last book is titled “The Fatal Conceit: The Errors of Socialism.” In this relatively short work from 1988, Hayek attempts to capture the essence of a lifetime effort to understand and explain how the actions taken by entire nations of people can create order. Let’s keep these lessons in mind as we hear ideas, both good and bad, from the field of 2020 presidential candidates.

Hayek’s focus was on institutions—customs, traditions, rules of law, and government—that sustain life and promote prosperity. Always showing a deep understanding of and respect for human nature, as well as an appreciation for evolutionary forces that affect all aspects of human life, he saw most features of society as having emerged spontaneously, not as the result of grand plans or designs. Millions of individuals making countless, largely rational and unnoticed decisions are the ones truly steering the ship.

The title of his book reflects a common self-delusion: the conceit that causes us to believe that mankind’s most profound problems can be solved if an assembly of the brightest and best—the “right ones”—are brought to Washington to devise a detailed, top-down plan to be implemented with the force of law. Almost inevitably, socialized approaches are seen as inherently superior to decentralized ones.

Of course, all of this conceit business is sometimes just political chatter. Many of these grand plans never really go anywhere. The conceit becomes potentially deadly—“fatal,” as Hayek put it—when it is taken too seriously. We see this when presidential candidates—though having never held a high-ranking executive office in their lives and with little first-hand technical knowledge—offer detailed plans to deal with such far-ranging problems as the opioid crisis, higher education for all, healthcare access for the indigent, climate change, nuclear proliferation, regulation of self-driving automobiles, abortion access, and cybersecurity.

No single person or agency can know how these plans (and their ripple effects) will affect the decision-making dynamic of millions of distinct individuals. Too often, this results in policies imposed upon the nation that simply do not work very well.

The conceit becomes complete when the typical voter is persuaded by all of this top-down political talk. This voter will not be satisfied with candidates who suggest, humbly and accurately, that the issue at hand is too complex to be solved beforehand by a group of experts, and that the knowledge necessary for addressing the problem is to found among the people. The candidate who says “I’ve got the solution” beats the one who will organize a series of town meetings nationwide to listen, learn, and then develop guidelines for legislating.

In like manner, the “I’ve got the solution” candidate won’t typically appreciate hearing about programs that assign a high priority to liberty while seeking to unleash and empower individuals to find decentralized solutions. Nor will this candidate be quick to leave some matters to state and local governments to resolve.

Conceit is endemic in presidential politics, no matter the party. We are not lacking for examples in the contest for the presidency in 2020. Nor should we expect otherwise.

We now see Senator Bernie Sanders presenting a series of detailed top-down solutions to important social problems. We hear plans from former Vice President Joe Biden and others. Indeed, a better illustration of Hayek’s concern is found in a New York Times analysis of Senator Elizabeth Warren’s public remarks. It focuses on her regular referral to specific plans and white papers that she has developed for solving many national problems. The Guardian also noted the senator’s habit of responding to questions about an issue by saying, “I have a plan for that.”

Hayek, who saw grand plans as a perfect vehicle for the fatal conceit, argued that highly mobile and creative human beings may have a better approach when left to their own devices. As he points out, ordinary people tend to solve the problems they confront, to figure things out, and invent new ways of doing things—including governing—and conserve resources in doing so. Those who face fewer regulatory constraints in carrying out their search for solutions tend to be more successful. But to be successful, those involved in life’s struggles must be subject to systems of property rights and a rule of law.

Through all this, human beings face a fundamental challenge which Hayek calls the “knowledge problem.” The knowledge required to address problems and invent solutions is dispersed across countless individual minds. In today’s terms, the trick is to find ways to make connections with billions of minds and engage them in building a better world.

Putting the meaning of Hayek’s knowledge problem into simple terms was a challenge met admirably by Leonard Read when he wrote a 1958 essay titled “I, Pencil.” Read’s essay makes the simple point that no one individual has sufficient knowledge to make even an ordinary yellow wooden pencil, the kind with lead inside and an eraser on top. While seemingly simple, each pencil component, along with its source and the technical knowledge required to obtain and process it, is extraordinarily complex. Yet these complicated devices are available everywhere, often without charge.

Read’s larger point is that ordinary people working in uncoordinated ways in relatively free markets solved the pencil problem, yet no single person had the knowledge necessary to do so. Those producing the inputs may have had no intent to create a pencil at all. We readily observe seemingly miraculous outcomes for far-more complicated devices, such as the construction of skyscrapers, suspension bridges, the design and manufacture of smart phones, computers, and the invention and production of artificial limbs and life-saving drugs.

The opposite of the pencil producers, Senator Warren and other candidates are attempting to solve important problems by concentrating knowledge in Washington and then passing problem-solving legislation based on a frozen collection of information. The candidates are undoubtedly sincere in their belief that they have the requisite knowledge and leadership ability to muster multiple solutions, if only they are elected.

Without realizing it, and as brilliant as they may be, the candidates—like all of us—are still profoundly ignorant. The time has come for more town meetings, more listening, less lecturing, and for the development of guiding principles instead of detailed answers for later legislative debate. That way, we may avoid the fatal conceit.

Republicans And Democrats Both Love The Monetary Socialism Of The Federal Reserve.

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While conservatives, led by their leader President Trump, are railing against the Democrats for their devotion to socialism, the current controversy over the Federal Reserve shows us, once again, that conservatives are as devoted to socialism as liberals (i.e., progressives) are.

As Richard Ebeling explains in his FFF ebook Monetary Central Planning and the State, the Federal Reserve is based on the concept of central planning, which is a core feature of socialism. Federal bureaucrats at the Fed plan, in a top-down, command-and-control fashion, the monetary policy that affects hundreds of millions of people, including determining the quantity of money in society.

It cannot be done, at least not without monetary and financial chaos and crises. Central planning is an inherently defective paradigm. Just ask anyone who lived in the Soviet Union. The reason is because the planners, no matter how brilliant they might be, simply lack the requisite knowledge to plan something as complex as money, especially in an economy as sophisticated as that of the United States.

Money, of course, serves as a way to facilitate trade. Given the inefficiencies of barter, people use money as an easy and efficient way to sell and acquire goods and services. In a market, people’s valuations are constantly changing, owing to constantly changing circumstances. Those constantly changing valuations apply to both the things that are being bought and sold and to the money that if being used to facilitate the exchanges.

There is no way that central planners can take all of those constantly changing valuations into account when doing their planning. The result is crisis and chaos. That’s why the U.S. has experienced a never-ending series of bubbles and bursting bubbles. It’s why the U.S. has had a constantly devaluing dollar ever since the Fed was established in 1913. It’s why gold and silver coins, which were the official money of the American people for more than a century, no longer circulate as money. It’s why there was the big stock-market crash in 1929, which led to the Great Depression.

The Federal Reserve has been and is the root cause of all this monetary chaos and crises. That’s what central planning does. That’s what any socialist system does.

So, what do conservatives and liberals say about all this? They both remain wedded to this socialist institution, notwithstanding the fact that it is inherently defective and has been so destructive to the liberty and well-being of the American people. They say that all the chaos and crises are the result of America’s “free-enterprise” system. They think the Fed is the solution to the woes that they feel are caused by “free enterprise.”

Consider President Trump. He wanted Herman Cain and Stephen Moore to serve on the Fed. Trump’s reason for appointing those two individuals? He was confident that they would keep interest rates “low,” which would ensure that the financial bubble that the Fed has been inflating since the last bubble burst in 2008 won’t burst before the 2020 presidential election. Trump has also been jawboning the Fed, which ostensibly is independent of the executive branch, into keeping rates low for the same reason — a bubbling economy will garner him votes.

Meanwhile, progressives are criticizing Trump for nominating Cain and Moore and for berating the Fed. For example, in yesterday’s New York Times former Obama Treasury official Steven Rattner has an op-ed entitled “Don’t Let Trump Mess With the Fed,” in which he takes Trump to task for interfering with the independence of the Fed. In the process, Rattner states, “Of course, the Fed doesn’t get it right. (It famously missed the dangers of the credit bubble in 2007.)”

Because Rattner, like Trump, is trapped within the central-planning box, he just doesn’t get that credit bubbles and other monetary chaos and crises are inherent to the Federal Reserve. He doesn’t understand that monetary central planning will never “get it right” because central planning can never “get it right.”

And that’s really the big problem with conservatives and progressives — their minds are so mired in statism that they can’t even conceive of the alternative — a free-market monetary system, one in which there is no monetary central planning — no monetary socialism — no Federal Reserve — a monetary system in which the state plays no role whatsoever — a system in which there is a total separation of money and the state.

The Austrian economist Friedrich Hayek called such a monetary system “the “denationalization of money.” In a free-market system, what would be used as money would be determined by people in the marketplace. The supply of money and the demand for money would be determined by market forces, just like everything else. Hayek pointed out that central planners suffer what he called a “fatal conceit” in convincing themselves that they can centrally plan complex economic and financial activities.

A genuine free-market monetary system would bring an end to the chaos and crises that are produced by monetary socialism. More important, it would be consistent with the principles of a free society, one where the government lacks the power to plunder and loot people through the debasement of currency.

Just don’t look to either conservatives or liberals for ending the Fed and bringing a free-market monetary system to America. Their minds are simply too mired in monetary socialism to enable them to break out of their statist box. To break out of that box and move toward liberty, people must look to libertarianism.

Here Is A Summary Of The Official Belief System To Which You Must Adhere, Otherwise You Are A Non-Person.

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According to the official, USA approved belief system, we are all equally intelligent and reasonable people, who are confronted with the same “harsh reality” and are bound to the same facts and truths. Of course, it is true, that even in the age of the American empire, in the USA, people do not live in the best of all worlds. There are many more problems to be solved. Though with the American system of a democratic state, humanity has found the perfect institutional framework which makes the next step in the direction of a perfect world possible; and if only the American system of democracy would take over worldwide, the way to perfection would be clear, smooth and free.

The single legitimate form of government is democracy. All other forms of government are worse, and any government is better than none. Democratic states like the USA are of the people, by the people and for the people. In democracies no one rules over the other; instead, the people rule over themselves and are thus free. Taxes in democratic states are therefore contributions and payments for governmentally provided services; accordingly, tax avoiders are thieves, who take without paying. To provide shelter for fleeing thieves is thus an act of aggression against the people, from whom they are trying to escape.

There are still other forms of governments around the world. There are monarchies, dictatorships, theocracies, and there are feudal landowners, tribes, and warlords. And for this reason, democratic states often must necessarily deal with non-democratic states. Eventually, all states must be converted to the American ideal, because only democracy allows for a peaceful and continual change for the better.

Democratic states like the USA and its European allies are inherently peaceful and do not wage war against each other. If they must fight any wars all at, then these are preventive wars of defense and liberation against aggressive and undemocratic states, that is, just wars. All countries and territories that are presently in war with or occupied by American troops or its European allies – Afghanistan, Pakistan, Iraq, Libya, Syria, Sudan, Somalia and Yemen – were therefore guilty of aggression and the war waging and occupation on behalf of the democratic West were an act of self-defense and liberation. However, there is still much to be done. Especially Russia and China still pose a huge threat and must be liberated, in order to make the world finally safe.

Private property, markets, and profits are useful institutions, but a democratic state must ensure that with the appropriate legislation, private property and profits are acquired and used in a socially responsible manner and that markets function efficiently. Moreover, markets and profit-seeking entrepreneurs cannot produce public goods and are thus incapable of satisfying any social needs. And they cannot take care of the truly needy. Only the state can take care of social needs and the less fortunate. The state alone can, through the finance of public goods and aid to the poor, increase the public welfare, and diminish poverty and the number of the needy, if not completely eliminate them.

The state has to put the private vice of greed and the pursuit of profit under control. Greed and the pursuit of profit were the leading causes of the most recent large financial crisis. Reckless financiers generated an irrational exuberance among the public, which ultimately had to crash into reality. The market was wrecked, and only the state stood ready to save the day. Only the state, through appropriate regulation and supervision of the banking industry and financial markets, can prevent such a thing from happening again. Banks and companies went bankrupt, yet the state and its central banks held ground and protected the money and jobs of the workers.

Advised by the leading and best-paid economists in the world, states and especially the USA have discovered the causes of economic crises and realized that in order to get out of an economic mess, the people must simultaneously consume more as well as invest more. Every cent under the mattress is a cent withheld from consumption and investment, which in turn impairs future consumption and investment expenditure. In a recession, spending must first of all and under all circumstances be increased; and when the people do not spend enough of their own money, the state has to do it instead. Prudently, states have this option, for their central banks can produce any necessary liquidity. If billions of Dollars or Euros are not enough, then trillions will do; and if trillions do not meet the goal, then surely quadrillions will. Only massive state expenditure can prevent an otherwise unavoidable economic meltdown. In particular, unemployment is the result of low consumption: people who do not have enough money to buy consumer goods; this problem must be remedied by providing them with higher wages or higher unemployment benefits.

When the last financial crisis is finally overcome, the democratic state can and must devote itself once more to the really urgent remaining problems of humanity: the battle against inequality, the elimination of all unjust discrimination, and the control of the global environment and the global climate in particular.

In principle, all people are equal. Differences are only apparent, shallow and meaningless: some people are white, some brown, some black, some are big, others are small; some are fat and others thin; some are male, and some are female; some speak English and others Polish or Chinese as mother tongue. These are accidental human traits. It is a coincidence that some people possess these and some do not. But accidental traits like these have no influence whatsoever on and do not correlate with mental properties like motivation, time preference or intellectual abilities, and they do not contribute to the explanation of economic and social success, especially of income and wealth. Mental and psychic properties have no physical, biological or ethical basis and are limitlessly malleable. In this regard is everyone, except for a few pathological individual cases, equal to the other, and every nation has made in the course of history a contribution to civilization of equal value or would have done so, if only it would have gotten the same chance. Seemingly obvious differences are solely the result of different external circumstances and education. All differences in income and achievements between Whites, Asians, and Blacks, women and men, Latins, Anglos-Saxons and Thais as well as Christians, Hindus, Protestants, and Moslems would disappear, if only equality of opportunity would be established. If instead it will be discovered, that all these different accidental groups are unequally represented in and distributed across different levels of income, wealth, or professional status, some are richer and more successful than others, then this demonstrates unjust discrimination; and such discrimination must be counterbalanced through appropriate, targeted affirmative action on behalf of the state, in which the discriminators have to compensate the unjustly discriminated.

And the studies of the leading and best paid social scientists have clearly shown, who, above all, are the discriminators. The people in question are first and foremost white heterosexual males and the institution of the traditional, patriarchal organized family. It is, therefore, most notably this group of people and this institution which must compensate all other groups and apologize to all other forms of social organization.

But this would not suffice. The reparations to all disadvantaged, to all victims of inequality and discrimination, require likewise strong governmental support of multiculturalism. The highly developed and white male dominated countries of the Western world have obtained their wealth at the expense of the inhabitants of all other regions of the world and are caught in a disastrous and prejudiced particularism and nationalism. This situation lends itself to be overcome through the promotion and systematic incentivization of immigration of people from different, foreign countries and cultural environments, in order to ensure that the foreign immigrants could finally unleash their full human potential and simultaneously replace the Western parochialism with an authentic cultural diversity.

And with the victory over the disastrous particularism and nationalism through a systematic policy of multiculturalism is one finally able to turn to the crucial stride toward a solution to the undoubtedly biggest global, borderless and world-encompassing problem of climate change. Divergent particularistic and nationalistic interests have thus far led to the fact that the production and the consumption of non-renewable energy sources were left mostly unregulated and uncoordinated worldwide. And that is why, as the leading and best-paid climate researchers have undoubtedly proven, the whole globe is threatened by unimaginable catastrophes: floods, suddenly rising sea levels and the emergence of fatal ecological disequilibria and instabilities. Only through a worldwide, concentrated action by all states, and ultimately the establishment of a supranational world government under the leadership of the USA and an enforced systematic regulation of any production and consumption activities, can this life-threatening danger be avoided. “The common good comes before the individual good” – this is, above all, what the problem of climate change shows, and it is on the states and especially on the USA to permanently implement this principle.

Now, I tell you no secret when I admit that I hold all this for a massive pile of rubbish, for complete nonsense and a highly dangerous one at that.

Hans-Hermann Hoppe via lrc. Lightly edited for length and translation from the German.

Ray Dalio Has Made His Pile, So Now He Wants To Change The Rules.

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Hedge fund titan Ray Dalio is just the latest billionaire to call for government to save us from guys like him.

It’s not pretty. Dalio’s recent article titled “Why and How Capitalism Needs to be Reformed” is a mess, though to be clear it’s a thoroughly well-intentioned and heartfelt mess. It’s a mix of self-effacement (I’m just a lucky guy with good parents who went to good public schools!), dubious statistics concerning the non-problems of wealth and income inequality, and utterly unoriginal, counterproductive proposals for government action. But approving journalists can’t get enough of it, or him, because nothing beats a billionaire’s mea culpa for capitalism. So Dalio, fantastically rich and successful at age 69, finds himself a media darling on financial talk shows after a recent kickoff appearance on CBS’s 60 Minutes.

The article, in two parts, is fairly long. It spends several pages discussing the author’s own background, wage and income inequality, bad schools, lack of child care, lack of health care, and a host of other standard left-liberal complaints. But we can summarize Dalio’s bottom line, as he does in a section called “What I Think Should be Done.” It’s an exercise in bland, meaningless jargon and lack of specifics:

  • Leadership from the top. People with their “hands on the levers of power” (yikes!) need to make inequality a priority. Obviously he means politicians and corporate leaders, and does not intend to lessen the “power” of either. But if bad politicians and greedy corporate types got us into this mess, how will they get us out? More importantly, and left unaddressed, is any suggestion of their incentives to do so. After all, the present system made them rich, powerful, and unaccountable.
  • Bipartisan policymakers working together to “divide and increase the economic pie better.” More politics, which doesn’t work and can’t work. Whose policy? What makes a policy good? Why hasn’t this supposed policy consensus already emerged on its own?
  • Clear metrics and accountability for the “people in charge.” This doesn’t work, and can’t work, in politics. We have centuries of “data” to show how the worst rise to the top of the political world. Government by definition acts outsider the market, and is unaccountable by its very nature as a monopoly. Politicians don’t have a P& L; private businesses do. Again, why does Dalio seem so oblivious to incentives?
  • Redistribution of resources. This doesn’t work and can’t work, except by market processes. Taxes. regulations, economic intervention, and state ownership of industry always reduce total wealth in society. A total non-starter of a tired and thoroughly debunked idea, especially considering we already have a heavily interventionist economy. We also have the entire history of 20th century collectivism to demonstrate why “third-way” interventionism can lead to outright socialism.

Many billionaires—Mr. Dalio, Warren Buffett, and Bill Gates among them— like to call for higher taxes on people such as themselves. But this raises a compelling question: would they have become rich in the first place under the kind of tax system they now advocate? Would they have accumulated a critical mass of investment capital if taxes had consumed more of their profits along the way? Would they have been able to maintain sufficient capital expenditures in their respective businesses to stay dynamic? Or would revenue, capital, and personal wealth lost to the IRS have relegated these super achievers to the status of merely successful?

Well-heeled tax hikers never mention the diminishing marginal utility of money. A billionaire could lose 90% of his/her wealth to the state and remain an elite centimillionaire. Higher taxes for billionaires are simply a cost of doing business, like paying 20% more for an acquisition. But for a “rich” American family making $200,000, or even $40,000 by global standards, a 20% higher tax bill might prevent them from ever reaching their own critical mass of savings and wealth. Just as dominant corporations welcome new regulations, financial elites welcome new taxes as a form of protecting their status from upstarts.

Furthermore, there is no indication Mr. Dalio or other wealthy advocates for wealth redistribution ever practiced this idea in their own businesses. Dalio voluntarily could have paid higher taxes, much higher taxes, both to the federal government and his home state of Connecticut. He could have argued for higher capital gains tax rates, and refused to accept “carried interest” treatment of his firm’s income for management services. After all, to paraphrase Warren Buffett, why should Dalio’s secretary pay a higher tax rate than him?

He also could have equalized pay and ownership among his employees, and hired low-income and low skilled victims of the bad public schools he identifies. He could have run his hedge fund as an employee-owned cooperative. He could have opened his funds to ordinary people with $500 or $1000 to invest.

Perhaps most of all, he could have called for the Federal Reserve to end its practice of keeping interest rates artificially low. Cheap money and credit are the lifeblood of hedge funds, making it possible to buy companies with less equity and more debt—less skin in the game. Leveraged acquisitions allow for fewer shareholders receiving (nondeductible) dividends, along with the tax benefits of deductible interest payments. Cheap leverage made Mr. Dalio billionaire he is today.

But low interest rates cause tremendous harm to average people who simply want to save money in simple, low-risk vehicles, and they distort the entire economy by producing malinvestment, encouraging consumption over saving, and rewarding high time preference. While Dalio admits the Fed favors rich guys by crafting policy that inflates asset prices instead of wages, he remains blind to the central bank’s role as the primary driver of the wealth inequality he laments.

Mr. Dalio is by all accounts a brilliant and hard-nosed businessman. Hedge funds, at least successful hedge funds, make money by ruthlessly identifying untapped value in organizations, replacing board members and management with fund executives, and selling when the selling is good. So why on earth would he pledge to donate $100 million to Connecticut public schools, a system he admits is failing?  Would he invest in a company with a similar track record of spending more and more each year for worse results? A company where he would have no say in management, board governance, operations, or how it spends his investment? Will he maximize, or even measure, the “return” on his investment in Connecticut public schools? Will he seek to minimize risk, in the form of his $100 million being irretrievably wasted?

The answer to these questions is “No”, because he’s not buying a company or making a financial investment. He’s buying goodwill, a form of insurance for billionaires against the growing tide of populist resentment. The infamous Reverend Bacon from Tom Wolfe’s Bonfire of the Vanities comes to mind: Dalio is buying “steam control,” and he’s getting “value for money” as Bacon puts it. He’s buying relief, an indulgence for his sin of getting too rich.

Dalio played the game, by the rules of the game. Now he appears to say, “I’ve got mine, let’s change the rules.”

 

Jeff Deist is president of the Mises Institute.

Once Democratically Chosen, There Is No Reversing Socialism.

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Almost every conceivable form of “socialism” was tried over the last 100 years. There has been Marxian socialism in the form of Soviet-style fully nationalized economies with strict and comprehensive five-year government central planning. There was national socialism in the Germany of the 1930s and 1940s, with private enterprise placed under total government control with Nazi four-year central planning. There was Mussolini’s Italian fascism, under which private businesses and workers were forced into cartels and trade unions with government oversight and command of prices, wages, production, work conditions, and trade. There was British “democratic” socialism under the post–World War II Labor-party government, with nationalized industries, socialized health care, and central planning. There was a French version under the name of “indicative” planning, under which the government manipulated prices and production incentives to direct capital and labor where the central planners thought they should go. There have been government planning through regulations and redistributions of wealth through fiscal policy. This regulatory-redistributive model of government oversight and directing of social and economic outcomes grew out of the discovered and admitted inescapable limits and shortcomings of more-direct government planning and control of economic affairs.

Costs and Consequences of Socialism-in-Practice

The human cost experienced from the extreme forms of socialism-in-practice goes beyond most of our imaginations. Tens of millions of people — ordinary, unarmed, and innocent men, women, and children — were starved, tortured, shot, or worked to death in slave-labor camps in the name of building that bright and beautiful paradise on earth that the communists, fascists, and Nazis all promised would belong to those they had designated the righteous and justly deserving social class, national group, or racial tribe. British democratic socialism foundered on the discovery that even in a democracy, government socialist planning entails imposing commands on everyone that succeed in only making life stagnant, dull, and poor for most in society. Indeed, this is how we have ended up with highly regulated economies combined with often-extensive networks of income redistribution and social safety nets.

A Green New Deal Means Central Planning

Now additional voices for a new socialism are on the public scene, such as the recently elected Democratic-party representative from New York, Alexandria Ocasio-Cortez, who is also a member of the Democratic Socialists of America. Even before being sworn in to the House of Representatives in early January 2019, she and others presented a proposal for a special and select congressional committee for the preparing and implementing of a Green New Deal.

Make no mistake, this is a plan for the introduction of comprehensive government planning over every facet of American social and economic life. Arguing that the world is facing an environmental Armageddon due to global warming, the time for doing nothing or relying upon carbon taxes to reduce use of fossil fuels or business regulations to influence how private enterprises produce  goods and services, they say, is behind us.

A Carbon-Free Road to Social Justice

This must be done in conjunction with commitments and goals for “social, economic, racial, regional, and gender-based justice and equality.” Labor unions must have a prominent place, with the ability to direct wages and employment conditions for workplace justice in the pursuit of a post-carbon economy. The federal government should take equity positions — that is, total or partial direct ownership — in businesses, industries, and sectors of the economy as a means to hit the target of radical environmental change.

The goal is to have a “100 percent” fossil fuel–free economy within 10 years. All businesses and residential structures will have to be dramatically made over to environmentally friendly renewable sources of energy. Where and what is produced will have to be commanded by the federal government for both industry and agriculture.

At the same time, this grand and comprehensive central planning of American society to save the planet can also serve as “an historic opportunity to virtually eliminate poverty in the United States and to make prosperity, wealth and economic opportunity available to everyone participating in the transformation” of the country.

The Hubris of Our Would-Be Central Planners

The hubris just oozes from every presumption according to which these American central planners just know what needs to be done and why everyone else must cheerfully, enthusiastically follow the commands of our would-be national-socialist führers. The plan for this Green New Deal shows its totalitarian premise in each of its proposed elements. No corner of the economy would be exempt from the green planners’ control. Every human association and status in society would be subject to modification as determined by the social-justice warriors in power.

Once Democratically Chosen, No Reversing Socialism

But what happens to democracy after that? What if “the people” have second thoughts in election years 2022 or 2024 or 2026 or 2028? What if other voices challenge the premises and the policies of the Green New Dealers? If planetary existence and social justice for all time are at stake, can our democratic socialists allow the fickle and wrong-headed voting decisions of some of the people to alter the collectivist course that has been taken?

Surely, it would be irrational to permit the central plan to be dismantled, to backslide into chaotic and petty profit-motivated self-interest, to undo all that the revolution had been attempting to achieve. The socially just people’s will could not be allowed to be reversed because of some people’s misinformed and misguided voting whims under the influence of sinister interests swaying them against their true and real interests.

Oh, we have heard all this before, and no doubt, if they were to come to power, we would hear it all once more. But, but … it can’t happen here! Think again. The logic of central planning undermines the institutions and the spirit of liberty. By concentrating power and decision-making in the hands of those in government, socialist central planning first weakens and then eliminates autonomous centers of choice and association.

Property Rights and Personal Choice

One of the most essential aspects of private property rights is that it creates potential centers of control and discretion outside of the clutches of those in political authority. Private property in functioning free markets enables sources of employment and income independent of the government. The individual does not have to worry about loss of a government job, or his government-supplied income and benefits, or his chances for personal betterment due to any disagreement with or peaceful opposition to the policies and practices of the state.

Competitive, free markets provide avenues for a plethora of ways for multitudes of people to simultaneously follow diverse ends with alternative means considered better than those selected by others in society. Mistakes and second thoughts concerning what goals and purposes to pursue and how best to do so may be modified in many different ways by different people at different times, without needing to persuade or gain the electoral agreement of enough others through a voting process.

Central Planning Means Centralized Decision-Making

But this is exactly what our new American socialists are impatient with and want to do away with. There needs to be one master hierarchy of values, with one centrally guiding and implemented master plan to bring it to fruition, with all in the society accepting and making their own personal wishes and desires subordinate to it.

What they really want is a version of “democratic centralism” — that is, an inner circle of people ideologically motivated by the same general collectivist purposes and ideals who bargain over and divide the social spoils for the identity-politics-based factions and interest groups that they, respectively, represent, with no interference from the ignorant “reactionary” and supposedly race- and gender-bigoted individuals and groups who don’t understand the nature of a real “people’s democracy.”

The role of these uninformed masses, who must be constantly subject to government “re-education,” is to produce the wealth and output that the Green New Deal planners need to pursue their power-lusting dreams. And don’t worry, if they cannot plunder enough wealth through taxation to cover the costs of their social-engineering schemes, they say they will turn to the Federal Reserve to create all the paper money they will need to pay for all that they want to do. Welcome to the possibility of a Venezuela-style hyperinflation on the back of a stagnant economy built on the political insanity of those who claim to know how everyone should live under the central planners’ agenda for a new, carbon-free world.

These are dangerous ideas that threaten anew the foundations and functioning of what remains of personal freedom and free enterprise in the United States. The Green New Dealers’ self-righteous fanaticism and ideological enthusiasm for a collectivist America should not be underestimated. Understanding their misguided political assumptions and the damaging economic consequences that would follow from their coming to power is essential if a “green” road to serfdom is to be avoided.

 Richard M. Ebeling, an AIER Senior Fellow, is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel, in Charleston, South Carolina. This article appeared at AIER.org and has been edited for length.

The “Green New Deal”: Green Socialism Is Still Socialism.

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Upon taking control of the U.S. House of Representatives the first thing America’s Marxist Party did was to propose a Soviet-style, communistic destruction of American capitalism labeled a “Green New Deal.”  The Party chose as its spokesperson for this totalitarian venture a young woman named Sandy Ocasio who grew up in one of the wealthiest enclaves in America, Westchester County, New York, but who decided to lie about this to get into politics by calling herself “Alex from the Bronx.”  Sandy sounds like a poorly-educated-but-well-indoctrinated young communist with a ninth-grade mentality.  She proudly labels herself a “democratic socialist” but as Ludwig von Mises explained, there really is no difference between communism and socialism: they are both attacks on private property and economic freedom.  She seems clueless about just about everything she talks about in public, whether it is the Constitution, especially the economy, the structure of government, history, etc.  This is the person the American Marxist Party has chosen as its front person in its proposal to destroy American capitalism, prosperity, and the American dream forever—and to give itself totalitarian control over virtually all aspects of American life.

The first thing to understand about the proposed “Green New Deal” is that the first New Deal not only failed to end the Great Depression but made it more severe and longer-lasting.  Its only “success” was in creating endless patronage opportunities and levers of political bribery and extortion for the Democratic Party, opportunities that the Republican Party happily embraced whenever it could to expand its own power and wealth in the succeeding decades.  The proposed Green New Deal would do the same, only many orders of magnitude worse.

Failure of the First New Deal

At the outset of the Great Depression, 1929, the unemployment rate in America was 2.9% according to U.S. Dept. of Commerce statistics.  Unemployment reached its peak in 1933 at 24.9%.  There was a bit of a recovery as mal-investments were liquidated, but it only dropped the unemployment rate to 14.3% by 1939.  It rose to 19.0% in 1938 and was still 14.6% in 1940, on the eve of American entry into World War II.  Personal consumption expenditures were still lower in 1940 ($71.9 billion) than in 1929 ($78.9 billion).  All of this despite eight years of unprecedented New Deal “stimulus spending,” regulating, controlling, subsidizing, lending, inflating, price-controlling, and taxing.  The New Deal was an utter failure to the American people.  Economists Richard Vedder and Lowell Gallaway estimated in their book, Out of Work, that the unemployment rate was eight percentage points higher in 1940 than it otherwise would have been without New Deal minimum-wage and pro-union legislation alone.

Nor did World War II end the Great Depression.  It ended high unemployment only because some 16 million men were sent overseas during the war.  Sending a man to die in a foxhole in Germany is not the same as that man going to work in his own country and returning home to have dinner with his family every evening, contrary to Keynesian folklore about how the war supposedly “ended the Great Depression.”  The average American family back at home was even worse off because of the massive diversion of resources from the consumer and business side of the economy to the government’s military infrastructure.  The production of new automobiles and other products was made illegal, food was rationed, and everyone sacrificed even more.

The Great Depression did not really end until after the war was over and the army was demobilized, returning billions of dollars of resources to the private sector. Federal government expenditures fell from $98.4 billion in 1945 to $33 billion in 1948.  As a result, the year 1946 was the most prosperous year in all of American history in terms of the growth of the private components of GDP:  private consumption and investment spending increased by 30% in that one year; no other year has ever been remotely close to that growth rate. Keynesian economists predicted another Great Depression because of the two-thirds reduction in federal spending while the exact opposite happened.  That should have discredited Keynesianism forever, but the Washington establishment just ignored or lied about this fact, as it does to this very day.

It took some seventy years, but the “mainstream” of the economics profession finally caught on to this truth, a truth that was recognized by Austrian School economists all along.  In an August 2004 article in the prestigious Journal of Political Economy by Harold Cole and Lee Ohanian entitled “New Deal Policies and the Persistence of the Great Depression” the authors concluded that “New Deal . . . policies did not lift the economy out of the Depression . . . the abandonment of these policies coincided with the strong economic recovery of the 1940s” (emphasis added).

Nevertheless, the New Deal was a political power bonanza for FDR and his fellow Democrats.  According to a 1938 Official Report of the U.S. Senate Committee on Campaign Expenditures it was routine for the Roosevelt administration to demand that recipients of government make-work jobs, of which there were millions, register and vote as Democrats.  As Jim Couch and William Shughart wrote in The Political Economy of the New Deal, “The distribution of the billions of dollars appropriated by Congress to prime the economic pump was guided less by considerations of economic need than by the forces of ordinary politics.”  For example, the nation’s number one economic problem was the South, but since the South was solidly Democratic it received relatively little New Deal spending compared to other regions where FDR needed the votes.  And, “The states that gave Franklin Roosevelt larger percentages of the popular vote in 1932 were rewarded with significantly more federal aid than less-supportive constituencies.”  What else would anyone expect?

American socialists have always searched for deceptive euphemisms for socialism with which to disguise their totalitarian plans for the rest of us.  “Liberal,” “progressive,” “economic democracy,” “liberation theology,” “social justice,” and “industrial policy” are just a few examples.  “Green New Deal” is the latest manifestation of this political con game.

What has been proposed is nothing less than the destruction of the fossil-fuel-based energy industries which have long been the lifeblood of capitalism.  All houses and businesses are to be “upgraded” in terms of their energy use by thousands, or tens of thousands, of government bureaucrats who would presumably go door to door to enforce the state’s energy-use mandates.  There are vague promises of replacing the entire power grid with “renewable energy sources” such as windmills and solar panels.  It all sounds very much like a middle-school paper assignment for an “environmental ethics” class.  I would not be surprised to learn that Sandy Ocasio took such a class and wrote such a paper in the Westchester County public schools.

The entire U.S. economy would be “planned” by a fifteen-member congressional committee, Soviet style.  There is no acknowledgment at all of the failures of socialist planning everywhere else in the world; of the well-known economic reasons for these inherent failures; or of the fact that all the countries of the world that touted “planning” in the twentieth century have abandoned it, and for good reason.  It is a recipe for turning America into a Third World economic hellhole, in other words, to be completed “in ten years” according to the published plan.  Free-lunch economics pervades the plan, promising everyone a job and a “living wage” and of course, an end to economic inequality through ever more income redistribution schemes.  But not to worry, say the Marxist planners, it will all be paid for by the Fed, a new system of “government banks,” and higher taxes.  Simple.

 

Thomas J. DiLorenzo is professor of economics at Loyola University, Maryland. This article first appeared at mises.org.

The Elitists’ Carbon Dividends Miracle: Price Controls, Taxation, And Redistribution.

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The recent wave of populism spreading across America and Europe has captured the imagination of strange bedfellows. The election of President Donald Trump, the vote in favor of Brexit in the UK, and the rise of nationalist movements elsewhere, has really made an impression on global central planning elites.

Among these is the Climate Leadership Council, whose founders include former Secretaries of State, Treasury Secretaries, Harvard professors of economics, an heir to billions, a venture capitalist, and a think tank visionary with lots of political pull. In other words, the usual muckety-mucks. Their pet project is called the Carbon Dividends Plan, and their founding PR tactic is to hijack “the increasing frustration and economic insecurity that many voters feel the political establishment has failed to address.” Its stated objective “is to redirect this populist energy in a socially beneficial direction.” How nice, but how?

“The first pillar is a gradually increasing tax on carbon dioxide emissions at the mine, well, or port. A sensible carbon tax might begin at $40 per ton and increase steadily over time.” As an idea borrowed from the federal government’s baseline budgeting scam; the increases do not end. In the second pillar, “all the proceeds from this carbon tax would be returned to the American people on an equal and monthly basis” via direct deposit; and for the unbanked, PayPal or Western Union. The third pillar creates “border adjustments for the carbon content of both imports and exports to protect American competitiveness and punish free-riding by other nations.” Lastly, unnecessary regulations would be eliminated by “the enactment of a rising carbon tax whose longevity is secured by the popularity of dividends.”

A Rational View of Free Markets

The second tactic of this manifesto is to load the plan with references to “the principles of free markets” and the promise of “durable economic growth.” Before anyone invokes the glories of free markets, they should understand what that means. According to economist Murray Rothbard:

The free market and the free price system make goods from around the world available to consumers. The free market also gives the largest possible scope to entrepreneurs, who risk capital to allocate resources so as to satisfy utthe future desires of the mass of consumers as efficiently as possible. Saving and investment can then develop capital goods and increase the productivity and wages of workers, thereby increasing their standard of living. The free competitive market also rewards and stimulates technological innovation that allows the innovator to get a head start in satisfying consumer wants in new and creative ways.

But the Carbon Dividends Plan is actually a forced price system. It levies a tax at “the first point where fossil fuels enter the economy,” and an absurd system of tariffs and subsidies at our borders. Also, the scope to entrepreneurs only applies to “large scale substitution of existing energy and transportation infrastructure” in order to “stimulate new investment.” Just like hurricanes and vandalism do. Economic philosopher Frederic Bastiat explained this phenomenon a long time ago with his Broken Window Fallacy.

The Proof is in the Pandering

The Carbon Dividends Plan also claims to satisfy the desires of consumers, but with one little catch. The dividends “would be earned based on the good behavior of minimizing our carbon footprints.” The emotional tug is to pander to nationalist pride by invoking the US Constitution with “We the People deserve to be compensated.” The populist feeling “that the American political and economic system is rigged against their interests” would be soothed by a new system that “would tip the scales towards the interests of the little guy.”

And it will also increase the productivity and wages of workers. But not really, everyone gets the dividend. And not wages either, those require voluntary trade. But who cares, incomes will rise, something like a bribe. As far as rising living standards, the Carbon Dividends Plan would allow “forward-looking households” to borrow against future dividend income, but only for purchases that conform to the planner’s “effective, popular, and equitable climate solutions.” In other words, monetize an unearned asset, convert it into debt, and fund purchases from government subsidized cronies.

Like any authoritarian system, this dividends plan wouldn’t be complete without hijacking language. In this case, the debasement of the word dividend, and by extension, earned profit. The foundational tenet of free markets, advanced civilizations, and the root cause of peace and prosperity of everyone, debased along with it. So how does the Climate Leadership Council keep a straight face? Veronique de Rugy, a Senior Research Fellow at the Mercatus Center has a possible answer.

Despite the breadth of the current political divide, it appears that there is at least one thing that all politicians can agree upon: energy sector cronyism. The only real dispute is over the preferred beneficiaries.

Of Cronies and Climate

Since the Carbon Dividends Plan is riddled with unworkable ideas masquerading as sound economic policy, there must be some payoff somewhere. Is it good old fashioned regulatory quid pro quo, or is it royalties for the intellectual elites who are merely gilding their reputations as planet saviors? Yes, and power over the means of production. And while the manifesto admits “the extent to which climate change is due to man-made causes can be questioned,” it doesn’t matter. Their plan is a “simple idea” that “could strengthen our economy, benefit working class Americans, reduce regulations, and protect our natural heritage.” And it could give pigs wings, freeze hell, and invent water.

What’s really sad is how badly these planners are disconnected from reality. They think this populist surge is founded in stupidity, and can be harnessed with more crony pandering. But who is really stupid? They claim “we need an insurance policy” against those “fostering a needless climate divide” with the “international mainstream.” What they really want is an insurance policy against the spontaneous order of free people; people who are pursuing their own rational self-interests. Yes, the ones that renders their international mainstream irrelevant.

 

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