Archive for June, 2010

Some Pre-Conditions for a Free Society

June 30, 2010

“Tort law in some measure will always be needed,so that we may not be used in certain ways by others merely as means or tools or material resources.  But a boundary to tort liability is needed too, if we are to accept ourselves as persons having individual rights with the dignity this constitutes and the responsibilities it implies.” Peter, W. Huber, Liability: The Legal  Revolution and its Consequences. 1988

“Law reflects but in no sense determines the moral worth of a society.  The better the society, the less law there will be.  In heaven there will be no law, and the lion will lie down with the lamb.  The worse the society, the more law there will be.  In hell there will be nothing but law, and due process will be meticulously observed.” Peter Huber, Liability: The Legal Revolution and its Consequences. 1988

As regular readers of my columns will know, I define individual freedom (or liberty) in the negative sense defined by Isaiah Berlin and Friedrich von Hayek: ‘the freedom of an individual from coercion by other individuals or groups’.  I place great emphasis on the rule of law as a first-line defense for such freedom: ‘laws should always be clear and well-advertised, they should always be prospective, never retrospective, they should be universal, never discriminating in favor of some individuals over others, and equally applicable to those who rule as to those who are ruled.

In terms of these criteria, no people on earth are, or ever have been, fully free. Some peoples, of course, are freer than others in terms of the approximation of their respective legal systems to the rule of law. The United Kingdom and the United States – the two countries with which I am especially familiar – fare quite well internationally in such a comparison. But, as Peter Huber notes in the opening quotes for this column, something more than good law is required for a people to be free. The moral worth of a people also plays a crucial role.

Now, as an economist, I do not view ‘moral worth’  as being entirely exogenous to law. Individuals respond to incentives and penalties, and the law, good or bad, provides plenty of those. Over time, individuals evolve in response to such induced behavior, and reflect the qualities that such laws demand. So there is a good deal of interaction – benign and malignant –  between the law and the moral worth of a society. That does not imply necessarily, however, that  all peoples are equally suited to freedom, that good laws will take any society to the land of the free. Whether by nature or by nurture, or by some combination of the two, nations tend to be differentially amenable to achieving true freedom under the rule of law.

Let me draw upon my own experience, living the first half of my life in the United Kingdom and the second half in the United States. As a classical liberal by inclination, I have a developed sense of the nature and the importance of freedom. So my observations, though ad hominem, are surely worthy of critical consideration. Let me say unequivocally that I always  feel more free in the United Kingdom than in the United States. Yet, on paper, the United States, with a written constitution that includes a firewall bill of rights, provides better safeguards against coercion than a country where parliament retains a ‘divine right’  to invade all liberties at the will of a majority.

Yet freedom is in the air in the United Kingdom as it surely is not in the air in the United States, the rule of law not withstanding. The difference, I have come to understand, lies in the ‘moral worth’ of the people, here defined narrowly to reflect different attitudes towards the imposition and the acceptance of coercion. Let me illustrate with regard to the nature of national sporting pastimes: in the UK, soccer, rugby football and cricket, in the United States, football and  baseball.

Soccer, rugby football and cricket, all games that I have played in my youth, are what I refer to as bottom-up sports. Prior to the game, the coach plays an important role, developing strategies and tactics for deployment on the field. But in largely free-flowing, perpetual motion sports such as these, the players must improvise on the pitch, in response to evolving circumstances. The role of the coach is limited to the waving of hands from the touchline and to the making of limited substitutions on the field. For the most part, these bottom-up sports do not appeal to the American psyche. There is insufficient top-down planning for their liking.  There is not enough coercion of the players on the field by those on the sidelines.

So Americans favor football and baseball as slow moving, cumbersome, coach-specialized sports with ample breaks for the intervention of the coach and with radio contact between players and coaches throughout the game.  These are  top-down  sports with deliberately designed unnatural breaks to provide dictatorial coaches with even more control over the players, who essentially are willing robots on the field. The American pysche has a highly developed preference for war games, if you will, where generals marshall their infantry and their cavalry in strategic and tactical maneuvers  on largely Napoleonic lines, albeit with the generals now well back from the sidelines issuing their commands by wireless communications.

Reflect now on the implications of this different psyche (moral worth if you will) for the implementation of the law.  In the United Kingdom, the law provides the framework for society. It is to be used with discretion by those responsible for its enforcement. A youth who infringes the law in some minor way might well receive a clip behind the ear from a genial bobby and a a quick despatch to his parents for more specific treatment. More serious, or repeat offenders will be dealt with in a suitably more vigorous fashion.

In the United States, laws are much more likely to be enforced always with full due process. The cops on the beat are much less genial, much less inclined to leniency when confronted with young mischief. Bureaucrats by nature, the full force of the law will be applied, guns will be unholstered, and those who refuse to conform to oft-times outrageous commands may be executed on the spot. Society condones such ‘due process’ because it is more fearful of anarchy and less concerned about freedom than is its British counterpart. The fear that currently flows through the Hispanic population located in the State of Arizona is an understandable response to the American attitude towards the enforcement of laws, however justifiable the new immigration laws may look on paper. It is the policeman’s gun and stick, not the parchment of the law, that legitimate as well as illegitimate Hispanic residents rightly fear.

When laws are ubiquitous, and  implemented with full due process, a paradise can swiftly become a hell. Tom Clancy, the well-known author of  military-worshipping novels, typifies this attitude in its most obnoxious form. I well remember a passage in one of his novels in which he intones that God’s Pavements and Sidewalks in Heaven will be comprehensively patrolled and policed by U.S. marines!  That no doubt is many an  American’s dream. It might encourage some freedom lovers to opt for a little wickedness in life in order to rest, for a while at least, in Purgatory, if not in Hell itself.

Robert Carlyle Byrd: Emperor of Pork

June 29, 2010

Robert Byrd – November 20, 1917-June 28, 2010 – who served as United States Senator for West Virginia for 51 years, returned repeated electoral favors by looting some $3 billion of U.S. taxpayers’ hard-earned money in order to bring back pork to his constituents.  In so doing, almost certainly,  he retarded entrepreneurship and private wealth- creation in West Virginia as succeeding generations of citizens came to rely on Byrd hand-outs and Byrd federal buildings, rather than on capitalist endeavor for their well-being.  In so doing, he ensured that his own name, and the name of his wife Erma, look down from building after building, and along road after road, throughout West Virginia, much like the names of  Dear Leaders in autocratic countries.

Certainly from the age of 24 until the age of 50, Byrd was strongly opposed to the individual and civil rights of all blacks in the United States.  He joined the Ku Klux Klanin 1942 and became the top officer of his unit, holding the titles of Kleagle (recruiter) and Exalted Cyclops. In 1944, Byrd wrote to the segregationist Mississippi Senator, Theodore Bilbo: 

“I shall never fight in the armed forces with a Negro by my side…Rather I should die a thousand times, and see Old Glory trampled in the dirt never to rise again, than to see this beloved land of ours become degraded by race mongrels, a throwback to the blackest specimen from the wilds.”

In 1946, Byrd wrote to a grand Wizard stating:

“The Klan is needed today as never before and I am anxious to see its rebirth here in West Virginia and in every state in the nation.”

With those reprehensible views, the Democratic Party became Byrd’s natural home, as he turned his mind to a career in politics. Even the Democratic Party had to be careful about associating itself with Klan members, however, so Byrd allowed his membership in the organization to fade away once he won a seat  in the West Virginia House of Delegates, where he served from 1947 through 1950. He then served in the West Virginia Senate, 1951-1952 before securing election to the United States House of Representatives (1953 through 1958). From 1959 until his death, Byrd served in the United States Senate, rising from the ranks to the most senior positions in that chamber.

Having discarded his links with the Klan explicitly for the purpose of career advancement, Byrd by no means abandoned his hatred of the blacks, at least until 1968. He started out his political career as a typical conservative Southern Democrat, upholding Jim Crow laws wherever possible. His 1958 campaign for the House of Representatives specifically and successfully targeted the pro-civil rights record of  the Republican incumbent.

In 1964, Byrd joined with other Southern and border state Democrats to filibuster the Civil Rights Bill of that year. Byrd personally filibustered the bill for 14 hours.  He also opposed the Voting Rights Act of 1965 on explicitly racist grounds. Byrd voted against the nomination of Thurgood Marshall to the United States Supreme Court in 1967, again on explicitly racist grounds.

 By 1968, Byrd realized that he would have to temper his segregationist and racist views if he was to play a national role in the Democratic Party. Thereafter, Byrd the Repentant emerged into public view, albeit with occasional lapses. For example, he voted against Clarence Thomas being confirmed to the Supreme Court in 1991, on the ground that Thomas had used the phrase: ‘high-tech lynching of uppity-blacks’.  He also voted against the confirmation of Condoleeza Rice for the position of Secretary of State in January 2005.

 Out of the shadows of racism emerged a new Robert Byrd: Emperor of Pork and looter of private property rights. From the outset of his Washington career, Byrd set out to link the U.S. Treasury to the pockets of his constituents. With an  uncharacteristic lack of modesty, he revelled in calling himself  ‘the king of pork’.  Ultimately he succeeded in bringing $3 billion in earmarked spending to West Virginia. His name is enscribed on at least  6 major transportation sites, on at least 7 major technology sites, on at least 6 major health care sites, on at least 10 major education sites, on at least 5 major rourist and community sites and on at least three court and law enforcement sites. All in West Virginia.

In my judgment, the special place reserved for such a looter of taxpayers’ precious dollars over a political career spanning some 60 years indeed does begin with H but surely does not end with N.

The Chris Dodd-Barney Frank-Barack Obama Comedy Show

June 28, 2010

The financial regulation bill that House-Senate negotiators have finally cobbled together, with ringside support from the White House, is farcical in its failure to learn relevant lessons from 2007-2009  U.S. experience.  The bill simply increases the regulatory authority of all government agencies responsible for that crisis, while leaving untouched the unsavory criminals and fraudsters, private and public, responsible for the collapse of financial markets.

The Federal Reserve, which actively promoted the housing bubble and failed utterly to monitor the major banks, is to gain yet more authority to regulate yet more financial institutions. The Treasury, which bailed out some institutions and refused to bail out others, without rhyme or reason to its decisions, is to control a new Financial Stability Oversight Council empowered arbitrarily to determine which companies pose ‘systemic risk’.  Rest assured that Goldman Sachs will never be so identified by any Sec. Treas. confirned into office.  The Securities Exchange Commission, which created the credit ratings oligopoly and failed completely to identify any of the major scam artists that thrived under its loose jurisdiction, is to have additional powers to control elections to corporate boards of directors.

And the criminals? Fannie Mae and Freddie Mac go completely untouched by government action.  Their top officials are feted by the Treasury and the Fed  instead of rotting in the same jail as Bernie Madoff for their much more serious crimes. The major banks are not to be broken up to separate commercial banking from casino banking, as yet may be the case in the United Kingdom. Nor are the banks to be seriously constrained by miminum cash reserve to total asset ratios and by minimum tangible common equity to total asset ratios. Instead, all the fault lines that fed the 2008 crisis are to remain in place.

In such circumstances, a major opportunity presents itself to the Republican minority in the Senate. If they hold together, they can filibuster this bad bill, and buy time until November 2010. Because so much financial market  lobbying money is sloshing around the Capitol, however, my public choice expectation is that this bill will pass into law.

My advice continues to be: Buy gold and take delivery now! And certainly do not turn that precious metal in when a bankrupt United States government eventually legislates to that end.

At G20 Meeting Obama Speaks With Forked Tongue

June 27, 2010

A communique agreed unanimously by leaders of the world’s major economies at the G20 meeting in Toronto  today acknowledged that countries with large budget deficits need to ‘accelerate the pace of consolidation’ and welcomed the announcement of plans by countries such as Germany and Britain to bring their public finances under control.  The United States President, Barack Obama, singled out Britain’s budget cuts for praise as a necessary and courageous action. The communique set non-binding targets for member states at least to halve their deficits by 2013 and to see debt falling by 2016.  Both Germany and Britain are already on target to achieve these objectives. The United States government has no such target in place.

At the very same meeting, Obama and Geithner warned that it is too soon after the recession for the United States  to withdraw spending:  ‘the scars of the crisis are still with us.’   Of course, the United States is special in this regard, or so we are led to believe.

Well, what is a little bit of verbal inconsistency among a pair of  hydraulic Keynesian deadbeats. When a snake stabs out its forked tongue, after all, it is deploying its highly developed sense of smell. There are some very differentiated smells out there at the moment for President Obama wafting across respectively  from the 2010 and 2012  election opinion polls. No wonder he is evolving a forked tongue.

 Actually, I find its forked tongue the most  frightening aspect of  any venomous snake; until, that is, the snake strikes and injects its venom. Then we really know that we are in trouble.

High Time to Call Out Obama’s Keynesian Deadbeats

June 26, 2010

“What the world has now reached…is a Keynesian dead end.  We are told to let Congress continue to spend and borrow until the precise moment when Mr. Summers and Mark Zandi and the other architects of our current policy say it is time to raise taxes to reduce the huge deficits and debt that their spending has produced.  Meanwhile, individuals and businesses are supposed to be unaffected by the prospect of future tax increases, higher interest rates, and more governmental control over nearly every area of the economy.”   ‘The Keynesian Dead End’, The Wall Street Journal, June 26, 2010

Let us hope that President Obama and Treasury Secretary Timothy Geithner return from the G8 and G20 meetings in Toronto next week with blackened eyes and bloodied noses delivered by European leaders sick and tired of their fraudulent Keynesian nostrums that currently are clogging the arteries of the advanced nations with fat and bad cholesterol.

Let us further hope that a President who has found a taste for beating up fine generals will lay some solid punches into his retread Keynesian advisors as he runs them out of town. For it is high time to call them out for their failures of economic prediction and the serious harm that their their growth-retarding policies have imposed on regular Americans.

It is important to understand just how academically weak Obama’s leading economic advisors truly are. Lawrence Summers has ridden far on a great pedigree (related to two Nobel Prize winning economists and cloaked in the Harvard label). But he is now far- distanced from serious academic work, preferring instead to relax in the  less intellectually pressured world of government and university administration.  A lot of his early work quite frankly was pedestrian, much of it co-authored. There is clearly no Nobel Prize in economic Sciences in the offing for his contributions.  Christina Romer is no path-breaker either, her best work co-authored with her much more impressive husband.  Both Summers and Romer are recent Keynesian retreads, who spent most of their academic careers in the world of rational expectations and New Keynesian economics. Their recent return to the hydraulic Keynesian fold is as mystifying as it is unfortunate for the nation.

Summers was directly involved in Stimulus I, pressing President Bush and Congress for a temporary spending injection of $150 billion  for 2008. The government responded with $168 billion in spending and one-time tax cuts.  This injection failed to stop the financial crisis and economic contraction of September 2008.  Summers and Romer, undeterred by failure, next pressed President Obama hard for Stimulus II early in 2009. The government responded with $862 billion in pork-laden outlays.

Summers and Romer went out on a limb, assuring the public that this spending would hold unemployment in the United States below 8 per cent. What a pair of losers!  Seventeen months later, with the United States running a monetary furnace, the unemployment rate hovers at 9.7 per cent, with first quarter growth for the U.S. economy at  an anaemic  2.7 per cent per annum, orders of magnitude worse than the Reagan recovery of 1983-84.  Still undeterred by repeated  failure, Summers and Romer now press for Stimulus III;  and President Obama fully supports their nostrums.

Throw these losers out, Mr. President, while you still have time to shift the economic course of this nation towards more desirable waters. If you do not do so, they will surely take you down in 2012, together with the Democratic-controlled Congress that has blindly followed your administration on the road to economic ruin.

Fiscal Policies: Merkel and Cameron Steer into Safe Waters; Obama Abandons the Bridge

June 25, 2010

Dramatic disagreements over the future of fiscal policy will be center-stage this weekend at the G8 and G20 summits hosted by Canada, as three of the world’s leading countries – the United States, Germany and the United Kingdom -attempt to justify sharply contradictory approaches to fiscal policy. All three countries are economically over-weight, staggering under the excessive blubber of outsized public sectors, and running perspiration from grotesquely obese budget deficits. All three countries confront imminent cardiac arrest should they fail to engage in weight-reducing exercises and to imbibe unpleasant but powerful corrective medicine. 

Out of the left corner crawls the United States, a once lean and fit contender, now barely able to support its own weight, wheezing  and puffing, its eyes searching desperately for a G20 oxygen tent that is no longer to be made available. Out of the right corner, swagger Germany and the United Kingdom, newly-confident because they are responding to doctors’ orders, albeit at the eleventh hour, and are taking care of their obesity, albeit in slightly different ways.

Barack Obama essentially has no long-term fiscal policy, despite having been in office for almost eighteen months. Obsessed as he is with expanding the relative size of the state, he is pursuing a hotch-potch of socialist policies – health care reform, pro-union card check legislation, cap and trade energy regulation and fiscal stimulus packages – that exacerbate the fiscal obesity of his nation. Budget deficits are written into the future for the United States as far as the mind can imagine, some calculate through 2050 and beyond. Obama is a captain who has fled the bridge for the cover of some lifeboat, leaving a set of Keynesian retreads to steer his ship onto the fiscal rocks.

In the meantime, Germany and the United Kingdom have reacted wisely to the near-death experiences of Greece and the other PIGS, collapses that threaten to destroy the euro-zone. Merkel is on target to eliminate budget deficits in Germany by 2016. Cameron is on target to eliminate deficits by 2014. In each case, public sector spending is directly targeted as the prime route to salvation. Public sector unions will be confronted as necessary, while spending cuts approaching 25 per cent are imposed over a four-to six year period. Because the deficits are so large, tax increases are to be imposed, and this must be a matter for concern for those wishing to rein in the size of the state.  But governments must survive to effect their policies, and issues of fairness as well as efficiency must be taken into account in any public choice reckoning.

Keynes always focused attention on the short run, suggesting that ‘in the long run we are all dead’. So it is not surprising that Obama and his Keynesian economic advisors are focused on living high on the hog today, without any consideration for tomorrow.  Merkel and Cameron are not Keynesians, and their eyes are focused correctly on the longer-term. If  the United States fails to follow suit, it is predictable that Germany and the United Kingdom, not the United States, will be  magnets for future enterprise and wealth-creation, just as the United States and the United Kingdom became such magnets during the era of Thatcher and Reagan.

What Obama has Thrown Away to Preserve his Self-Esteem

June 24, 2010

“McChrystal’s immediate staff officers, many of whom came from the world of Special Operations, routinely spoke of him as someone who was accessible, warm and open to new ideas. Unlike Petraeus, who often maintained an emotional distance from even his most loyal staff members, McChrystal was often described by his inner circle as both boss and brother in arms….’What I really respected was his intellectual courage,’ said one military official who worked with the general in Kabul. ‘He was open to a lot of inputs from a lot of areas and had a real ability to connect with people.’ Gregg Jaffe, ‘Lack of political savvy brought down warrior’ The Washington Post, June 24, 2010

“Obama and Petraeous then met privately for 40 minutes. The president asked him to step down as head of the Central Command, which is based in Florida, and take over day-to-day control of the Afghan war.  The president’s advisers said that Petraeous agreed to do so, but that it was clear to Obama that it came ‘at some great personal sacrifice.’ Asked to describe it, one senior administration official said: ‘Tampa to Kabul.’   Scott Wilson and Michael D. Shear, ‘McChrystal ousted from Afghan post’, The Washington Post, June 24, 2010

“The White House has, in effect, stacked the deck against lasting success in Afghanistan.  In the process, it has placed its military leaders – Gen. McChrystal among them – in the untenable position of losing American lives to implement a strategy that, whatever the tactical successes in the short term, is increasingly likely to be a strategic failure in the long run.” Ilan Berman, ‘McChrystalyzing failure’ The Washington Times, June 24, 2010

“Unlike Gen. McChrystal prior to his appointment, Gen. Petraeous hasn’t spent any time directly commanding troops in Afghanistan. He has met President Hamid Karzai, but doesn’t have the close relationship that Gen. McChrystal had with the prickly Afghan leader.  He is, however, closer to Ambassador Richard Holbrooke, U.S. envoy to Afghanistan and Pakistan, who was at odds with the McChrystal team.  One area where Gen Petraeous may be at a disadvantage is with Pakistan, whose military chief, Gen. Ashfaq Kayani, has forged a close alliance with Gen. McChrystal.  ‘The Americans always come here and …try to sell us things.  Do this, do that, shoot him for us,’ one senior official said before the appointment. ‘This Petraeous is always selling.  we want people who are buying.’” Nathan Hodge, Michael M. Phillips and Matthew Rosenberg, ‘From Iraq to a Hard Place’  The Wall Street Journal, June 24, 2010.

Put all this together and the replacement of General McChrystal by General Petraeous reads to me like a loser’s strategy. Petraeous is not going to dirty his outfit with his men, he is not going to sweat in the summer and freeze in the winter on the front line with his troops. Like Tommy Franks before him, he is going to  command COIN far away from the battlefeld, if not in Tampa, then surely in Kabul, where the air-conditioning runs in summer and the heat in winter. And like Tommy Franks, he is going to lose key battles and allow key Taliban  leaders to buy their way out of  trouble.

But, then we already know that Obama is a loser. Maybe Petraeous understands that his CIC has been severely  down-graded since the superbly led 2008 surge in Iraq. One can only faint so often to avoid difficult questions without calling into doubt one’s fitness for duty. Nevertheless, Petraeous would have been well-advised to faint yesterday at that critical moment during his meeting with the President.

President Obama Removes General Stan McChrystal

June 23, 2010

Black Flag in his wise comment on my previous column, sums up what has happened. A low self-esteem, narcissistic President cannot tolerate ridicule.  He would rather lose a war than confront modest laughter about his self-induced failures. So he turns to General Petraeus, who fainted at a Congressional Hearing  to avoid either lying under oath or criticizing his Commander-in-Chief for his stupid decision to telegraph troop withdrawals in the middle of a major counter-insurgency.

Well, Obama now has yet another senior sycophant to polish his ego. I wonder whether such ego-boosting will impress the Taliban, or protect U.S. troops on the ground in Afghanistan, or lever Obama to re-election in 2012?

General McChrystal and his Aides Tell the Unvarnished Truth

June 23, 2010

A key advantage of democracy over dictatorship, it is often argued, is that accurate information flows much more effectively upwards to the top under the former than the latter system. Dictators do not like to here unwelcome truths, and their toadies make sure that they do not do so. In consequence, their populations suffer from repeated famines as agricultural policies repeatedly fail;  and their leaders embark on unwinnable wars and battles because no one will advise them to hold or to redirect their fire.

Unfortunately, when democracies elect weak and less than smart leaders, they also become vulnerable to the same phenomenon, as is currently the case of the Obama adminstration in the United States. For such leaders know their own personal limitations, and fear that stronger and smarter counsellors will displace them from decision-making authority. So, they too choose to listen to the true believers and to the sycophants, in order to make-believe that they themselves are smarter ythan they are.  Barack Obama appears to have fallen prey to such temptation, with serious consequences for the U.S. war against the Taliban, both in Afghanistan and Pakistan.

General Stan McChrystal, either by accident or by design, has exposed the soft-under-belly of the Obama adminstration’s war policy. In so doing, he has rendered a great service to his nation, even at the cost of breaching military code, and thus exposing himself to dismissal by his Commander-in-Chief. For if an Emperor has no clothes, and a brave soul tells him that he is uniquely exposed, that Emperor confirms his own stupidity should he choose to remain naked while killing the messenger who advised him that all is much less than well in the big picture of things.

What then is the essence of the truth that has been forced upon the President. First, that the Vice-President that he selected is a truly stupid man, prone to intellectual incoherence that ill-fits his office. When such a senior official chooses continually to criticize a war strategy - counterinsurgency or COIN – that has been approved by the President and that is in process throughout the war zone, he deserves to be disciplined, not the general whose forces risk their lives on the field of battle.

Second, when the President attends an initial meeting with his chosen general without briefing himself for the occasion, and offering only a few short minutes of his time, it is right that he should be publicly rebuked for his inefficiency and  laziness. The golf course and the basketball hoops should not lead a  President astray from the work for which he is paid so well.

Third, when a President covers for his own limitations by appointing  unqualified individuals such as Jim Jones to the key position of National Security Advisor, Karl Eikenberry to the key position of  U.S. Ambassador to Afghanistan, and Clinton re-tread,  Richard Holbrooke as U.S. Special Envoy, he deserves tro have his fingers publicly rapped by his lead general in the field.

One thing is surely clear in all the upheaval that has followed from the Rolling Stones article that outlines General McChrystal’s  reactions to such policy errors by the Obama administration. The appointment of McChrystal to lead the war in Afghanistan is the one first-rate decision that the President has made in that field. No doubt the President now feels that he has made a mistake;  for, by appointing competence rather than incompetence,  he has opened himself up to the very criticism that he most feared. Now, however, he has a genuine chance to redeem himself.

If President Obama is capable of rising above his personal limitations, he will congratulate General McChrystal for telling the truth, while asking him in future to report those truths exclusively to the Oval Office.  He will then muzzle his Vice-President, replace his National Security Advisor and his Special Envoy, and recall his Afghanistan Ambassador, as he confirms unequivocal support for COIN under the high quality leadership of General Stan McChrystal.  If McChrystal proves to be successful in that war, then the President might consider awarding him that much-coveted fifth star. And that would be the mark of a true President of a great nation.

The Economist: Obama an Economic Illiterate, Not a Socialist

June 22, 2010

“The American right  misses Mr. Obama’s real flaw.  He is not a ‘socialist’; but he does not understand business.  As even Democrat-leaning CEOs complain, he neither expresses enough appreciation of capitalism nor shares the wavelength of those who practise it.  Bosses are ushered in for photo-calls and then ignored.  It is one thing to seek redress from BP, another to vilify it as an alien invader.  He is interested in economics and technology; but not in how to make money.” Lexington, ‘The 70-30 nation’, The Economist, June 19, 2010

The Economist – itself a magazine that has drifted over the past quarter century from classical liberalism through social democracy to 21st century socialism – is only half-right in this judgment.  Obama is economically illiterate; and he is also a socialist. The two conditions typically go hand in hand. For, as my former colleague Gordon Tullock was wont to say, one cannot be an economist and a socialist,  because socialism runs directly counter t0 all economic logic.

The large majority of Americans, sadly, are economic illiterates as another of my colleagues at George Mason University, Bryan Caplan, has ably demonstrated. This is a consequence of a simply dreadful public education system in which the basic principles of economics – economics 101 if you like – are rarely taught, and when taught, are taught badly. The large majority of  American politicians are also economic illiterates, as their wealth-destructive policy actions clearly demonstrate. Barack Obama, as a consequence of his upbringing,  his education choices, and his choice of colleges - public affairs and the law at Columbia and Harvard respectively – is less economically literate than any president since FDR. But this degree of economic illiteracy places him only at the median of the United States electorate, which explains why he was a strong candidate for office at a time when economic literacy should have been at an absolute political premium.

However, if Obama is also a confirmed socialist – as I have shown to be the case in many columns – then he locates firmly in the minority 30 percent tail of the U.S. electorate, a location that may prove fatal to his re-election chances in 2012. For, as The Economist acknowledges, even after the 2008 financial crisis an overwhelming majority of Americans confirm in opinion poll after opinion poll that they prefer capitalism to socialism.  In January 2010, Gallup found that 61 per cent of those polled had a positive view of capitalism and a negative view of socialism. In March 2010, the Pew Research Center asked Americans whether they were better off in a free market economy even though there may be severe ups and downs from time to time. Seventy per cent of those polled answered in the affirmative. Seventy per cent of Americans consistently poll that federal income taxes are too high (at an average of 18.2 per cent of gross domestic product). Even those who favor high taxes on the rich think the top rate should be 20 per cent or less (rather than the 40 per cent that soon will be the case). 

So, in a 70:30 nation, how come that a socialist candidate was elected to the presidency of the United States?  The answer, I believe, lies not just in economic illiteracy within the electorate, but in the ideological composition of the 30 per cent socialist tail. The tail is heavily represented in the politically influential media and universities, and within the wider public sector, by so-called elites that have little or no capitalist experience. It is also heavily represented within the Black and the Hispanic communities, large proportions of which are unusually dependent on hand-outs from the state. Obama, half-black and half-white, attracted both the elites and the minority interests without   alienating required support within the naturally more pro-capitalist White majority and Asian minority voters.

Because Obama and the Democrat-controlled Congress have successfully pursued socialist policies – and because such policies predictably have failed – the American electorate predictably will  reverse course in 2010 and 2012, and begin to ease their country back to its natural capitalist roots. And Barack Obama, and many of his economically illiterate, socialist cohorts, will find themselves relegated to the trash-can of history.


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