Author Archive
Michael Lind’s Economic Philistinism
In a recently published article for the journal Democracy, Michael Lind of the New America Foundation lays out “The Case for Goliath” (registration required) — i.e., for returning to the good old days of price-and-entry regulation and cartelized industries. No, seriously.
I’ll give Lind credit for daring to go where his fellow devotees of “nostalgianomics” fear to tread. Many on the left these days look back fondly at the ’50s and ’60s when activist government and strong unions coincided with a narrowing income distribution. What they fail to recognize, or at least admit, is that the political economy of that supposed golden age rested on a systematic muting of competition, both by circumstance and deliberate policy. The devastation of Europe and Japan in World War II, price-and-entry controls, high trade barriers, and the threat of antitrust enforcement against industry leaders all combined to make heavy unionization and above-market wages for union workers economically viable.
This glaring oversight is understandable. There is, after all, overwhelming economic evidence that competition beats cartelization of industry hands down. When government restricts entry by new firms, the predictable result is a stifling of innovation. For example, consider this admission by former FCC chairman Michael Powell: “Because the history of the FCC is, when something happens that it doesn’t understand, kill it. We tried to kill cable. We tried to kill long-distance. When [MCI founder] Bill McGowan starting stringing out microwave towers that threatened AT&T, the FCC tried to stop him. The FCC tried to kill cable because it was going to threaten broadcasting.” (For more details on the the FCC’s lamentable track record, see here.)
The upshot is that progressive fantasies of a return to the good old days are just that — fantasies. Private-sector unions have withered and shrunk not because of changes in labor law, but because unionized firms haven’t been able to hack it in the new, more competitive marketplace (see “Auto industry, U.S.”). So the only way to get back to the days of Big Labor is by throttling the main engine of innovation and productivity: competition. And, well, that just doesn’t sound very progressive, does it?
Lind, though, grasps the nettle and chooses cartels and unions over economic progress. He does try to argue that we can have our cake and eat it too, but his case boils down to a crude post hoc ergo propter hoc fallacy: the big move toward cartelization in the ’30s was followed by good times in the ’50s and ’60s (let’s not talk about the ’70s), so therefore cartelization was good for the economy! Yes, and the Union won the Civil War with inferior generals, so perhaps poor military leadership is a key to victory. The fact is, the strong economic performance of the early postwar decades occurred in spite of, not because of, widespread restrictions on competition.
Though the anticompetitive nostrums Lind peddles are pure poison, he nonetheless deserves commendation. By identifying correctly the link between cartelization and strong unions, Lind highlights the essentially reactionary nature of progressives’ infatuation with Big Labor. He has therefore, however unwittingly, performed a public service.
The Closing of the Conservative Mind
If you’re unclear what’s wrong with conservatism these days, I urge you to check out the tragicomic dustup accidentally provoked last week by my colleague Jerry Taylor at National Review Online’s “The Corner” blog.
I don’t want to give a blow-by-blow recount of the fracas, but happily a convenient compendium of the relevant links is provided here. Go read the whole thing; you’ll be entertained, that’s for sure. For present purposes, suffice it to say that Jerry made two basic points: (1) talk radio hosts Rush Limbaugh and Sean Hannity are not popular outside the conservative movement; and (2) the two have a habit of making “dodgy” arguments even when their positions are sound. He might have added that the sky is blue and A comes before Z. For his effrontery Jerry was verbally beaten to a pulp by his fellow Cornerites.
The whole thing seems like an updated version of the Emperor’s New Clothes, except this time the crowd turns on the truth-telling kid and gives him the Rodney King treatment. And that response to Jerry’s innocent and obvious points captures the essence of what has gone wrong with the conservative movement. That the flagship publication of the movement will brook no criticism of demagogic blowhards like Limbaugh and Hannity says it all: A movement founded on the premise that “ideas have consequences” has suffered a calamitous decline in intellectual standards.
Richard Posner agrees. In a recent blog post, he offered this withering assessment of the state of the conservative mind:
My theme is the intellectual decline of conservatism, and it is notable that the policies of the new conservatism are powered largely by emotion and religion and have for the most part weak intellectual groundings. That the policies are weak in conception, have largely failed in execution, and are political flops is therefore unsurprising. The major blows to conservatism, culminating in the election and programs of Obama, have been fourfold: the failure of military force to achieve U.S. foreign policy objectives; the inanity of trying to substitute will for intellect, as in the denial of global warming, the use of religious criteria in the selection of public officials, the neglect of managment and expertise in government; a continued preoccupation with abortion; and fiscal incontinence in the form of massive budget deficits, the Medicare drug plan, excessive foreign borrowing, and asset-price inflation.
By the fall of 2008, the face of the Republican Party had become Sarah Palin and Joe the Plumber. Conservative intellectuals had no party.
I don’t endorse every detail of Posner’s bill of indictment, but the broad thrust is correct. Movement conservatism has regressed to something like the days before National Review was founded — back when Lionel Trilling could say that conservatism consisted of nothing but “irritable mental gestures which seek to resemble ideas.” And as Jerry’s trip to the woodshed demonstrates, those gestures can be very irritable indeed! Conservatism today has degenerated into a species of especially unattractive populism, pandering to the pro-torture-and-wiretapping, anti-gay-and-Mexican prejudices of a dwindling, increasingly sectarian, increasingly regional “base.”
Some who sympathize with libertarian and free-market causes are cheered by the anti-government rhetoric and Tea Party theatrics now increasingly in evidence on the right. Perhaps, they think, the old Goldwater-Reagan conservatism is making a comeback. Sorry, but I seriously doubt it. On the contrary, I worry that good free-market ideas are going to get tainted by association with an increasingly brutish identity politics for angry white guys and the women who love them.
In order to make gains for the cause of limited government, we need to convince smart people that we are right. We need to win the battle of ideas in the intellectual realm by making better arguments than our opponents, and we need to educate the public so that it is less susceptible over time to “rational irrationality.” None of this can be accomplished by consorting with and apologizing for merchants of intellectual junk food, or by making common cause with some of the ugliest cultural attitudes in contemporary America. Greater economic freedom will not come with pitchforks and torches; it will come, as it has in the past, by reshaping the elite consensus.
Nostalgianomics: If the Shoe Fits…
In a recent post commenting on my new Cato paper, Matt Yglesias just doesn’t get why I would accuse Paul Krugman of peddling nostalgia for the good old days of his boyhood. Indeed, Matt says my whole argument is “kind of silly.” Here’s the gist of Matt’s critique:
In his paper, Lindsey takes the unusual-for-a-libertarian tack of agreeing with Krugman (and others) that public policy changes have played an important role [in increasing inequality]. But he argues that the changes have mostly been changes that, on net, are positive. So it’s wrong of Krugman to espouse nostalgianomics and support a return to the policies of the 1950s. Which is fine, except I read almost every Krugman column and I’ve read Conscience of a Liberal (and, indeed, other works of Krugmanania such as Pop Internationalism and Peddling Prosperity) and it’s not as if the book ends with a call for the return of comprehensive regulation of airline fares or the re-establishment of the AT&T monopoly. To observe that the growth of inequality has policy roots isn’t to say that the right response to it is to methodically reverse every policy change of the past thirty years. It’s simply to deny the previous conventional wisdom — that it would be impossible to reverse the growing inequality of our society.
I think Matt misunderstands both my argument and what Krugman has been doing. I quite agree that Krugman doesn’t want a full-scale reinstatement of the corporatist, cartelistic policies of yesteryear. I say as much in the paper. What Krugman does want, however, is to portray the economic policies of the early postwar decades as an inspiration for progressives today — an example of how activist, interventionist government can simultaneously promote growth and reduce inequality. To quote Krugman’s Conscience of a Liberal: “During the thirties and forties, liberals managed to achieve a remarkable reduction in income inequality, with almost entirely positive effects on the economy as a whole. The men and women behind that achievement offer today’s liberals an object lesson in the difference leadership can make.”
To get to that ideologically convenient punch line, Krugman is forced to systematically misrepresent the policies and culture of the early postwar decades. He has to leave out all the things he doesn’t like, all the things that virtually all his fellow economists and fellow progressives don’t like, about the supposedly good old days — for example, the widespread cartelization efforts of the thirties, farm supports, price and entry controls on large sectors of the economy, restrictions on retail competition, high trade barriers, racist immigration laws, and the sexist confinement of working women to a pink collar ghetto. All of these contributed to the compression of incomes, yet they don’t serve Krugman’s ideological purposes. So he ignores them. That’s nostalgia-mongering, plain and simple: the selective recall of the past to make it seem better than it really was.
The relevance of all this to today’s situation is both real and important. Progressives have returned to power, and because of the current economic crisis the policymaking environment is incredibly fluid. Big changes are possible, indeed almost inevitable. In particular, proposals to substitute government control for market competition on a massive scale are now on the table: large-scale industrial policy in the name of creating “green” jobs, a full-court press to restore the power of private-sector unions, a qualitative increase in government’s role in health care, and “temporary” (such a dangerous word in Washington) government control of large parts of the financial system. We run the risk right now of making disastrous mistakes that will haunt us for many years to come. And that risk is exacerbated by the nostalgic fantasy, peddled by Krugman and others, that the record of the early postwar decades shows that Big Government and Big Labor are actually good for the economy.
The End of Jacob Weisberg
In an article for Slate (another version appears in Newsweek) entitled “The End of Libertarianism,” Jacob Weisberg mocks libertarians and other free-market supporters for arguing that interventionist government policies contributed to the financial crisis. In italicized exasperation he cries, “Haven’t you people done enough harm already?” According to Weisberg, it’s already clear that, when it comes to what caused the meltdown, “any competent forensic work has to put the libertarian theory of self-regulating financial markets at the scene of the crime.” Consequently, he argues, libertarians in general have now been utterly discredited. “They are bankrupt,” he concludes, “and this time, there will be no bailout.”
In firing this broadside, Weisberg poses as the pragmatic, empirically minded anti-ideologue. In fact, he is engaging in the lowest and most intellectually trivial form of ideological hack work.
As every good hack does, he bulls ahead with completely unjustified certainty. We’ve just experienced a global disruption of financial markets on a scale not seen in seven decades. And we’re still in the middle of it: the ultimate extent, severity, and consequences of this crisis remain unknown. Yet Weisberg can already sum up the story in a single sentence: the libertarians did it!
But consider the fact that it wasn’t until Milton Friedman and Anna Schwartz’s Monetary History of the United States — published in 1963, three decades after the event — that our contemporary understanding of the causes of the Great Depression began to take shape. That understanding has been further refined by contributions from, among others, Ben Bernanke and Barry Eichengreen during the 1980s and ’90s.
So serious people will be debating what triggered the current crisis for a long time to come. I’ve been reading voraciously in recent weeks, trying to get some handle on what’s going on, and I can tell you that there is nothing like a consensus among scholars yet — and certainly not a consensus in favor of some simple, monocausal explanation.
With regard to government interventionism as a cause of the crisis, Charles Calomiris and Peter Wallison have marshalled strong evidence that Fannie and Freddie played a major role in inflating the real estate bubble. Despite the fact that these two gentlemen have forgotten more about financial markets than Weisberg will ever know, Weisberg dismisses their analysis as not only wrong, but risible.
Filed under: Finance, Banking & Monetary Policy; Foreign Policy and National Security; Political Philosophy
Follow Huckabee’s Money
I read in Robert Novak’s column this morning that Mike Huckabee held a fundraiser earlier this week at the Houston home of Dr. Steven Hotze. As Novak notes, Hotze is “a leader in the highly conservative Christian Reconstruction movement.”
Christian Reconstructionists, for those unfamiliar with the term, are Religious Right radicals who believe that America, and the rest of the world besides, should be governed in accordance with strict Biblical law. And yes, that includes stoning adulterers. Here’s a snippet from “A Manifesto for the Christian Church,” a 1986 document from an outfit called the Coalition on Revival that was signed by, among others, Steven Hotze:
We affirm that the Bible is not only God’s statements to us regarding religion, salvation, eternity, and righteousness, but also the final measurement and depository of certain fundamental facts of reality and basic principles that God wants all mankind to know in the sphere of law, government, economics, business, education, arts and communication, medicine, psychology, and science. All theories and practices of these spheres of life are only true, right, and realistic to the degree that they agree with the Bible.
For more, check out this audio clip of Hotze from back in 1990. Over the years, Hotze has achieved some prominence for his anti-abortion and anti-gay activism. Also, the good doctor appears to be a total quack.
Meanwhile, Novak reports that among the members of the fundraiser’s host committee was Baptist minister Rick Scarborough. The founder of Vision America and a self-described “Christocrat,” Scarborough made news earlier this year when he argued that the HPV vaccine improperly interferes with God’s punishment of sexual license.
Just when you thought the Huckabee campaign couldn’t get any creepier….
[cross-posted from www.brinklindsey.com]
Krugman’s Populist Fantasies
Paul Krugman’s transformation into a Howard Beale wannabe continues to (take your pick) astound/amuse/sadden. In today’s column, Krugman blasts Barack Obama for his “naïve” refusal to demonize those with whom he disagrees on public policy issues. Siding instead with John Edwards, he endorses the view that “America needs another F.D.R. — a polarizing figure, the object of much hatred from the right, who nonetheless succeeded in making big changes.”
Hmm, who’s the one being naïve here? Let’s recall that F.D.R. won the presidency in the depths of the worst economic cataclysm in American history — public blame for which fell squarely on his partisan and ideological opponents. Consequently, F.D.R. entered the White House with 313 fellow Democrats in the House and 61 in the Senate. Under the circumstances, it is entirely understandable that he didn’t worry too much about maintaining bipartisan good feeling.
But does anybody think that the political environment in 2009 will be remotely similar to that of 1933? Even assuming that a Democrat wins the White House and Democratic majorities in both houses of Congress are maintained, how likely is it that “big changes” are going to occur without some significant level of Republican support?
Based, no doubt, on the direct line to vox populi afforded him by his twin perches at the New York Times and Princeton University, Krugman is convinced that the hour of the angry populist is at hand. “[T]here’s every reason to believe,” he writes, “that the Democrats can win big next year if they run with that populist tide.” Krugman cites as confirming evidence CNN and FoxNews focus groups that declared Edwards the winner of the most recent Democratic debate. He’s curiously silent, however, about all the other polls that show Edwards trailing badly behind the more centrist Hillary Clinton and Obama.
At the end of his column, Krugman accuses those who long for a less vitriolic politics of “projecting their own desires onto the public.”
That’s funny.
[cross-posted from www.brinklindsey.com]
Lind on Libertarianism
Michael Lind is at it again, proclaiming the death of libertarianism on the op-ed pages of the Financial Times. “The two great trends now,” he writes, “are the collapse of libertarianism as a political force and the rise of economic populism.”
In the piece Lind provides a potted history of America’s evolving political economy. In the opening act of 1932-1968, New Deal welfare-state liberalism occupied the political center, flanked on the left by economic populism and on the right by Eisenhower-style “dime store New Deal” conservatism. Then came the shift to the right during 1968-2004, when welfare-state liberalism was shunted to the left, a newly assertive libertarianism occupied the right, and moderate conservatism commanded the center. Now, according to Lind, anxieties over globalization have led to the rout of the libertarians and the rebirth of populism. So we’re back to where we began, with welfare-state liberalism in the center (where, according to Lind, it rightfully belongs).
I’ll concede that we’ve seen a cyclical shift in recent years somewhat along the lines Lind describes. The political terrain has become more difficult for supporters of free markets and limited government, and more inviting for Lou Dobbsian populism.
But we need to be careful to distinguish between cyclical and secular change. Lind focuses on the back-and-forth of the pendulum and misses the fact that the whole clock has been moving. And it’s been moving in a generally libertarian direction.
Lind merrily proclaims that welfare-state liberalism has reclaimed the center that it occupied during 1932-1968. But he ignores the fact that welfare-state liberals today are dramatically more libertarian on economic issues than their predecessors in their parents’ and grandparents’ generations. Nobody these days seriously supports a return to a 70% top income-tax rate, or Keynesian fine-tuning, or interest-rate controls for banks, or the phone monopoly, or regulated trucking; nobody touts nationalization or wage-and-price controls as cures for what ails.
The economy today is dramatically more competitive and entrepreneurial today, and markets are dramatically less regulated, than was the case a few decades ago. And notwithstanding Lind’s fond hopes for a return of the New Deal liberal ascendancy, there is little reason to believe that this huge secular shift is going to be reversed in the foreseeable future.
Filed under: General; Government and Politics; Political Philosophy
Paul Krugman and the Unbearable Lameness of Partisanship
In a recent appearance on bloggingheads.tv with Mark Schmitt, I expressed disdain for the current spate of conservative-bashing books by Jonathan Chait, Greg Anrig, and Paul Krugman. Now don’t get me wrong: conservativism deserves some fairly spirited bashing these days. But what I objected to about these books was their crude partisanship — specifically, their grossly distorted, black-hats-versus-white-hats version of recent American political history.
I didn’t get a chance there to flesh out my criticisms in any detail, so I’d like to do a little bit of that here. And thanks again to bloggingheads.tv (if you’re not familiar with it, it’s really a terrific site), I’ve got an excellent jumping-off point: an interview of Paul Krugman by none other than Mario Cuomo. Cuomo, it turns out, is an excellent interviewer, carefully drawing out Krugman’s views and gently challenging him at a number of points. And the picture of Krugman that emerges is one of a man completely besotted with ideological enthusiasm.
You have to remember who Paul Krugman is, or at least who he was: an immensely talented economist, winner of the John Bates Clark medal, capable of analytical ingenuity at the most rarefied level and simultaneously a gifted popularizer of complex economic ideas. So how can someone with so much brainpower, with such talent for subtlety and insight, say something like this? Or this?
Let’s focus on these two snippets. In the first, Krugman says that the middle-class society he grew up in (i.e., the American political economy of the quarter-century after World War II) did not evolve by the invisible hand of the market; it was created by FDR and the New Deal. Meanwhile, the “second Gilded Age” we now live in (i.e., the American political economy of the past quarter-century) was created by Reagan and other right-wing politicians.
And in the second clip, Krugman defines liberalism as the idea that we are our brothers’ keepers, and that government needs to ensure a basic minimum for all citizens. Conservatives, on the other hand, believe “you’re on your own.”
In these clips we see, not subtlety or insight or analytical ingenuity, but the Manichean worldview of the true believer: one mass political movement, defined by its noble intentions, accomplishes unalloyed good, while a rival mass political movement, motivated by base and selfish values, works to undo that good. Read the rest of this post »
The Liberaltarians Are Coming…
… and Harold Meyerson is not pleased!
In his Washington Post column today, Meyerson bemoans the sinister influence of “Wall Street Democrats”:
The younger masters of the universe who work on Wall Street like as not are liberal on cultural issues and appalled at Republican foreign policy, though they’re no fans of regulating capitalism. They give big-time to such Democrats as Barack Obama (who supported legislation moving class-action lawsuits from state to federal courts, a bill intended to reduce the size of jury awards in such lawsuits) and Chuck Schumer (who has opposed a fairer tax rate for hedge fund operators)….
The problem is that the drift of much of Wall Street toward the Democrats on noneconomic issues coincides with Wall Street’s creation of inscrutable and unregulated investment devices that imperil the entire economy, as the current mortgage crisis makes painfully clear. On gay rights, say, the nouveau financiers are 21st-century progressives; on economic oversight, they are 1920s speculators, determined to keep their machinations free from public oversight.
Last year, in a piece called “Liberaltarians,” I wrote that conservatism’s crackup had created the possibility that libertarian-leaning “economically conservative, socially liberal” types might shift their loyalties to the Democratic Party. I was urging liberals to meet them halfway, and that certainly hasn’t happened yet. But maybe it doesn’t matter.
After all, if small-government voters come to think of themselves as Democrats because of social and foreign policy issues, sooner or later they’ll try to make their influence felt on economic matters as well. Will they be able to make a discernible impact on the Democratic Party’s longstanding love affair with Big Government? Who knows, but the very idea is giving Harold Meyerson heartburn — and, surely, that’s an encouraging sign.
[cross-posted from www.brinklindsey.com]
Disaster Collectivism
Naomi Klein, darling of the loonie left, has a new book out called The Shock Doctrine: The Rise of Disaster Capitalism. The basic idea is that the insidious forces of neoliberalism take advantage of wars, economic crises, and natural disasters to impose their evil schemes on disoriented and distracted publics. The career of Milton Friedman, the occupation of Iraq, and the bungled response to Katrina are all supposedly cases in point.
Klein is not a serious person, and in this book she does not mount a serious argument. But she does raise an interesting issue: the political implications of crises. It is certainly true that the waves of liberal reform (political as well as economic) that swept the world in the ’80s and ’90s were often triggered by economic crises. Indeed, I wrote a book on the subject in which I interpreted the current episode of globalization as a response to the often cataclysmic breakdown of various state-dominated models of economic development.
There’s nothing terribly surprising about this. Inertia is a powerful force in politics: every status quo has vested interests that benefit from it, while advocates of change push in all different directions and frequently cancel each other out. A crisis, though, can discredit the status quo and demoralize its supporters, while galvanizing particular pro-reform camps and boosting their credibility. Politics suddenly becomes more fluid; rapid and sweeping changes that had no chance of being enacted beforehand now occur in rapid succession.
But it’s ridiculous to portray this dynamic as somehow uniquely favoring one side of the political spectrum. Recall the great triumphs historically associated with the left: the French Revolution was made possible by the financial distress of the ancien regime; the Paris Commune was founded after defeat at the hands of the Prussians; the Russian Revolution was catalyzed by military failures in World War I.
In our own country, it was a one-two punch of cataclysms – the Great Depression, followed by World War II — that brought Big Government to the United States and then consolidated its hold. The unprecedented economic collapse made traditional American attitudes of laissez faire and individual responsibility seem hopelessly outdated; by contrast, the frenetic activity of the New Deal, regardless of the decidedly mixed results, projected boldness and vigor and hope. The subsequent mass mobilization for total war reinforced the shift in political culture. If you watched any of the wonderful new Ken Burns documentary on “The War,” you saw that the “home front” wasn’t just an expression: the diversion of the country’s industrial might to war production, price controls and rationing, extremely high tax rates, war bond drives, and incessant propaganda combined to thoroughly collectivize American society. And it worked: the economy boomed, people reaped the psychological satisfactions of banding together against a common and abominably evil enemy, and in the end America triumphed.
Today people on the left are filled with nostalgia for the political economy of the early postwar decades. I don’t think many of them recognize, though, how heavily their Golden Age depended on the lingering economic and cultural effects of destruction on a mind-boggling scale. They call themselves progressives, yet they pine for the good old days of disaster collectivism.
[cross-posted from www.brinklindsey.com]
Invasion of the Cheney Snatchers
This eerie video clip of a 1994 interview with Dick Cheney has been making the rounds in recent days:
In it, Cheney defends the Bush 41 administration’s decision not to proceed to Baghdad after expelling the Iraqi army from Kuwait. His description of the downsides of occupation now sounds downright prophetic.
Seeing this clip reminded me of a personal experience along similar lines. Back in 1998, when I was running Cato’s then-new Center for Trade Policy Studies, we held a conference on unilateral economic sanctions called “Collateral Damage: The Economic Cost of U.S. Foreign Policy.” And our luncheon speaker at that event was none other than Halliburton CEO Dick Cheney.
Looking back at the transcript of his talk, you can see that it’s not just Cheney’s views of the wisdom of occupying Iraq that have undergone an amazing transformation. So has his attitude about engaging versus confronting Iran:
[O]ur sanctions policy oftentimes generates unanticipated consequences. It puts us in a position where a part of our government is pursuing objectives that are at odds with other objectives that the United States has with respect to a particular region.
An example that comes immediately to mind has to do with efforts to develop the resources of the former Soviet Union in the Caspian Sea area. It is a region rich in oil and gas. Unfortunately, Iran is sitting right in the middle of the area and the United States has declared unilateral economic sanctions against that country. As a result, American firms are prohibited from dealing with Iran and find themselves cut out of the action, both in terms of opportunities that develop with respect to Iran itself, and also with respect to our ability to gain access to Caspian resources. Iran is not punished by this decision. There are numerous oil and gas development companies from other countries that are now aggressively pursuing opportunities to develop those resources. That development will proceed, but it will happen without American participation. The most striking result of the government’s use of unilateral sanctions in the region is that only American companies are prohibited from operating there.
Another good example of how our sanctions policy oftentimes gets in the way of our other interests occurred in the fall of 1997 when Saddam Hussein was resisting U.N. weapons inspections. I happened to be in the Gulf region during that period of time. Administration officials in the area were trying to get Arab members of the coalition that executed operation Desert Shield/Desert Storm in 1991 to allow U.S. military forces to be based on their territory. They wanted that capability in the event it was necessary to take military action against Iraq in order to get them to honor the UN resolutions. Our friends in the region cited a number of reasons for not complying with our request. They were concerned with the fragile nature of the peace process between Israel and the Palestinians, which was stalled. But they also had fundamental concerns about our policy toward Iran. We had been trying to force the governments in the region to adhere to an anti-Iranian policy, and our views raised questions in their mind about the wisdom of U.S. leadership. They cited it as an example of something they thought was unwise, and that they should not do.
So, what effect does this have on our standing in the region? I take note of the fact that all of the Arab countries we approached, with the single exception of Kuwait, rejected our request to base forces on their soil in the event military action was required against Iraq. As if that weren’t enough, most of them boycotted the economic conference that the United States supported in connection with the peace process that was hosted in Qatar during that period of time. Then, having rejected participation in that conference, they all went to Tehran and attended the Islamic summit hosted by the Iranians. The nation that’s isolated in terms of our sanctions policy in that part of the globe is not Iran. It is the United States. And the fact that we have tried to pressure governments in the region to adopt a sanctions policy that they clearly are not interested in pursuing has raised doubts in the minds of many of our friends about the overall wisdom and judgment of U.S. policy in the area.
Note again that Cheney gave these remarks in 1998 — when Iran’s nuclear ambitions were already well known, and two years after the Khobar Towers bombing in which Iran was believed to be complicit.
9/11 may not have changed everything, but it sure changed Dick Cheney.
[cross-posted from www.brinklindsey.com]
The Myth of the Rational Voter
Cato adjunct scholar Bryan Caplan has a fantastic new book out from Princeton University Press called The Myth of the Rational Voter: Why Democracies Choose Bad Policies. In it he argues that misguided policies can’t just be blamed on special interests and the “concentrated benefits/dispersed costs” dynamics explored by public choice economics. According to Caplan, voter irrationality — systematic erroneous biases in public opinion — is a major culprit as well.
Which is to say, Caplan confirms the wisdom of H. L. Mencken’s observation: “Democracy is the theory that the people know what they want and deserve to get it good and hard.”
In my opinion, Caplan’s book makes a major contribution to our understanding of the sausage grinder of democratic policymaking. So buy it and read it!
But if you’re short on time, here are some shortcuts for getting up to speed on what Caplan has to say. First, Cato released last week a new Policy Analysis that is an excerpt from the book. In particular, I’d heartily recommend this paper to all those who fancy themselves members of the “reality-based community” yet blithely cling to social-scientific illiteracy when it comes to basic principles of economics. The “assault on reason,” it turns out, is a pincer movement involving both sides of the political spectrum.
Also, you might want to check out this “diavlog” between Caplan and Cato policy analyst Will Wilkinson on bloggingheads.tv.
Ahead of the curve as always, Cato Unbound devoted its November issue last year to an in-depth discussion of Caplan’s thesis.
And just to whet your appetite, take a look at this profile of Caplan from the New York Times magazine.
Abundance Has Arrived
Today is the official release date for my new book, The Age of Abundance. In it I offer a new interpretation of American history since World War II — one that focuses on the sometimes exhilarating, sometimes disorienting social changes triggered by the advent and deepening of mass prosperity. The civil rights movement and the sexual revolution, environmentalism and feminism, the fitness and health care boom and the opening of the gay closet, the withering of censorship and the rise of a “creative class” of “knowledge workers,” the decline of machine politics and the mad proliferation of subcultures and lifestyles — all, in my telling, are the progeny of economic abundance. Furthermore, I argue that the upshot of all these changes is a much more libertarian America, although politics has not yet caught up to the new social reality.
I’ve also started up a weblog, www.brinklindsey.com, as a companion site for the book. The idea is to comb the Internet’s massive historical archives for materials and imagery that relate to the book’s themes. Check it out!
Review of Barber’s Consumed
I have a review in today’s Wall Street Journal (subscription required) of Benjamin Barber’s new book Consumed, which examines the supposed perils of material plenty. The book’s unsubtle subtitle makes it clear enough where Barber stands: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole.
Here’s a sample of my take on Barber:
[Barber] sees the explosion of consumer choices today and assumes that Americans are growing ever more materialistic: The more gadgets, gizmos and fripperies the marketplace serves up, the more deeply we fall under commerce’s evil spell. In fact, the opposite is true.
Political scientist Ronald Inglehart has exhaustively documented a world-wide shift toward “postmaterialist” values, in which, as he puts it, the “emphasis on economic achievement as the top priority is now giving way to an increasing emphasis on the quality of life.” The more stuff we have, the less interested we become in simply accumulating more and the more we seek out instead the intangible satisfactions of memorable experiences, meaningful work and self-realization.
The existence of books like Mr. Barber’s proves the point. In an amusing irony, the progress of capitalist development creates a continuing demand for fulminations against the evils of materialism. Thus do anti-market intellectuals like Benjamin Barber find their niche in the consumerist cornucopia they so revile.
For my further thoughts on the revolutionary social consequences of capitalist mass affluence, check out my forthcoming book (out next month) The Age of Abundance: How Prosperity Transformed America’s Politics and Culture.
More on Libertarians and Democrats
In a blog post yesterday, my colleague John Samples tried to pour cold water on my idea of libertarian outreach to the left. Specifically, he cites depressing polling data that show strong support among Democratic voters for increased government spending. Alas, the appetite for free ice cream from Washington isn’t restricted to Democrats, as I point out in an essay for this month’s issue of Cato Unbound. I’ll concede, though, that Democratic voters are especially unlikely to pressure their representatives to show spending restraint.
Does that mean libertarians have no business seeking common ground with liberals? Let me make just a couple of quick points.
First, polls aren’t everything. After all, as Cato’s Stephen Slivinski has written, real federal spending increased at an annual rate of only 1.5 percent under Bill Clinton, as compared to a 5.6 percent rate of growth during George W. Bush’s first term. So Democratic politicians can run and win on a record of fiscal prudence. Yes, it’s true that Clinton’s good spending record was due in significant part to the fact that he faced a GOP Congress for most of his time in office. But this just shows that people who care about controlling spending would do better to rely on divided government than on Republicans’ small-government rhetoric. And you can’t have divided government without electing some Democrats!
Second, spending isn’t everything. The cause of limited government has many other dimensions besides the degree of budget bloat. How, I wonder, do Democratic voters compare to Republicans in their attitudes on getting out of Iraq? Getting into Iran? Torture? Warrantless wiretapping? Immigration? The drug war? Whatever voters tell pollsters, it’s clear that Democratic politicians are more likely than their GOP counterparts to resist government overreaching in these vital areas.
The sad fact is that libertarians have few allies today in either political party. Why on earth then should we refuse to seek common ground with those Democrats who hold relatively pro-market attitudes?
Ponnuru Misses the Point
In his cover story for the new issue of National Review, “Conservatives on the Couch” (not yet available online), Ramesh Ponnuru devotes considerable ink to debunking the recent Cato study by David Boaz and David Kirby on “The Libertarian Vote.” I think he misses the point.
Here’s Ramesh:
David Boaz and David Kirby … have recently made an ambitious attempt to claim that libertarians are the swing voters at the center of American politics. Their chief evidence: The 15 percent of voters whom they identify as broadly “libertarian” gave Bush 72 percent of their votes in 2000 and only 59 percent in 2004….
They seem unaware that their data tell more against than for their thesis. The electorate as a whole swung toward Bush during those years: He increased his percentage of the overall vote from 48 to 51. Libertarians swung one way; the remaining 85 percent of the electorate swung the other way, and swung far enough to overwhelm the libertarians. Could it be that the same actions that alienated libertarians won Bush the support of these other voters? Well, yes, it could.
For those keeping score at home, here’s how my card reads: Ramesh, 1; Straw Man, 0!
Ramesh does a fine job of marshaling evidence in support of the utterly obvious. Of course libertarians aren’t the kingmakers of American politics. Of course it’s possible to ignore particular libertarian concerns and profit electorally. If those things weren’t true, much of American history would be inexplicable.
As I read it anyway, “The Libertarian Vote” makes more modest claims than those Ramesh seeks to refute. And Ramesh’s critique leaves those modest but important claims intact.
The fact is we don’t know why libertarian support for Bush declined between 2000 and 2004. Was it the war? Big spending? Social issues? The overall stink of incompetence? Or some or all of the above? We just don’t know.
We therefore don’t know what overlap there is between the issues that underlay reduced libertarian support and those that underlay increased overall support. It’s possible that an alternative-universe Bush administration could have taken positions that maintained or increased libertarian support while increasing support from other quarters as well – thus producing an even bigger victory in 2004 than the one that occurred here (which was pretty anemic for an incumbent with an expanding economy).
Here’s what we do know after reading “The Libertarian Vote.” The group of broadly libertarian, “economically conservative but socially liberal” voters makes up around 15 percent of the population. Historically, these voters have strongly favored Republicans, but their level of support fluctuates and has been trending down of late.
And what does that mean? It means that Democrats might be able to capitalize on those recent trends if they made any concerted effort at all to appeal to libertarians. And by so capitalizing, they might be able to change the outcome of close elections.
And if Democrats started winning by attracting libertarians who used to vote GOP — as it appears they have begun doing in Western states, according to Ryan Sager — libertarians could actually end up as a bona fide swing constituency, actively courted by both sides. And wouldn’t that be fun?
We’re not there yet. Right now, the libertarian vote is only a potentially important swing constituency. It has come into play for reasons we don’t understand well. But it’s big enough, and volatile enough, that it could lend decisive aid to either party that courts it.
Ramesh’s message seems to be that small-government types are unpopular nerds who should content themselves with being allowed to run with the social-conservative cool kids. (Yeah, I know that sounds funny — the conservative cool kids, I mean, not the libertarian nerds.)
I say libertarians can do better than that. And the data in “The Libertarian Vote” show that isn’t just an idle fantasy.
Filed under: Cato Publications; General; Government and Politics
Taking Labor Markets Seriously
Perplexity over economic statistics – in particular, the decades-long trends of flat median real wages and increasing income inequality, combined with a recent disconnect between productivity growth and wage increases – is provoking serious, sober-minded people on the center-left to worry whether there might be something badly wrong with America’s economic system.
In a well-written piece (subscription required) for The New Republic, Jonathan Chait chronicles how the economic numbers are undermining confidence among Democrats in Clinton-style, pro-growth economic policies. The bottom line: what good is economic growth if it only benefits those at the very top?
Ezra Klein of The American Prospect is among the anxious. He’s written frequently on this point, but here’s a typical formulation of the perceived problem as he sees it:
What worries me about inequality isn’t what it does, but what’s doing it, namely, a decades-long decline in worker bargaining power and the resultant redirection of productivity increases and corporate profits away from compensation and salaries.
And here’s another:
[T]hrough mechanisms we’re not entirely sure of, the very richest are siphoning off the economic growth before it flows through the middle and lower classes.
And here’s yet another that suggests what needs to be done:
The right has tried to explain this accelerating inequality as an unstoppable structural feature of the new economy: It’s the meritocracy, or computers, or benefits, or global trade. Unfortunately, those explanations are largely bull****. Europe also has computers, and trade, and mobility, and benefits, and has easily avoided the widening chasm we’ve seen. So what makes us different?
In a word, power. Or the distribution of it. Europe has strong unions and active governments; countervailing powers that wrest a portion of the pie for their constituencies. We don’t.
It’s one thing to be concerned generally about inequality: to hope that all people can participate in the blessings and opportunities that modern capitalism affords, and to look for policies that help those who are lagging. It’s quite another when that concern curdles into a belief that the capitalist system is fundamentally unfair – that workers are failing to get their fair share of the value they create because people at the top are hogging the gains from growth. It’s the difference between being an egalitarian liberal and being a collectivist. Or, in other words, between being a progressive and being a reactionary.
Confessions of a Former (and Maybe Future) Hawk
Once upon a time, way back in 2002-03, I had my own blog. Unsurprisingly, given the times, I wrote frequently about issues relating to the war on terrorism. I took a hawkish line, supporting the U.S. invasion of Iraq and the resort to force, if necessary, to prevent other terror-sponsoring states like Iran from developing nuclear weapons. Based on my blog writings, I was invited to participate in a Reason online debate with John Mueller back in November 2002 on whether to go to war with Iraq. I argued vociferously in the affirmative.
The views I expressed were extremely controversial within Cato and the larger libertarian camp. Cato’s foreign policy scholars, reflecting the “orthodox” libertarian opposition to an interventionist foreign policy, strongly opposed the Iraq invasion. But for a minority of policy staffers at Cato, as well as many other libertarians, waiting for the other guy to take the first swing no longer seemed to make sense in a post-9/11 world.
Since the fall of Baghdad, I haven’t written a word about foreign policy. Virtually all my writing energies have been directed elsewhere: to a book, due out next spring, that examines the effect of mass affluence since World War II on American politics and culture. Much has changed in the past three-plus years, including my own views as I struggle to make sense of ever-changing circumstances. As a one-time outspoken “libertarian hawk,” I feel a responsibility to explain where I stand now and how I got here. Given recent (and incorrect) speculation about my views on the brewing crisis with Iran, now is as good a time as any.
How Soccer Explains the Dead Hand
This year’s World Cup hasn’t converted me to soccer fandom, but it did motivate me to read a good book. I’m talking about TNR editor Frank Foer’s How Soccer Explains the World: An Unlikely Theory of Globalization.
The book, which came out in 2004, offers a series of fascinating, compulsively readable profiles of soccer’s cultural and political underbelly — its connection to, among other things, war crimes, sectarian conflict, racism and anti-Semitism, political corruption, and culture wars. The beautiful game, perhaps, but what goes on off the pitch is frequently anything but. The picture, though, isn’t all bleak: Foer also tells how soccer has figured into resistance to fascism in Spain and Islamist tyranny in Iran.
The book is heavy on storytelling and light on argument, but through soccer’s prism an interesting picture of globalization emerges. And my apologies to Frank if I’m stretching here, but the picture is quite similar to that offered in my own book about globalization. Soccer, of course, is the global game par excellence — played and loved and marketed around the world. The best teams compete for talent and fans without regard for national boundaries. At the same time, though, this thoroughly cosmopolitan product is consumed in a world where national boundaries — and racial, religious, ideological, and class divisions as well — remain very real and continue to exert an often pernicious influence.
The Libertarian Center?
Jonah Goldberg over at National Review Online cites David Boaz’s recent post on the Webb-Allen Senate race, agrees with its substance, but then objects to the notion of a “libertarian center.” “[S]omeone really needs to come up with a better analytical framework than the one(s) which always seem to claim the good guys are in the center,” Jonah writes. “Who says? Besides, if libertarians are in the center, everyone is and no one is.”
I understand Jonah’s distress, since centrism all too often boils down to muddled, sloppy thinking and compromise for compromise’s sake. But the fact remains that the center—i.e., where the swing voters reside—will always be prized territory in democratic politics. Accordingly, much of the action in politics consists of trying to define the relevant issues so that people in the center identify more with your side than with the other guys. That’s why the definitions of left and right change so much over time (compare the priorities of left-wingers and right-wingers a half-century ago with those of their counterparts today, and you’ll see there’s not much overlap)—ideologues in pursuit of power are chasing the ever-changing, ever-elusive center.
Another way to put this is that the location of the center depends on the alignment of the political axis. If the axis of politics at a particular time is the size and scope of government, the center consists of one group of constituencies. If the axis shifts to cultural issues, the center relocates and includes a very different set of voters.
When, from the 1930s through the 1980s, the role of government in the economy was a major, defining issue in American politics, libertarians clearly were not in the center. But how about now? In recent years, the axis has shifted to cultural “red” vs. “blue” issues. As Edward Glaeser and Bryce Ward note in an excellent recent paper entitled “Myths and Realities of American Political Geography,”
[An] important truth captured by the red state/blue state framework is that political parties and politicians have had an increasing tendency to divide on cultural and religious issues rather than on economic differences.
Glaeser and Ward are right. There is little principled difference between the R’s and D’s these days about the size and scope of government. On that score, the main disagreements now are about which favored groups get to feed at the government trough at the expense of the rest of us. By contrast, the really fundamental issues today, the issues that define ideological loyalties and drive voters to the polls, are cultural questions: abortion, stem cell research, gay marriage, guns, immigration, nationalism. Church attendance is now a better predictor of voting patterns than income.
And so, whether Jonah likes it or not, libertarians are in the center of the American political debate as it is currently framed. In the red vs. blue culture wars, libertarians find themselves in the middle, along with that large, nonideological chunk of the electorate that is equally squeamish about the religious right and the countercultural left. This is a new and unaccustomed position for libertarians to be in, but I am coming to believe it represents a unique opportunity for us if we can figure out how to take advantage of it.
What’s the Big Idea?
I’ll be taking part tomorrow in the Hudson Institute’s 2006 Bradley Symposium. Entitled “What’s the Big Idea? True Blue versus Deep Red: The Ideas that Move American Politics,” the event features, in addition to yours truly, a who’s who of Washington intellectual heavyweights: Michael Barone, David Brooks, Francis Fukuyama, Bill Kristol, Charles Murray, and Shelby Steele, among others.
The discussion’s point of departure will be this paper by University of Virginia political scientist James Ceaser. Ceaser argues that the current red vs. blue political divisions reflect deep-seated and profoundly important differences over the sources and nature of social order.
My short take: I agree with Ceaser that such differences exist, but I disagree that it is useful to shoehorn the various alternatives into just two rival camps. Doing so allows Ceaser to cast contemporary politics as a contest between nihilism on the left and conservatism of some kind or another on the right. Ceaser thus frames the debate in a way that, in my view, unfairly favors the right.
Here’s another typology that I think is closer to the mark: one noisy minority of nihilists on the “true blue” left, another noisy minority of dogmatists on the “deep red” right, and the rest of us moping and groping around in a politically underrepresented center. From this perspective, the main problem with American politics today isn’t the unhinged left. Rather, it’s the disproportionate influence of culture warriors on the left and right alike—and the outmoded political categories that allow the cultural extremes to lord it over the center.
Mart Laar, Friedman Prize Winner
Tonight, in Chicago, Cato is hosting the formal presentation of the third biennial Milton Friedman Prize for Advancing Liberty. This year’s winner is Mart Laar, the former prime minister of Estonia responsible for guiding his country’s successful transition from communism to a democratic market economy.
We are now in the fifteenth year since the collapse of the Soviet Union, and unfortunately many of the former Soviet republics have made little progress in either economic or political reform. Estonia, however, is a glittering exception. According to the Economic Freedom of the World report, the country now ranks 12th out of 127 countries in economic freedom. Freedom House gives Estonia its highest rankings for both political rights and civil liberties. And the World Economic Forum rates Estonia 20th out of 117 in its Growth Competitiveness Index.
For Laar to win the Friedman Prize is especially fitting, since Laar’s bold free-market reforms were inspired by Friedman himself. Before entering politics, Laar was a historian. “I had read only one book on economics — Milton Friedman’s Free to Choose. I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatization, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible.”
Here is Laar’s 1992 book, War in the Woods, on Estonian resistance to Soviet occupation during and after World War II. And here is a paper presented by Laar at a 2004 Cato conference in Russia on Estonia’s reform experience.
Filed under: General; International Economics and Development
The Battle over Entitlements Isn’t Lost Yet
I thought I would step out from behind Cato Unbound’s editorial curtain and make a comment here about what’s going on over there. In particular, I’d like to offer some words of encouragement to my friends David Frum and Bruce Bartlett, both of whom are downhearted (excessively, in my opinion) about the prospects of checking and reversing the entitlement-driven expansion of government spending.
Both David and Bruce make strong cases for their pessimism. David points to the opportunities blown during the nineties, while Bruce stresses the huge increases in spending that existing commitments under Social Security, Medicare, and Medicaid will necessitate in coming years.
Good points, but not the whole story. Yes, the nineties offered what in retrospect were optimal conditions for restructuring America’s entitlement commitments and thereby winning huge victories for good policy and limited government. But to adopt the clear-eyed realism that David and Bruce urge, since when did countries ever make major systemic reforms at the optimal time? Over the past generation, we have seen bold moves around the world to unwind overreaching government and install more market-friendly policies. And almost without exception, those moves have occurred, not when favorable conditions permitted sweeping changes with a minimum of short-term pain and dislocation, but when countries had their backs against the wall. Gorbachev’s launch of perestroika and the resulting collapse of communism in the Soviet bloc, India’s dismantling of central planning, the general turn toward macroeconomic stabilization, trade liberalization, and privatization throughout the less developed world, New Zealand’s dramatic policy turnaround — all occurred when countries were in extremis and alternatives to liberal reform had been exhausted.
So while it’s disappointing, it’s not terribly surprising that we have thus far failed to face up to the fiscal unsustainability of our existing entitlement commitments. We have opted for delay because delay has been the path of least resistance, but it will not remain so indefinitely. At some point, the day of reckoning will arrive, and we will face an unavoidable choice: pay to keep the promises we have made with huge tax increases, or repudiate those promises and restructure the programs that made them. It is entirely possible that, when the time comes, we will end up choosing something much closer to the former than the latter. Certainly that is what David and Bruce seem to assume. But I don’t think it’s inevitable. Indeed, there are sound, non-wishful-thinking reasons for believing that the limited-government side has a fighting chance.
After a steady runup from the 1930s through the 1960s, total government spending as a percentage of GDP has been stable for a generation [.pdf], knocking around the 35 percent range (see Figure VI.1 on page 163). Yet if no changes are made to Social Security, Medicare, and Medicaid, spending under those programs will increase dramatically over the coming decades — according to this CBO report, from 8 percent of GDP today to 21 percent in 2075. Which means a commensurate 13 percentage point increase in overall government spending as a share of GDP, and a mind-bogglingly large tax increase to pay for it all.
Bruce assumes that because past efforts to roll back government spending’s share of GDP have been unsuccessful, further whopping increases in that share are all but inevitable. But how does that follow? Look at things another way: efforts to prevent increases in government spending’s share of GDP have been highly successful for over three decades. Why is it unimaginable that such success can be continued? Isn’t it conceivable that, when faced with a ruinously expensive tax increase, Americans will choose a repudiation of past promises, and a restructuring of future commitments, as the lesser of two evils?
David and Bruce seem to assume that repudiating past promises will be next to impossible. I think that assumption is unwarranted. Countries around the world have repudiated obligations under fiscally unsound public pension programs — and so did we (by increasing the retirement age and subjecting benefits to taxation) in the 1983 Social Security reform. And unsustainable corporate promises to retirees are being repudiated left and right these days, without any strong political backlash.
So there is hope. A battle is looming, and the limited-government side is very much alive. Because we have waited so long, partial repudiation of past promises will inflict pain that could have been avoided. And even with partial repudiation, the price tag of taking care of existing retirees and near-retirees will be hefty. But if we do succeed in restructuring these programs, that transition can be financed, and after digesting the rat the government snake can slim down again.
It won’t be easy. We could lose. But we are not foredoomed.
“Fair Trade” Coffee: Answering Peter Singer
It just came to my attention that noted Princeton philosopher Peter Singer blogged recently about a Cato study I did back in 2003 on the slump in world coffee prices. (By the way, this isn’t Singer’s first brush with Cato. He served graciously as one of the commenters in the March issue of Cato Unbound, which addressed the question “When Does Inequality Matter?”
In his blog post Singer takes issue with my characterization of the growing market for “fair trade” coffee (coffee sold at a premium price that benefits farmers in “fair trade” cooperatives) as a “well-meaning dead end.” Here’s an excerpt:
With some justification, he argues that the real cause of the fall in coffee prices was not the profiteering of multinationals, but big increases in coffee production in Brazil and Vietnam, combined with new techniques that make it possible to grow coffee with less labor and hence more cheaply.
In Lindsey’s view, if we want to assist coffee growers, we should encourage them either to abandon coffee and produce more profitable crops – and here he rightly points to rich nations’ trade barriers and subsidies as obstacles that must be dismantled – or to move into higher-value products, like specialty coffees, that bring higher prices.
What is curious about Lindsey’s argument, however, is that the Fairtrade coffee campaign can be seen as doing just what he recommends – encouraging coffee farmers to produce a specialty coffee that brings a higher price. Pro-market economists don’t object to corporations that blatantly use snob appeal to promote their products…. So why be critical when consumers choose to pay $12 for a pound of coffee that they know has been grown without toxic chemicals, under shade trees that help birds to survive, by farmers who can now afford to feed and educate their children?
To which my response is: I agree! If people want to produce and market coffee under a “fair trade” label and other people want to buy it, I’m all for it. Far be it from a libertarian to speak ill of capitalist acts between consenting adults….
So why did I call “fair trade” coffee a dead end? I did so in the context of discussing the causes of and possible solutions to the worldwide coffee glut that had resulted in record-low prices for struggling farmers. In that particular context, I criticized the “fair trade” movement for demonizing all other segments of the market as unfair and exploitative. Further, I argued that socially conscious coffee was never going to be more than a small niche market, and thus it was a “dead end” as far as resolving what was then called the “coffee crisis.” Far more promising, I wrote, was the booming “specialty” or gourmet coffee market. That assessment was based on the empirical judgment that, for the foreseeable at least, the upside of the snob appeal market was dramatically greater than that of the social conscience market.
Three years later, that assessment is holding up. As of 2005, “fair trade” coffee constituted only 1.8 percent of the overall U.S. market and 4.1 percent of the specialty market. In other words, snob appeal is outselling social conscience by better than 20 to 1. “Fair trade” products are doing somewhat better in Europe, but they’re still a minority taste.
Meanwhile, what’s going on with coffee prices? The coffee crisis was due primarily to a big runup in low-cost supply (from Brazil and Vietnam in particular). As a result, green coffee prices were stuck around 50 cents a pound during the first years of decade. With recent production cutbacks in Brazil, however, prices have now rallied to nearly a dollar a pound. Shifts in supply and demand, not quixotic denials of their relevance in determining prices, have brought improved market conditions for the world’s coffee farmers — at least for the time being.
Back from the Former USSR
I’ve just returned from a fascinating week in Russia and Ukraine. I was in Moscow last week to deliver some lectures regarding my book on globalization, Against the Dead Hand, which was recently translated into Russian. From there I traveled down to Kiev to improve Cato’s contacts with liberal (in the everywhere-but-America sense of that word) organizations there.
My overwhelming impression from the visit: what a difference an oil boom makes! Now in the fifteenth year since the collapse of the Soviet Union, neither Russia nor Ukraine has had much success in making the transition from communism to a viable market economy (according to the latest Economic Freedom of the World report, Ukraine ranks 103rd in the world, with Russia trailing just behind at 115th). Despite this and many other similarities, there is one critical difference between the two countries: Russia has oil and gas, and Ukraine doesn’t. Read the rest of this post »
Cato on Facebook
Cato on Twitter
Cato on YouTube
Cato Tweets