Capitalism

Leftists Shouldn’t Complain about Corporate Rent-seeking when Leftists Encourage Corporate Rent-seeking

A notice in this morning’s Federal Register gives us insight about how regulatory capture begins.

The Department of Energy is looking to create a a regulatory subcommittee of vetted stakeholders to develop energy efficiency standards for electricity distribution transformers:

SUMMARY: The U.S. Department of Energy (DOE or the Department) is giving notice that it intends to establish a negotiated rulemaking subcommittee under ERAC in accordance with the Federal Advisory Committee Act (FACA) and the Negotiated Rulemaking Act (NRA) to negotiate proposed Federal standards for the energy efficiency of low- voltage dry-type distribution transformers. The purpose of the subcommittee will be to discuss and, if possible, reach consensus on a proposed rule for the energy efficiency of distribution transformers, as authorized by the Energy Policy Conservation Act (EPCA) of 1975, as amended. The subcommittee will consist of representatives of parties having a defined stake in the outcome of the proposed standards, and will consult as appropriate with a range of experts on technical issues. DATES: Written comments and requests to be appointed as members of the subcommittee are welcome and should be submitted by August 29, 2011.

So the government is looking for parties with “a defined stake” — meaning entities operating in distribution transformer space, from electricity companies and device manufacturers to green groups and (probably) well-heeled and connected Democratic donors — to appoint (not elect) to a committee responsible for promulgating efficiency criteria that will eventually have the force of law.

August 2nd: A Day That Won’t Live In Infamy

If a deal hasn’t been reached by the time this is posted (the agreement reached by congressional leaders and the White House over the weekend is pending caucus approval), then tomorrow will be a day of infamy. According to public consensus, our credit rating will be downgraded, our borrowing rates will skyrocket, Social Security checks won’t go out, we’ll have to lay off millions of government workers (oh hyperbole), China will get mad, and our cost of living will sharply increase while the quality of living decreases dramatically. The sky will fall, the world economy will collapse, unemployment will make what we have now look like a cakewalk. It will be Disaster;.

Except it will be none of these things.

August 2nd, if a deal is not reached, will not spell the end of the world. Even if S&P and Moody’s try and downgrade the United States. Why? Three reasons: One, if the markets thought we were going to be screwed, they would have done it before. Second, the credit rating agencies are utterly superfluous and worthless when it come to US debt. Third, even if we hit the debt ceiling, Turbo Tax Geithner will be permitted to prioritize interest payments on the debt and send out Social Security checks, meaning we won’t have a default (and Grandma can still buy the ingredients for her damned fruitcake.)

Taken together, these three things illustrate a picture where August 2nd isn’t the end of the world, and that we should really slow down, take a deep breath, and then have a shot of whiskey. Preferably rye, but that’s just me.

Article the First: The market was supposed to explode under the debt ceiling, showing how urgent and necessary it is to raise it, according to John Carney:

George Pataki Launches New Website “No American Debt”

Congressman Tom McClintock stated many times recently that America is headed towards a “sovereign debt crisis” that our only hope is to make serious budget cuts or the “Titanic will hit the iceberg”. Congressman Ron Paul says that the collapse of the dollar is “imminent” if Washington doesn’t drastically change. A group called No American Debt was officially launched last night by their Chairman George Pataki. They say that they will address these serious issues and brings them to the foreground of discussion.

According to their website, No American Debt is a group dedicated to holding elected officials accountable for our debt crisis. Their purpose is to educate the public about the debt and they will focus their efforts to persuade President Obama and Republican candidates for President to propose real solutions to the number one issue facing our country today.

Former Governor of New York George Pataki is the Chairman of No American Debt. Speculation has arisen that Pataki would be running for President, although he has recently stated that he will not be running for President in 2012. He did say, however, “but I’ve been around politics long enough to know you never say never”.

George Pataki announced No American Debt on April 20th on the Sean Hannity Show (See Below). Since then the Wall Street Journal has also featured them in an Article.

Visit their website at www.NoAmericanDebt.com and their FaceBook page for more information on their campaign.

A Defense of the Free Market

One of the most common refrains from the political left and the media is that, regarding the economy, conservatives advocate for unchecked freedom for big business to do whatever it wants to do, and for no government interference with business at all. These assertions stem from a fundamental misunderstanding of the nature of conservatism.

For the conservative, the issue comes down to the proper role of government. To have no government at all is anarchy, and certainly no conservative would argue that. So the question is not whether or not there should be government involvement (there should), but what level of government involvement is appropriate.

When we look at the biggest financial scandals of the last decade (Enron, WorldCom, Fannie Mae and Freddie Mac, etc.), they all have one thing in common. At some point, whether through active complicity or negligence, government played a huge role in allowing the scandals to occur. And with every scandal, it becomes an excuse, or rather an imperative, to increase the level of government involvement to keep it from occurring again.

Some of the major scandals have occurred because the regulatory oversight assigned to one government agency or another was either inadequately enforced, or government employees were co-opted into the fraudulent scheme. Others occur because our statutory and regulatory law has become so complex that it is inevitable that a crafty thief will be able to find technical loopholes that fulfill the letter of the law while being contradictory to the clear intent of the law. Either way, we continue to add layer after layer of government bureaucracy, regulation and complexity, and yet the scandals keep getting more and more expensive. That is because the more complex the law, the easier it is to find a technical Get-Out-of-Jail-Free Card.

Capitalism versus Corporatism: A Love/Hate Story

Capitalism gets a bad rap these days, as evidenced by Michael Moore’s documentary Capitalism: A Love Story. Like so many people though, Moore – and most of Hollywood – get it wrong. What they decry, greedy individuals exploiting others and using government regulations and rules as a shield isn’t capitalism in the least. That’s called corporatism, as evidenced in the video that Jason posted recently from Reason.tv.

Corporatism is defined as:

Today, corporatism or neo-corporatism is used in reference to tendencies in politics for legislators and administrations to be influenced or dominated by the interests of business enterprises (limited liability corporations).

Basically, corporatism is a system where corporations make the calls on laws. Some would argue that for capitalists, this is a good thing. Unfortunately for those folks, they don’t have a clue what they’re talking about.

We currently see in our government’s actions through things like bailouts for banks and the auto industry (though in all fairness, the auto bailout probably had more to do with politicians being beholden to the United Auto Workers than to GM and Chrysler). That wasn’t capitalism, contrary to what some people argue. Capitalism would have let the banking industry eat their own. Let AIG break up and be bought up by others who are more solvent. Let General Motors break up and be purchased by whoever wanted to own a car company. If no one did, then it’s time for the company to die. It sucks, but it’s the nature of the beast.

A Hot Cup of TEA

Recently, the TEA Party movement celebrated its first anniversary. At first the TEA (Taxed Enough Already) Party activists were dismissed as a few grumpy right-wingers upset that America elected a black president. They were given little credence beyond being an amusing political side show. That soon changed. On April 15th hundreds of thousands of average Americans showed up at protest rallies across the nation, outraged at the “stimulus” package of goodies doled out to special interests, liberal activism organizations and Democrat pet projects. CNN reported that a few thousand people showed up at the rally in Atlanta, but I was there and can assure you that it was close to ten-fold that amount. It was shoulder-to-shoulder for about four blocks in one direction, not counting the people on the side streets.

Once they could no longer be dismissed as a fringe element, TEA Party activists were labeled as “Astro-turf” (fake grass roots), accused of being flunkies of Big Corporate America, mindlessly doing the bidding of their masters. They were accused of being a fabrication of FOX News and the Republican Party. They were accused of being everything except what they are…average Americans, generally with traditional conservative values, who were fed up over 20 years of Bush-Clinton-Bush politics, two political parties who paid only lip service to the people they claimed to serve while engaging in a bacchanalian orgy of political perks, who had finally been pushed over the edge by a pork-laden spending bill of almost $800 billion. They were saying “Enough is enough!”, and they were going to make their voices be heard.

When Magic Bullets Fail

I recently read an article written by former Fed economist Richard Alford over at Naked Capitalism. He focused his criticism on the zero interest rate policy (ZIRP) currently deployed by the Fed under the watch of Chairman Ben Bernanke. There has been increasing noise surrounding ZIRP and more mainstream suggestions that interest rates were too low for too long between 2001 and 2006.

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Alford’s article gets into quite a bit of detail, but it is worth a read if you enjoy geeky economics stuff. Mainstream macroeconomists believe that the economy can be explained and managed with mathematical formulas. In fact, the formulas are really quite simple and do not capture the dynamics of the millions of “irrational” actors therein. One favorite is the Taylor rule which suggests a target for the Fed funds rate - the key interest rate set by the central bank. Alford points to a Taylor op-ed which states that rates were too low from 2002-2005.

Bernanke has suggested that rates necessarily had to be low (and must stay low) to fend off the threat of deflation. When analyzing Bernanke’s definition of deflation, however, Alford suggests deflation was never a threat. Thus, interest rates were lower than they “should have been” for no good reason.

An Excerpt From “Goddess of the Market: Ayn Rand and the American Right”

Oxford University Press, which published Jennifer Burns’ biography of Ayn Rand, has made available a short excerpt of the book:

“I am coming back to life,” Rand announced as the Nathaniel Branden Institute entered its second year of existence.  Watching Nathan’s lectures fill, Rand began to believe she might yet make an impact on the culture.  Roused from her despair, she began once more to write.  In 1961 she published her first work of nonfiction, For the New Intellectual, and in 1962 launched her own monthly periodical, The Objectivist Newsletter. Over the course of the decade she reprinted articles from the newsletter and speeches she had given in two more books, The Virtue of Selfishness and Capitalism: The Unknown Ideal.  Although she occasionally talked of a fourth novel, Rand had abandoned fiction for good.  Instead she reinvented herself as a public intellectual. Gone were the allegorical stores, the dramatic heroes and heroines, the thinly coded references to real politicians, intellectuals, and events.  In The Objectivist Newsletter Rand named names and pointed fingers, injecting herself directly into the hottest political issues of the day.  Through her speeches and articles she elaborated on the ethical, political, and artistic sides of Objectivism.

Republicans vs Conservatives

In a recent conversation with a local Pastor, a social/moral issue rose and the man said I know how strong you will be,on that issue, since you are one of the most Republican people I know. Let me stop at his statement and draw two conclusions from his statement:

Economic Depressions Don’t Exist Under Totalitarian Systems

So contends Lev Nazrozov. He writes:

Out-of-control predatory capitalists have perpetrated a worldwide economic depression. Capitalism’s degenerate character is now extraordinarily visible during this time of multiple crises.

On each side of the page there is a picture of a miserable emaciated proletarian who carries on his back a huge pack of money, with a bourgeois seated atop of the pack and smoking a cigar.

By simply allowing the government to dominate every sector of the polity, by embracing totalitarianism, we might be able to avoid the woes of economic recession? Historical study makes such a conclusion seem ridiculous. While totalitarian economies did not suffer from “depressions”, per se, one could argue that consumers and citizens lived under a system which continuously mimicked the effects of depression.

 


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