Chávez Declares Socialism the ‘Kingdom of God’
A new poll in Venezuela shows that President Hugo Chávez’s approval ratings have fallen from about 60 percent early this year to 46 percent now. Likewise his disapproval ratings have increased from about 30 percent earlier in the year to 46 percent now, and 59 percent of those polled view the country’s situation negatively.
Despite having received upwards of $800 billion in revenues during Chávez’s ten years in power, the government is doing a dismal job of carrying out its proper functions—such as controlling crime or corruption—and public administration in other areas is deteriorating. Chávez recently announced regular cuts in electricity and water provision. (These issues will be discussed in an upcoming Cato forum on Venezuela on November 10.)
As domestic conditions deteriorate, Chávez is apparently feeling more empowered, or at least feels the need to continue his relentless accumulation of power. Today, El Universal, a Venezuelan daily, reports that Chávez has announced that he can expropriate private enterprises at will because he was given that power by the people. Why worry about the rule of law when you have the ability to interpret the will of the people? Chávez’s comments reported today should dispel any doubts that he considers himself a savior to his country:
Every day I’m more of a revolutionary, every day I’m more socialist… I’m going to take Venezuela toward socialism, with the people and the workers…The revolution is not negotiable, socialism is not negotiable, because every day I’m more convinced that socialism is the kingdom of God on earth. That is what Christ came to announce.
Michael Moore’s Billionaire Backers
I wrote in Libertarianism: A Primer, “One difference between libertarianism and socialism is that a socialist society can’t tolerate groups of people practicing freedom, but a libertarian society can comfortably allow people to choose voluntary socialism.” (In the final section, “Toward a Framework for Utopia.”)
Now Ira Stoll notes the irony that it was very successful capitalists who put up the money that allowed Michael Moore to make his anti-market screed Capitalism: A Love Story:
The funniest moments of all in the movie, though, may just be in the opening and closing credits. We see that the movie is presented by “Paramount Vantage” in association with the Weinstein Company. Bob and Harvey Weinstein are listed as executive producers. If Mr. Moore appreciates any of the irony here he sure doesn’t share it with viewers, but for those members of the audience who are in on the secret it’s all kind of amusing. Paramount Vantage, after all, is controlled by Viacom, on whose board sit none other than Sumner Redstone and former Bear Stearns executive Ace Greenberg, who aren’t exactly socialists. The Weinstein Company announced it was funded with a $490 million private placement in which Goldman Sachs advised. The press release announcing the deal quoted a Goldman spokesman saying, “We are very pleased to be a part of this exciting new venture and look forward to an ongoing relationship with The Weinstein Company.”
So maybe I should add a corollary to my claim:
One difference between libertarianism and socialism is that a socialist society won’t put up the money for people to make libertarian movies, but in a capitalist/libertarian society the capitalists are happy to put up the money for anti-capitalist movies.
And if you doubt that a socialist society would discriminate against anti-socialist movies, you can either observe socialism in practice — in Cuba, China, the Soviet Union, East Germany, etc. — or read the chilling words of bestselling economist Robert Heilbroner in Dissent:
Taking Over Everything
“My critics say that I’m taking over every sector of the economy,” President Obama sighed to George Stephanopoulos during his Sunday media blitz.
Not every sector. Just
- health care
- energy
- local schools
- banks
- insurance companies
- automobile companies
- compensation at financial firms
- newspapers
- the internet
This president and his Ivy League advisers believe that they know how an economy should develop better than hundreds of millions of market participants spending their own money every day. That is what F. A. Hayek called the “fatal conceit,” the idea that smart people can design a real economy on the basis of their abstract ideas.
This is not quite socialism. In most of these cases, President Obama doesn’t propose to actually nationalize the means of production. (In the case of the automobile companies, he clearly did.) He just wants to use government money and government regulations to extend political control over all these sectors of the economy. And the more political control achieves, the more we can expect political favoritism, corruption, uneconomic decisions, and slower economic growth.
Filed under: Finance, Banking & Monetary Policy; Tax and Budget Policy
More Evidence on America’s Socialism
KPMG has released its annual survey of personal income tax rates around the world. The survey covers 86 countries, including all the high-income nations and many middle- and lower-income nations, such as Brazil, China, and India.
The chart shows the top personal income tax rates in 2009 for national governments, per the KPMG study. The current top U.S. rate is 35 percent, which is substantially above the 86-country average of 28.9 percent. The Obama administration plans to let the U.S. rate jump to 39.6 percent in 2011, which would be almost 11 points higher than the international average.
Worse still, the United States has state income taxes with rates up to 10 percent that are piled on top of the federal tax. Some of the nations in the survey (e.g. Canada) also have subnational income taxes, but many, or most, of them do not.
Finally, note that supporters of government health care expansion have been eyeing further increases in the top U.S. tax rate above 40 percent. Alas, we need more of the Global Tax Revolution to sweep across our shores.
Filed under: International Economics and Development; Tax and Budget Policy
British Economic Suicide
A Bloomberg story on one cause of the ongoing British economic disaster under Prime Minister Gordon Brown:
Andrew Wesbecher moved to London from New York in 2006 to sell software to banks and hedge funds. This month he joined the exodus of American expatriates fleeing high taxes and the city’s shrinking financial industry . . . Americans are heading home as Britain plans a 50 percent tax rate for those who earn more than 150,000 pounds ($248,000) a year and employers cut benefits for workers living abroad, reducing the allure of London. That comes a year after the U.K. said foreigners who have lived in the country for more than seven years must pay 30,000 pounds annually or give up the special status that shields overseas income from British taxes.
Since the 1980s, London has boomed as an international city open to the world’s entrepreneurs and their wealth, and perhaps home to more billionaires than any other city. The British economy as a whole has done quite well, pulled ahead by London and driven by a new free-market spirit in the wake of Margaret Thatcher’s privatization, deregulation, and tax cuts. Thatcher rightly argued that her cuts to income tax rates “provided a huge boost to incentives, particularly for those talented, internationally mobile people so essential to economic success.” High tax rates at the top end were a “symbol of socialism” that she wanted to scrap.
Brown is killing the free-market goose that laid the golden eggs of Britain’s success. I really don’t understand the vision of such politicians — don’t they know what they are doing? I want people to be successful. I want entrepreneurs to create wealth. I love growing, vibrant cities. Why do some people want to destroy all that?
Filed under: International Economics and Development; Tax and Budget Policy
Don’t Count on Getting Your “Investment” Back from Government Motors
The president and his appointees have expressed their hope that Government Motors will eventually pay back taxpayers for their “forced investment” in the company. But there aren’t many cases of this sort of lemon socialism actually paying off.
Now most everyone connected with GM is admitting the same thing. Reports the Washington Post:
If a new General Motors emerges from bankruptcy as planned, U.S. financial aid for the company will expand to nearly $50 billion, but neither the government nor the company is forecasting how much of the public money will be repaid.
It’s sure to be a stretch. For the United States to fully recover its investment, the value of General Motors stock will have to reach levels it has never before attained.
“I’m not going to predict it — that’s not my job today,” GM chief executive Fritz Henderson said in a recent interview.
“I don’t know how much we’re going to recover,” a senior Obama administration official said as the company headed into bankruptcy last month.
This uncertainty stems from the difficulty in valuing the 60 percent GM stake that the United States will receive in exchange for the public investment. The government also gets preferred shares and other compensation.
The stake will be worth enough to fully cover the government’s direct investment only if GM’s stock rises above $68 billion. Even at its recent 2000 peak, GM’s stock was worth only $56 billion.
“I don’t see GM hitting those benchmarks in a very long time,” said Maryann Keller, a veteran automotive analyst and author of “Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors,” which was published in 1989.
She noted that global competition will continue to squeeze American automakers. Though the world’s factories can produce about 100 million vehicles a year, demand for them only stands at about 55 million, and the gap will push prices and profits down, she said.
“It’s very unlikely” that the government will recover its money, said David Whiston, auto equities analyst at Morningstar. “GM will be a smaller company after the bankruptcy and there are going to be more foreign automakers entering the market that will make GM’s efforts more difficult.”
Oh, well. As they say, it’s only money!
Filed under: Finance, Banking & Monetary Policy; Tax and Budget Policy
Should You Vote on Keeping Your Local Car Dealership?
There are lots of reasons Washington should not bail out the automakers. Whatever the justification for saving financial institutions — the “lifeblood” of the economy, etc., etc. — saving selected industrial enterprises is lemon socialism at its worst. The idea that the federal government will be able to engineer an economic turnaround is, well, the sort of economic fantasy that unfortunately dominates Capitol Hill these days.
One obvious problem is that legislators now have a great excuse to micromanage the automakers. And they have already started. After all, if the taxpayers are providing subsidies, don’t they deserve to have dealerships, lots of dealerships, just down the street? That’s what our Congresscritters seem to think.
Observes Stephen Chapman of the Chicago Tribune:
The Edsel was one of the biggest flops in the history of car making. Introduced with great fanfare by Ford in 1958, it had terrible sales and was junked after only three years. But if Congress had been running Ford, the Edsel would still be on the market.
That became clear last week, when Democrats as well as Republicans expressed horror at the notion that bankrupt companies with plummeting sales would need fewer retail sales outlets. At a Senate Commerce Committee hearing, Chairman Jay Rockefeller, D-W.Va., led the way, asserting, “I honestly don’t believe that companies should be allowed to take taxpayer funds for a bailout and then leave it to local dealers and their customers to fend for themselves.”
Supporters of free markets can be grateful to Rockefeller for showing one more reason government shouldn’t rescue unsuccessful companies. As it happens, taxpayers are less likely to get their money back if the automakers are barred from paring dealerships. Protecting those dealers merely means putting someone else at risk, and that someone has been sleeping in your bed.
The Constitution guarantees West Virginia two senators, and Rockefeller seems to think it also guarantees the state a fixed supply of car sellers. “Chrysler is eliminating 40 percent of its dealerships in my state,” he fumed, “and I have heard that GM will eliminate more than 30 percent.” This development raises the ghastly prospect that “some consumers in West Virginia will have to travel much farther distances to get their cars serviced under warranty.”
Dealers were on hand to join the chorus. “To be arbitrarily closed with no compensation is wasteful and devastating,” said Russell Whatley, owner of a Chrysler outlet in Mineral Wells, Texas.
Lemon socialism mixed with pork barrel politics! Could it get any worse? Don’t ask: after all, this is Washington, D.C.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Tax and Budget Policy
“Gangster Government” at Work
With the Obama administration preferring to rely on politics rather than the law to “fix” the auto industry, bondholders have discovered that the new politics of this administration is quite a bit more brutal than the old politics practiced by the Bush administration.
Henry Payne and Richard Burr write of “gangster government” using not just demagogic public attacks on greedy bondholders but apparent threats of regulatory sanction to get its way in bankruptcy court. They explain:
The holdout debtholders sought the refuge of the courts, where decades of bankruptcy law promised that secured lenders would receive just compensation for their investment. But then Obama called in his fixers.
In his April 30 news conference, Obama singled out Chrysler’s self-described “non TARP lenders” as “speculators” who sought to imperil Chrysler’s future for their own benefit. “I do not stand with them,” Obama thundered. “I stand with Chrysler’s employees and their families and communities. . . . (not) those who held out when everybody else is making sacrifices.” Michigan Democratic allies like Sen. Debbie Stabenow and Rep. John Dingell piled on, calling the lenders “vultures.”
Then, on Detroit radio host Frank Beckmann’s show May 1, a lawyer for the lenders, Tom Lauria, chillingly revealed how “one of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight.”
Lauria later confirmed the threats came from Rattner and that the target was Perella Weinberg, which had suddenly withdrawn its opposition after the president’s April 30 press conference.
The White House denied the threats, but Business Insider subsequently reported that “sources familiar with the matter say that other firms felt they were threatened as well. None of the sources would agree to speak except on the condition of anonymity, citing fear of political repercussions.”
“The sources, who represent creditors to Chrysler,” continued the Insider story, “say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking ‘end justifies the means’ group they have ever encountered. . . . Both were voters for Obama in the last election.”
The idea of the White House–with the IRS and SEC at its disposal–threatening investment firms should have sent off alarm bells in America’s newsrooms. Inexcusably, the media establishment largely ignored the hardball tactics. This is the same media that has doggedly reported on President Bush’s U.S. attorney firings and the post-9/11 interrogations of terrorist suspects.
I have no opinion on who should get what as part of Chrysler’s bankruptcy — other than that the taxpayers shouldn’t be paying for America’s version of lemon socialism so common around the world. But crude political interference by the political authorities in Washington in a bankruptcy case erode the rule of law and administration of justice. If Obama and company believe that the end justifies the end when it comes to handing the auto companies over to favored interests, who among us is safe from similar action by this or another administration in the future?
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Law and Civil Liberties
Barack Obama “Fatally Conceited” on Education
The AP reports today that president Obama wants the nation’s school districts to close 5,000 failing schools and re-open them with new principals and teachers. Here is why this won’t work:
- Typically, public schools only dismiss teachers when they are forced to reduce their workforce for budget reasons, but the president has just infused the system with $100 billion to prevent such dismissals. And when teachers are let go, it is done starting with those with the least seniority, not the lowest performance. So the hundreds of thousands of teachers displaced from failing schools will simply move to other schools rather than being replaced by better teachers. This has been going on for decades. It is called “the parade of the lemons.” Overall, it achieves nothing.
- The new principals who take over the formerly failing schools have to come from somewhere. So for every school that gets one of the system’s “good” principals, there will be another school that loses one. Public schooling has no incentive structure to ensure that it can identify, hire, and retain competent administrators to strengthen its ranks.
What the president is trying to do in education — as in the auto industry — is to replace the web of market forces that close failing businesses in the private sector with his own personal diktat. This is Hayek’s Fatal Conceit.
The market solves the problem of failing schools by allowing consumers to chose the ones that serve them best, which simultaneously accomplishes two things: it drives failing schools to either improve or go out of business, and it provides incentives for the expansion of successful schools and the hiring of effective teachers and administrators.
As I wrote here, and in expanded and updated form in vol. 3, no. 1, of the Journal of School Choice, the international scientific evidence reveals the overwhelming superiority of market over monopoly schooling. President Obama’s educational dirigism will fail.
More Reasons Not to Nationalize Health Care
Advocates of a government takeover of the health care system routinely offer up horror stories of American medicine, and no system yet has found a way around the problem of human imperfection, especially when operating in a system with such distorted incentives–most from ill-considered government policies. Yet the horror stories in nationalized health care systems are manifold and tend to be more intractable since they result from government policy.
For instance, consider the quality of care delivered by hospitals in one region in Great Britain (with a hat-tip to Philip Klein of the American Spectator for finding this story). According to the Daily Telegraph:
Sir Ian Kennedy, chairman of the Healthcare Commission, said the report is a ’shocking story’ and that there were failures at almost every stage of care of emergency patients. “There is no doubt that patients will have suffered and some of them will have died as a result,” he said.
The investigation of the trust now called the Mid-Staffordshire NHS Foundation Trust, found overstretched and poorly trained nurses who turned off equipment because they did not know how to work it, newly qualified doctors left to care for patients recovering from surgery at night, patients left for hours in soiled bedclothes, reception staff expected to judge how seriousness of patients arriving at A&E, patients left without food or drink, others who received the wrong medication or none at all, blood and faeces left on lavatories and floors, and doctors diverted away from seriously ill patients in order to treat minor ones who were in danger of breaching the four hour waiting time target.
When high mortality rates triggered questions, the trust board of directors ‘fobbed off’ investigators by saying the rates were a result of statistical errors but the Healthcare Commission found this was not that case.
The report said there was a ‘reluctance to acknowledge or even consider that the care of patients was poor’.
The trust was more concerned with hitting targets, gaining Foundation Trust status and marketing and had ‘lost sight’ of its responsibilities for patient care, the report said.
Sir Ian said: “The resulting report is a shocking story. Our report tells a story of appalling standards of care and chaotic systems for looking after patients.”
While Britain tends to be near the bottom in terms of health care system in industrialized states, there are plenty of horror stories elsewhere. Socialism doesn’t work, whether in health care or elsewhere. As Investor’s Business Daily reminds us:
The Swedish government system is no better. It also refuses to provide some expensive medication and, inhumanely, refuses to let patients buy the drugs themselves. Why? According to a Journal of American Physicians and Surgeons article, bureaucrats believe doing so “would set a bad precedent and lead to unequal access to medicine.”
Like Canadians, Swedes are subjected to long waits. They also have denial-of-care problems that sometimes lead to death.
A reasonable person would see the record of repeated failures in government-run medicine as evidence that such a system is not sustainable. Yet every central planner thinks he or she — or his or her immediate group — is smart enough to correct the flaws of socialist programs and therefore has the moral authority to force others to participate in his experiments. It is the same thinking that will move a person to say we are the ones we’ve been waiting for.
The Obama administration seems determined to waste a lot of money “stimulating” the economy. We can replace money lost. But if the administration succeeds in nationalizing the medical system directly or indirectly, the damage may prove irreversible–and deadly.
He Has a Point
Stung by accusations that he is a “socialist,” President Obama pointed out to two New York Times reporters that, “it wasn’t under me that we started buying a bunch of shares of banks. It wasn’t on my watch. And it wasn’t on my watch that we passed a massive new entitlement -– the prescription drug plan — without a source of funding.”
Not to defend Obama’s unprecedented increase on government spending or plans to involve the government in almost every area of our lives…but he does have a point. As I pointed out in Leviathan on the Right, the Bush administration’s brand of big-government conservatism was, at the very least, the greatest expansion of government from Lyndon Johnson to, well, Barack Obama.
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