Category: Free Markets

One Way to Defend Free Trade (in Honor of Reagan’s Birthday)

(p. A9) Baldrige also knew how to use humor to deflate tense moments, as when the U.S. toy balloon industry petitioned for protection against cheap Mexican imports. Baldrige was opposed, but after debate the entire cabinet favored sanctions. Sensing this was not where the president wanted to go, Baldrige pulled from his pocket a dozen toy balloons and tossed them on the cabinet table. As the room filled with laughter, he said, “This is what we are talking about.” Reagan denied the sanctions.

For the full review, see:
CLARK S. JUDGE. “BOOKSHELF; The Cowboy At Commerce; During tense talks over steel imports, Baldrige insisted the tired Europeans work through lunch. He’d hidden snacks for his team nearby.” The Wall Street Journal (Tues., Jan. 5, 2016): A9.
(Note: the online version of the review has the date Jan. 4, 2016, and has the title “BOOKSHELF; The Cowboy At Commerce; During tense talks over steel imports, Baldrige insisted the tired Europeans work through lunch. He’d hidden snacks for his team nearby.”)

The book under review, is:
Black, Chris, and B. Jay Cooper. Mac Baldrige: The Cowboy in Ronald Reagan’s Cabinet. Lanham, MD: Lyons Press, 2015.

Dignity and Equality Before the Law Unleashes Creativity in the Poor

(p. A23) We can improve the conditions of the working class. Raising low productivity by enabling human creativity is what has mainly worked. By contrast, taking from the rich and giving to the poor helps only a little — and anyway expropriation is a one-time trick.
. . .
Look at the astonishing improvements in China since 1978 and in India since 1991. Between them, the countries are home to about four out of every 10 humans. Even in the United States, real wages have continued to grow — if slowly — in recent decades, contrary to what you might have heard. Donald Boudreaux, an economist at George Mason University, and others who have looked beyond the superficial have shown that real wages are continuing to rise, thanks largely to major improvements in the quality of goods and services, and to nonwage benefits. Real purchasing power is double what it was in the fondly remembered 1950s — when many American children went to bed hungry.
What, then, caused this Great Enrichment?
Not exploitation of the poor, not investment, not existing institutions, but a mere idea, which the philosopher and economist Adam Smith called “the liberal plan of equality, liberty and justice.” In a word, it was liberalism, in the free-market European sense. Give masses of ordinary people equality before the law and equality of social dignity, and leave them alone, and it turns out that they become extraordinarily creative and energetic.

For the full commentary, see:
DEIRDRE N. McCLOSKEY. “Economic View; Equality, Liberty, Justice and Wealth.” The New York Times, SundayBusiness Section (Sun., SEPT. 4, 2016): 6.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date SEPT. 2, 2016, and has the title “Economic View; The Formula for a Richer World? Equality, Liberty, Justice.”)

McCloskey’s commentary, quoted above, is related to her book:
McCloskey, Deirdre N. Bourgeois Equality: How Ideas, Not Capital, Transformed the World. Chicago: University of Chicago Press, 2016.

EU Regulations Frustrate Innovation

(p. A13) The EU is a supranational government run in a fundamentally undemocratic, indeed antidemocratic, way. It has four presidents, none of them elected. Power to initiate legislation rests entirely with an unelected commission. Its court can overrule our Parliament.
. . .
. . . today, Britain–the most outward-facing of the major European economies–will thrive if it leaves. . . .
This is because the EU’s obsession with harmonization (of currency and rules) frustrates innovation. Using as an excuse the precautionary principle or the need to get 28 countries to agree, the EU gets in the way of the new. “Technological progress is often hindered or almost impossible in Europe,” says Markus Beyrer, director general of BusinessEurope, a confederation of industry groups. Consequently, we’ve been left behind in digital technology: There are no digital giants in Europe to rival Amazon, Google, Apple and Facebook.
The EU is also against free trade. It says it isn’t, but its actions speak louder. The EU has an external tariff that deters African farmers from exporting their produce to us, helping to perpetuate poverty there, while raising prices in Europe. The EU confiscated Britain’s right to sign trade agreements–though we were the nation that pioneered the idea of unilateral free trade in the 1840s. All the trade agreements that the EU has signed are smaller, as measured by the trading partners’ GDP, than the agreements made by Chile, Singapore or Switzerland. Those the EU has signed usually exclude services, Britain’s strongest sector, and are more about regulations to suit big companies than the dismantling of barriers.
Even worse than in Westminster or Washington, the corridors of Brussels are crawling with lobbyists for big companies, big banks and big environmental pressure groups seeking rules that work as barriers to entry for smaller firms and newer ideas. The Volkswagen emissions scandal came from a big company bullying the EU into rules that suited it and poisoned us. The anti-vaping rules in the latest Tobacco Products Directive, which will slow the decline of smoking, came from lobbying by big pharmaceutical companies trying to defend the market share of their nicotine patches and gums. The de facto ban on genetically modified organisms is at the behest of big green groups, many of which receive huge grants from Brussels.

For the full commentary, see:
MATT RIDLEY. “The Business Case for Brexit; Britain will thrive outside the EU, free from Brussels’ regulation and empowered to cut its own trade deals.” The Wall Street Journal (Weds., JUNE 22, 2016): A13.
(Note: ellipses added.)
(Note: the online version of the commentary has the date JUNE 21, 2016.)

“Liberated People Are Ingenious”

(p. C1) Nothing like the Great Enrichment of the past two centuries had ever happened before. Doublings of income–mere 100% betterments in the human condition–had happened often, during the glory of Greece and the grandeur of Rome, in Song China and Mughal India. But people soon fell back to the miserable routine of Afghanistan’s income nowadays, $3 or worse. A revolutionary betterment of 10,000%, taking into account everything from canned goods to antidepressants, was out of the question. Until it happened.
. . .
(p. C2) Why did it all start at first in Holland about 1600 and then England about 1700 and then the North American colonies and England’s impoverished neighbor, Scotland, and then Belgium and northern France and the Rhineland?
The answer, in a word, is “liberty.” Liberated people, it turns out, are ingenious. Slaves, serfs, subordinated women, people frozen in a hierarchy of lords or bureaucrats are not. By certain accidents of European politics, having nothing to do with deep European virtue, more and more Europeans were liberated. From Luther’s reformation through the Dutch revolt against Spain after 1568 and England’s turmoil in the Civil War of the 1640s, down to the American and French revolutions, Europeans came to believe that common people should be liberated to have a go. You might call it: life, liberty and the pursuit of happiness.
To use another big concept, what came–slowly, imperfectly–was equality. It was not an equality of outcome, which might be labeled “French” in honor of Jean-Jacques Rousseau and Thomas Piketty. It was, so to speak, “Scottish,” in honor of David Hume and Adam Smith: equality before the law and equality of social dignity. It made people bold to pursue betterments on their own account. It was, as Smith put it, “allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice.”

For the full commentary, see:

DEIRDRE N. MCCLOSKEY. “How the West (and the Rest) Got Rich; The Great Enrichment of the past two centuries has one primary source: the liberation of ordinary people to pursue their dreams of economic betterment.” The Wall Street Journal (Sat., May 21, 2016): C1-C2.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date May 20, 2016.)

McCloskey’s commentary is based on her “bourgeois” trilogy, the final volume of which is:
McCloskey, Deirdre N. Bourgeois Equality: How Ideas, Not Capital, Transformed the World. Chicago: University of Chicago Press, 2016.

Mast Brothers Started Their Chocolate Business in Their Apartment

The Masts provide another example showing the possibility of entry into the candy business. The issue is relevant to the claim of those who support sugar quotas, that a decline in sugar prices would not be passed on to consumers in the form of lower candy prices. If there is easy entry into the candy business, then the business is traditionally competitive, and lower costs of production will be passed on to consumers.

(p. A20) In an interview on Sunday [Dec. 20, 2015], Rick Mast, who with his brother began making chocolate in a Brooklyn apartment in 2006, said the allegations were untrue — for the most part. But on the claim that the Masts were “remelters” at the start, Mr. Mast confirmed the brothers did use industrial chocolate, what is known as couverture, in some of their early creations, before settling on the bean-to-bar process for which they are now known.

“It was such a fun experimental year,” Mr. Mast said, adding that the brothers were transparent “to anyone that asked.”

For the full story, see:
SARAH MASLIN NIR. “Unwrapping a Chocolatier’s Mythos.” The New York Times (Mon., DEC. 21, 2015): A20 & A22.
(Note: bracketed date added.)
(Note: the online version of the story has the date DEC. 20, 2015, and has the title “Unwrapping the Mythos of Mast Brothers Chocolate in Brooklyn.”)

Textile Production Moving from China Back to United States

(p. A1) INDIAN LAND, S.C. — Twenty-five years ago, Ni Meijuan earned $19 a month working the spinning machines at a vast textile factory in the Chinese city of Hangzhou.
Now at the Keer Group’s cotton mill in South Carolina, which opened in March, Ms. Ni is training American workers to do the job she used to do.
“They’re quick learners,” Ms. Ni said after showing two fresh recruits how to tease errant wisps of cotton from the machines’ grinding gears. “But they have to learn to be quicker.”
Once the epitome of cheap mass manufacturing, textile producers from formerly low-cost nations are starting to set up shop in America. It is part of a blurring of once seemingly clear-cut boundaries between high- and low-cost manufacturing nations that few would have predicted a decade ago.
Textile production in China is becoming increasingly unprofitable after years of rising wages, higher energy bills and mounting logistical costs, as well as new government quotas on the import of cotton.
At the same time, manufacturing costs in the United States are becoming more competitive.
. . .
(p. A3) Ms. Ni, one of 15 Chinese trainers at Keer’s Indian Land plant, complained softly of American workers’ occasional tardiness. In China, she said, managers can dock the pay of workers who show up late. But here, she said, she felt frustrated that she could not discipline tardy staff.

For the full story, see:
HIROKO TABUCHI. “Chinese Textile Mills Are Now Hiring in Places Where Cotton Was King.” The New York Times (Mon., AUG. 3, 2015): A1 & A3.
(Note: ellipsis added.)
(Note: the online version of the story has the date AUG. 2, 2015, and has the title “Chinese Textile Mills Are Now Hiring in Places Where Cotton Was King.”)

Canadian Cartel Seizes 20,400 Pounds of Robert Hodge’s Maple Syrup

Video interviews related to the New York Times article quoted below.

(p. B1) The scenic and narrow lane that leads to Robert Hodge’s sugar camp is surrounded by a cat’s cradle of plastic piping that draws sap from 12,000 trees. At the end of the lane, a ramshackle hut contains reverse osmosis pumps to concentrate the harvest. A stainless steel evaporator, about the size of a truck, finishes the conversion into maple syrup.
Just one thing is missing: the maple syrup.
For weeks, security guards, hired by the Federation of Quebec Maple Syrup Producers, kept watch over Mr. Hodge’s farm. Then one day, the federation seized 20,400 pounds of maple syrup, his entire annual production, worth about 60,000 Canadian dollars, or nearly $46,000.
The incident was part of the escalating battle with farmers like Mr. Hodge who break the law by not participating in the federation’s tightly controlled production and sales system.
“It’s a good thing that I’m not 35, 40 years old because I’d pack up all my sugar equipment that’s movable, and I’d go to the United States — oh yes, in a minute, in a minute,” said Mr. Hodge, 68.
While many Americans associate Vermont with maple syrup, Quebec is its center. The province’s trees produce more than 70 (p. 4) percent of the world’s supply and fill the majority of the United States’ needs. The federation, in turn, has used that dominance to restrict supply and control prices of the pancake topping.
. . .
Mr. Hodge is similarly intransigent. At this point in the season, Mr. Hodge would normally have sold his syrup, turning his attention to his cattle and other crops. But this year he had nothing to sell. He contends that farmers should be allowed to set their own level of production and sell directly to large buyers, regardless of what the law says.
“They call us rebels, say we’re in a sugar war or something. I’ve heard rumors of that,” said Mr. Hodge, at his farm in Bury, Quebec.
“Yeah, I guess you could call it that.”
Across the table, Whitney, his 20-year-old daughter, who also farms, looked up from her smartphone and interjected.
“A war over maple syrup, like how pathetic can you get?”
. . .
Prices are set by the federation, in negotiation with a buyers’ group. The federation holds most of the power, given that it controls a majority of the world’s production.
Such domestic systems are facing scrutiny in a global marketplace. One major hurdle in the talks over the Trans-Pacific Partnership, a major trade deal with 12 countries, has been Canada’s refusal to dismantle a similar quota system for dairy and poultry farmers.
Maple syrup buyers, including some American companies, have bristled at the federation’s tactics. They appreciate the steady supply. But some have taken issue with the aggressive enforcement efforts, including large fines for companies buying from Quebec producers outside the system, and the rising prices.
The situation, critics contend, could prompt buyers and producers to shift to the neighboring province of New Brunswick, and Vermont in the United States. Or consumers might simply pour artificial syrup instead.
“People will always eat chicken,” said Antoine Aylwin, a Montreal lawyer who has represented several buyers in disputes with the federation, including some American companies. “But they will not always eat maple syrup if they think that they can’t afford it.”

Defying the Law
Mr. Hodge was shocked in 2009 when the federation demanded 278,000 Canadian dollars for not joining the system and for selling directly to a buyer in Ontario.
Most years, Mr. Hodge’s sugar bush grosses about 50,000 Canadian dollars. About half the money goes to cover electricity for the vacuum pumps and oil for the evaporator.
“I’d have to give them 100 percent of what I gross for five years, and I would have nothing for production cost,” he said. “That just ain’t possible.”
Mr. Hodge openly acknowledges that he is defying the law. When the quota and centralized selling system were introduced, he continued to sell directly to a buyer in Ontario.
. . .
Like others who have invoked the federation’s wrath, Mr. Hodge’s battle seems as much about principle as avoiding a potentially crippling fine.
In Mr. Hodge’s view, the system’s restrictions are stunting the growth of Quebec’s industry. It is less bureaucratic and less expensive, he explains, for buyers to go to Vermont or New Brunswick. He said that he had no problem with paying the federation its 12 cents a pound tax for various services, like promoting maple syrup in new markets, particularly in Asia. But he will not adhere to the quotas.
“Well, I don’t accept the system because I don’t believe in not being able to sell our product,” he said. “We just think that that product is ours. We bought the land. We’ve done all the work. Why should we not be able to sell our product the way we want as long as we legitimately put it on our income tax?”
That’s a question that exasperates Mr. Trépanier of the federation. While Mr. Trépanier studiously avoids calling the organization a cartel, he has described it as the OPEC of maple syrup in the past, referring to the group of oil-producing countries. The system, he said, is doomed to collapse without production discipline.

For the full story, see:
IAN AUSTEN. “The Maple Syrup Mavericks.” The New York Times, SundayBusiness Section (Sun., AUG. 23, 2015): 1 & 4.
(Note: ellipses added.)
(Note: the online version of the story has the date AUG. 20, 2015, and has the title “Canadian Maple Syrup ‘Rebels’ Clash With Law.”)

“America Represents Wilderness and Freedom, and Also a Big House”

(p. A1) JACKSON HOLE, China — Yearning to breathe untainted air, the band of harried urbanites flocked to this parched, wild land, bringing along their dreams of a free and uncomplicated life.
But unlike the bedraggled pioneers who settled the American West, the first inhabitants of Jackson Hole, a resort community on the outskirts of the Chinese capital, arrived by Audi and Land Rover, their trunks filled with French wine and their bank accounts flush with cash.
Over the past decade, more than a thousand families have settled into timber-frame houses with generous backyards, on streets with names like Aspen, Moose and Route 66. On Sundays, some worship at a clapboard church that anchors the genteel town square, outfitted with bronze cowboys and a giant Victrola that sprays water.
“America represents wilderness and freedom, and also a big house,” said Qin You, 42, who works in private equity and owns a six-bedroom home that features a koi pond, a year-round (p. A8) Christmas tree and what he proudly described as “American-style” electric baseboard heating. His parents live in the house and he goes there on weekends. “The United States is cool,” he says.
. . .
. . . , Communist Party edicts and conservative commentators have sought to demonize so-called Western values like human rights and democracy as existential threats. Even if the menace is seldom identified by name, the purveyor of such threats is widely understood to be the United States.
. . .
Gao Zi, 60, a retired military employee who organizes an oil painting club for Jackson Hole residents, said that “we accepted the propaganda” back in the 1950s, when China was a closed society. “But now people have the opportunity to travel abroad and see the truth for ourselves.”
Like Ms. Gao, Mr. Qin, the investment executive, has never been to the United States but he has long admired American ideals like personal liberty and blind justice. Five years ago, after his wife gave birth to their second child, Mr. Qin says the government fined him nearly $30,000 for violating the country’s population-control policies. “This is not freedom,” he said, before continuing a tour of his expansive back patio.

For the full story, see:
ANDREW JACOBS. “JACKSON HOLE JOURNAL; Living a Frontier Dream on Beijing’s Outskirts.” The New York Times (Fri., DEC. 11, 2015): A1 & A8.
(Note: the online version of the story has the date DEC. 8, 2015, and has the title “JACKSON HOLE JOURNAL; Living a Frontier Dream on the Outskirts of China’s Capital.”)

Behavioral Economists Ignore Biases and Irrationalities of Governments

(p. A4) . . . it is quite a leap between acknowledging markets sometimes fail and arguing they are inherently flawed. Policy makers who work from the second assumption risk overreaching, by seeing market failure where there is none and ignoring their own behavioral biases, in either case leaving people worse off, not better. Public trust in free markets hasn’t wavered notably in the U.S. or Britain from precrisis levels and even in the pope’s native Argentina, attitudes aren’t much more negative than in 2009.
. . .
. . . , consumers don’t seem irrational when they evaluate fuel economy; one study found changes in gasoline prices are closely reflected in the relative prices of less fuel-efficient used cars.
Besides, as Mr. Viscusi and Mr. Gayer note, the government has behavioral biases of its own. Courts and regulators assign more value to the potential harm of a new drug than its potential benefits. Politicians take actions out of proportion to the risks, for example by closing schools during the Ebola scare or imposing onerous airline-security checks to prevent terrorist hijackings.

For the full commentary, see:
GREG IP. “Market Critics Shouldn’t Overreach.” The Wall Street Journal (Thurs., Sept. 24, 2015): A2.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 23, 2015, and has the title “Critics of Free Market Shouldn’t Overreach.” Where there are minor differences between the print and online versions of the article, the sentences quoted above follow the online version.)

The Vicusi and Gayer paper mentioned above, is:
Viscusi, W. Kip, and Ted Gayer. “Behavioral Public Choice: The Behavioral Paradox of Government Policy.” Harvard Journal of Law & Public Policy 38, no. 3 (Summer 2015): 973-1007.

Consumers Vote “No” on Costly Organic Smoothies “Made of Swiss Chard, Cashew Milk and Himalayan Salt”

(p. D1) As recently as last month, one could hardly throw a lentil in New York City without hitting an Organic Avenue storefront, with its orange banner, stick-figure logo and promise of better living through $9 cayenne-infused lemonade.
Kat Schamens, a yoga teacher and fitness-apparel designer, liked it that way. “I would always think, ‘I can’t wait to go in and get my chickpea soup,’ ” she said.
In mid-October, Ms. Schamens learned that Organic Avenue’s 10 stores had been shuttered and that the company had filed for bankruptcy. “I kind of freaked out,” she said. “I was distraught. I lost my yoga for a minute.”
. . .
(p. D7) The loyalty of devotees like Ms. Schamens and Ms. Kerin notwithstanding, there is an admitted emperor’s new clothes quality to paying $25 for a lunch of vegetable shavings and a smoothie made of Swiss chard, cashew milk and Himalayan salt.
“You can’t get people to crave this food,” the former investor said. “You can’t build a long-term business off what Gwyneth Paltrow likes.”
Some researchers began to publish studies questioning the necessity and safety of juice cleanses. And the fashion world started to feel pushback from nutritionists and eating-disorder activists against its support of juicing in early 2013, after the Council of Fashion Designers of America announced a 50 percent discount for models on Organic Avenue juices during New York Fashion Week.

For the full story, see:
KATHERINE ROSMAN. “How Organic Avenue Lost All Its Juice.” The New York Times (Sun., NOV. 5, 2015): D1 & D7.
(Note: ellipsis added.)
(Note: the online version of the story has the date NOV. 4, 2015.)