Innovative Entrepreneurs Bring Prosperity to the Poor

(p. A17) As the economist Joseph Schumpeter observed: “The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses.”
For Schumpeter, entrepreneurs and the companies they found are the engines of wealth creation. This is what distinguishes capitalism from all previous forms of economic society and turned Marxism on its head, the parasitic capitalist becoming the innovative and beneficent entrepreneur. Since the 2008 crash, Schumpeter’s lessons have been overshadowed by Keynesian macroeconomics, in which the entrepreneurial function is reduced to a ghostly presence. As Schumpeter commented on John Maynard Keynes’s “General Theory” (1936), change–the outstanding feature of capitalism–was, in Keynes’s analysis, “assumed away.”
Progressive, ameliorative change is what poor people in poor countries need most of all. In “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty,” Harvard Business School’s Clayton Christensen and co-authors Efosa Ojomo and Karen Dillon return the entrepreneur and innovation to the center stage of economic development and prosperity. The authors overturn the current foreign-aid development paradigm of externally imposed, predominantly government funded capital- and institution-building programs and replace it with a model of entrepreneur-led innovation. “It may sound counterintuitive,” the authors write, but “enduring prosperity for many countries will not come from fixing poverty. It will come from investing in innovations that create new markets within these countries.” This is the paradox of the book’s title.
. . .
One example that the authors cite is Tolaram Group, a Singapore-based conglomerate that created the instant-noodle market in Nigeria, pushing out 4.5 billion packets annually and generating revenue of almost $1 billion a year. Sourcing, manufacturing, distributing and selling its Indomie-branded noodles required that Tolaram invest in a broad and deep logistics and distribution chain; create a retail network; develop specialized training; acquire its own electricity generation; build a water and sewage-treatment plant; and construct a deep-water port in the city of Lekki. Had Tolaram waited for the Nigerian government to address these infrastructure and institutional challenges before investing in the country, the company would still be waiting. Other examples include British businessman Mo Ibrahim’s pan-African Celtel, which built a cellphone network across 13 African countries and gained 5.2 million customers in six years, and India’s Narayana Health, which has brought the cost of open-heart surgery down to $1,000.
. . .
Instead of a book of glib answers, they present something much more powerful–a work of creative destruction for today’s failed development-policy paradigm.

For the full review, see:
Rupert Darwall. “BOOKSHELF; A Better Way to Fight Poverty; The current foreign-development paradigm of government-funded programs should be replaced by an entrepreneurial model.” The Wall Street Journal (Thursday, January 31, 2019): A17.
(Note: ellipses added.)
(Note: the online version of the review has the date Jan. 30, 2019, and has the title “BOOKSHELF; ‘The Prosperity Paradox’ Review: A Better Way to Fight Poverty; The current foreign-development paradigm of government-funded programs should be replaced by an entrepreneurial model.”)

The book under review, is:
Christensen, Clayton M., Efosa Ojomo, and Karen Dillon. The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. New York: HarperBusiness Press, 2019.

Private Firms Build Costly Complex Cable Infrastructure

(p. B1) Nearly 750,000 miles of cable already connect the continents to support our insatiable demand for communication and entertainment. Companies have typically pooled their resources to collaborate on undersea cable projects, like a freeway for them all to share.
But now Google is going its own way, in a first-of-its-kind project connecting the United States to Chile, home to the company’s largest data center in Latin America.
. . .
(p. B7) Inside the ship, workers spool the cable into cavernous tanks. One person walks the cable swiftly in a circle, as if laying out a massive garden hose, while others lie down to hold it in place to ensure it doesn’t snag or knot. Even with teams working around the clock, it takes about four weeks before the ship is loaded up with enough cable to hit the open sea.
The first trans-Atlantic cable was completed in 1858 to connect the United States and Britain. Queen Victoria commemorated the occasion with a message to President James Buchanan that took 16 hours to transmit.
While new wireless and satellite technologies have been invented in the decades since, cables remain the fastest, most efficient and least expensive way to send information across the ocean. And it is still far from cheap: Google would not disclose the cost of its project to Chile, but experts say subsea projects cost up to $350 million, depending on the length of the cable.
. . .
Poor weather is inevitable. Swells reach up to 20 feet, occasionally requiring the ship captain to order the subsea cable to be cut so the ship can seek safer waters. When conditions improve, the ship returns, retrieving the cut cable that has been left attached to a floating buoy, then splicing it back together before continuing.
Work on board is slow and plodding. The ship, at sea for months at a time, moves about six miles per hour, as the cables are pulled from the giant basins out through openings at the back of the ship.
. . .
“It really is management of a very complex multidimensional chess board,” said Ms. Stowell of Google, who wears an undersea cable as a necklace.
Demand for undersea cables will only grow as more businesses rely on cloud computing services. And technology expected around the corner, like more powerful artificial intelligence and driverless cars, will all require fast data speeds as well. Areas that didn’t have internet are now getting access, with the United Nations reporting that for the first time more than half the global population is now online.
“This is a huge part of the infrastructure that’s making that happen,” said Debbie Brask, the vice president at SubCom, who is managing the Google project. “All of that data is going in the undersea cables.”

For the full story, see:
ADAM SATARIANO. “Underwater Freeways for Your Puppy Posts.” The New York Times (Tuesday, MARCH 12, 2019): B1 & B6-B7.
(Note: ellipses added.)
(Note: the online version of the story has the date MARCH 10, 2019, and has the title “How the Internet Travels Across Oceans.”)

Universal Basic Income Increases Taxes and Does Not Increase Work Among Unemployed

(p. 13) HELSINKI, Finland — A basic income made recipients happier than they were on unemployment benefits, a two-year government experiment in Finland has found. But it did not, as proponents had hoped, make them more likely to work.
. . .
The basic income has been controversial, however, with leaders of the main Finnish political parties keen to streamline the benefits system but wary of offering “money for nothing,” especially ahead of parliamentary elections due in April [2019].
. . .
The higher taxes that the Organization for Economic Cooperation and Development says would be needed to pay for basic income schemes might also be off-putting for voters.
In a review of the Finnish scheme last year, the organization warned that implementing it nationally and cost-neutrally for the state would imply significant income redistribution, especially toward couples from single people, and increase poverty.
The researchers have acknowledged that the Finnish pilot was less than realistic because it did not include any tax clawback once participants found work and reached a certain income level.
Swiss voters rejected a similar scheme in 2016.

For the full story, see:
Reuters. “Experiment Explores Income, Jobs and Happiness.” The New York Times, First Section (Sunday, Feb. 10, 2019): 13.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the story has the date Feb. 9, 2019, and has the title “Finland’s Basic Income Trial Boosts Happiness, but Not Employment.”)

Boghossian May Be Punished for Exposing the “Faulty Epistemology” of Grievance Studies

(p. A15) A massive academic hoax has taken a surprising twist. Peter Boghossian, an assistant professor of philosophy, faces disciplinary action at Oregon’s Portland State University. The accusations against him raise constitutional questions about federal regulation of academic research. They also implicitly acknowledge that the prank had a serious point.
Mr. Boghossian–along with two confederates, neither of whom has an academic affiliation–set out to expose shoddy scholarship in what they call “grievance studies.” They concocted 20 pseudonymous “academic papers,” complete with fake data, and submitted them to leading peer-reviewed scholarly journals in fields like “queer studies” and “fat studies.” The Journal’s Jillian Melchior discovered the deception last summer and broke the story in October, by which time seven of the phony papers had been accepted for publication and four published.
“It had to be done,” Mr. Boghossian tells me. “We saw what was happening in these fields, and we were horrified at the faulty epistemology that these people were using to credential themselves and teach others.” The effort drew praise from some well-known public intellectuals, including Richard Dawkins, Jordan Peterson and Steven Pinker.
. . .
A hastily formed university committee recommended that Mr. Boghossian be investigated for “research misconduct”–that is, purposely fabricating data. That case would seem to be open and shut, but the investigation has stalled.
More serious are the sanctions against Mr. Boghossian announced Dec. 21 on behalf of Portland State’s Institutional Review Board for conducting research on “human subjects” without submitting his research protocol to the IRB for review as required by the federal National Research Act of 1974. The “human subjects” in question were the editors and peer-reviewers of the duped journals. Portland State ordered Mr. Boghossian to undergo “human subjects research training,” and its letter warns that “further actions may be required,” with no elaboration.
. . .
Philip Hamburger, a law professor at Columbia, argues that the National Research Act and the HHS’s regulations violate the First Amendment, infringing on scholars’ freedom of expression. Mr. Hamburger has likened IRB vetting procedures to the Star Chamber’s licensing of publications that prevailed in 17th-century England–which the Constitution’s drafters were eager not to replicate. “Licensing . . . prohibits generally, and then selectively permits what otherwise is forbidden,” Mr. Hamburger wrote in 2007.

For the full commentary, see:
Charlotte Allen. “A Hoax and Its ‘Human Subjects’; An Institutional Review Board disciplines an academic prankster. But is it constitutional?” The Wall Street Journal (Tuesday, Jan. 29, 2019): A15.
(Note: ellipses between paragraphs, added; ellipsis internal to last paragraph, in original.)
(Note: the online version of the commentary has the date Jan. 28, 2019.)

Small Spanish Firms Less Likely to Hire with Higher Minimum Wage

(p. B1) MADRID — As Spain grapples with a turbulent political crisis, one of Europe’s last Socialist governments may soon fall amid the rise of a new nationalism in the country. But whatever the outcome, Prime Minister Pedro Sánchez is leaving behind a signature legacy: a record increase in the minimum wage.
The 22 percent rise that took effect in January, to 1,050 euros (about $1,200) a month, is the largest in Spain in 40 years. Yet the move has ignited a debate over whether requiring employers to pay more of a living wage is a social watershed, or a risky attempt at economic engineering.
. . .
(p. B4) Over 95 percent of businesses in Spain are small and medium-size firms, many of which operate with thin margins, according to Celia Ferrero, the vice president of the National Federation of Self-Employed Workers.
“You won’t find people disputing that higher wages are needed,” said Ms. Ferrero, whose organization represents many smaller businesses. “The question is whether firms can afford it. Higher wages and social security taxes simply make it more expensive for employers to hire or maintain staffers.”
“It’s not that they don’t want to pay; they literally can’t,” she added.
Lucio Montero, the owner of General Events, which makes booths and backdrops for firms displaying wares at big conventions, employs eight workers on the outskirts of Madrid. He pays each €1,400 a month.
The higher minimum wage and increased social security charges will put upward pressure on his labor bill and already thin margins, he said. It is a cost that he can ill afford.
“I would need to think twice about hiring more people,” said Mr. Montero, walking around his tiny, sawdust-covered factory floor.

For the full story, see:
Liz Alderman. “Spain’s Minimum Wage Has Surged. So Has Debate.” The New York Times (Friday, March 8, 2019): B1 & B4.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 7, 2019, and has the title “Spain’s Minimum Wage Just Jumped. The Debate Is Continuing.”)

Hickenlooper Should Be Proud He Worked Hard to Build a Business Under Capitalism

(p. A21) John Hickenlooper ought to be a poster child for American capitalism. After being laid off from his job as a geologist during the oil bust of the 1980s, he and his business partners turned an empty warehouse into a thriving brewery.
. . .
Yet there he was on MSNBC’s “Morning Joe,” squirming in his seat as Joe Scarborough asked if he would call himself “a proud capitalist.” Hickenlooper protested the divisiveness of labels. He refused to reject the term “socialism.” He tried, like a vegetarian who still wants his bacon, to have it both ways: “There are parts of socialism, parts of capitalism, in everything.”
But Hickenlooper did allow this: “We worked 70, 80, 90 hours a week to build the business; and we worked with the other business owners in [Lower Downtown Denver] to help them build their business. Is that capitalism? I guess.”
He guessed right.
. . .
An economy in which private property is protected, private enterprise is rewarded, markets set prices and profits provide incentives will, over time, generate more wealth, innovation and charity — and distribute each far more widely — than any form of central planning.
. . .
To the extent that Sanders’s concept of democratic socialism has gained traction, it’s not because capitalism has failed the masses. It’s because Sanders, beyond any of his peers, has consistent convictions and an authentic persona.
To prevail, a moderate Democrat will need to behave likewise. The message can go like this: Capitalism has worked for millions of Americans. It worked for me. We need to reform it so it can work for everyone.

For the full commentary, see:
Stephens, Bret. “Capitalism and the Democrats; The most successful economic system shouldn’t be a dirty word.” The New York Times (Saturday, March 9, 2019): A21.
(Note: ellipses added; italics in original.)
(Note: the online version of the commentary has the date March 8, 2019, and has the title “Capitalism and the Democratic Party; The most successful economic system shouldn’t be a dirty word.”)

Central Planning Elitism Leads to Rule by the Corrupt or the Incompetent

(p. A23) . . . the underlying faith of the Green New Deal is a faith in the guiding wisdom of the political elite. The authors of the Green New Deal assume that technocratic planners can master the movements of 328 million Americans and design a transportation system so that “air travel stops becoming necessary.” (This is from people who couldn’t even organize the successful release of their own background document.)
They assume that congressional leaders have the ability to direct what in effect would be gigantic energy firms and gigantic investment houses without giving sweetheart deals to vested interests, without getting corrupted by this newfound power, without letting the whole thing get swallowed up by incompetence. (This is a Congress that can’t pass a budget.)
. . .
The impulse to create a highly centralized superstate recurs throughout American history. There were people writing such grand master plans in the 1880s, the 1910s, the 1930s. They never work out. As Richard Weaver once put it, the problem with the next generation is that it hasn’t read the minutes of the last meeting.

For the full commentary, see:
Brooks, David. “How the Left Embraced Elitism; The progressives’ Green New Deal centralizes power.” The New York Times (Tuesday, Feb. 12, 2019): A23.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Feb. 11, 2019.)

Chief Justice Marshall Held That Corporations Were Citizens

(p. C4) How did corporations come to possess some of the most fundamental rights of individuals? They never marched on Washington. Instead, they have fought to win their rights in the Supreme Court–and in the process have been unexpected innovators in constitutional law.
The first Supreme Court case on the rights of business corporations was decided in 1809–nearly a half-century before the first case on the rights of African-Americans. Far from an oppressed minority, the Bank of the United States, which brought the case, was among the richest and most powerful corporations in the new nation.
After opponents in Georgia imposed a tax on the Savannah branch, the bank claimed a constitutional right to challenge the tax in federal court. Article III of the Constitution, however, guaranteed the right to sue in federal court only to “citizens.” In one of the neglected landmarks of American law, the legendary chief justice John Marshall held that the Constitution must be read expansively to include corporations.

For the full essay, see:
Adam Winkler. “What Rights Should Corporations Have?; The business world’s ‘artificial persons’ have long fought to win the same constitutional protections as citizens.” The Wall Street Journal (Saturday, March 3, 2018): C4.
(Note: the online version of the essay has the date March 1, 2018.)

The essay is based on the author’s book:
Winkler, Adam. We the Corporations: How American Businesses Won Their Civil Rights. New York: Liveright Publishing Corp., 2018.

In a “Terribly Regulated” Germany “People Look for Their Little Spaces of Freedom”

(p. A1) BERLIN — It seemed like a no-brainer: Lower Germany’s embarrassingly high carbon emissions at no cost, and save some lives in the process.
But when a government-appointed commission in January [2019] dared to float the idea of a speed limit on the autobahn, the country’s storied highway network, it almost caused rioting.
. . .
(p. A10) Call it Germany’s Wild West: The autobahn is the one place in a highly regulated society where no rule is the rule — and that place is sacred.
. . .
Germany is woefully behind on meeting its 2020 climate goals, so the government appointed a group of experts to find ways to lower emissions in the transport sector. Cars account for 11 percent of total emissions, and their share is rising.
A highway speed limit of 120 kilometers an hour, or 75 miles per hour, could cover a fifth of the gap to reach the 2020 goals for the transport sector, environmental experts say.
“Of all the individual measures, it is the one that would be the most impactful — and it costs nothing,” said Dorothee Saar, of Deutsche Umwelthilfe, a nonprofit environmental organization that has lobbied for a speed limit.
. . .
Once, during the oil crisis in 1973, a German transport minister took his chances and imposed a speed limit. Road deaths stood at over 20,000 a year at the time (six times today’s level) and with oil prices skyrocketing, Lauritz Lauritzen thought Germans might reasonably see the benefits of saving some lives and some money on gas, too.
The speed limit lasted four months, and Mr. Lauritzen not much longer.
The experiment gave birth to the “Freie Fahrt für freie Bürger!” campaign — or “Freedom to drive for free citizens!” — the car lobby’s most powerful slogan to this day, and one used by political parties and car companies alike, a sort of unwritten second amendment.
“It’s all about freedom,” said John C. Kornblum, a former United States ambassador to Germany, who first arrived here in the 1960s, and has been living (and driving) here on and off ever since.
. . .
“Germany is terribly regulated, for reasons which have to do with the past, with a fear of uncertainty, a fear of being overwhelmed,” Mr. Kornblum said. “But then people look for their little spaces of freedom and the autobahn is one of them.”
And speeding isn’t the only freedom the autobahn offers.
Driving naked in Germany is legal, too. But if you get out of the car nude, you face a $45 fine.

For the full story, see:
Katrin Bennhold. “Autobahn Speed Limits? Voting With Lead Feet.” The New York Times (Monday, Feb. 4, 2019): A1 & A10.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the story has the date Feb. 3, 2019, and has the title “‘GERMANY DISPATCH; Impose a Speed Limit on the Autobahn? Not So Fast, Many Germans Say.”)

Government Fiscal Stimulus Does Not Speed Job Growth

DebtAndEmploymentGrowthGraph2019-02-17.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A17) . . . is there evidence that stimulus was behind America’s recovery–or, for that matter, the recoveries in Germany, Switzerland, Sweden, Britain and Ireland? And is there evidence that the absence of stimulus–a tight rein on public spending known as “fiscal austerity”–is to blame for the lack of a full recovery in Portugal, Italy, France and Spain?
A simple test occurred to me: The stimulus story suggests that, in the years after they hit bottom, the countries that adopted relatively large fiscal deficits–measured by the average increase in public debt from 2011-17 as a percentage of gross domestic product–would have a relatively speedy recovery to show for it. Did they?
As the accompanying chart shows, the evidence does not support the stimulus story. Big deficits did not speed up recoveries. In fact, the relationship is negative, suggesting fiscal profligacy led to contraction and fiscal responsibility would have been better.

For the full commentary, see:
Phelps, Edmund. “The Fantasy of Fiscal Stimulus; It turns out Keynesian policies are correlated with slower, not faster, economic growth.” The Wall Street Journal (Tuesday, Oct. 30, 2018): A17.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Oct. 29, 2018.)