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Filed under Uncategorized
The third-quarter GDP results were just announced, and they showed a 3.5% growth rate. This has prompted Ben Bernanke to declare that, no matter what the uninformed masses standing in the ever-growing unemployment lines might think, the recession is probably over. As if on cue, the media have been quick to parrot the Federal government’s claim that its interventions in the economy have saved us once again from capitalism. Even I might be inclined to believe that their optimism was genuine if it weren’t for the unmistakable note of desperation in their voices, but somewhere in the background you can hear them clapping their hands and chanting, “I do believe in Obama! I do believe in Bernanke! I do, I do, I do!”
Despite the strained enthusiasm and suspended disbelief filling the news cycle these days, the White House is trying to manage expectations ahead of the upcoming jobs report. It’s almost as if they understand that the GDP number erroneously considers government spending to be every bit as productive as private economic activity. Maybe they also realize that GDP is artificially inflated because it doesn’t include the cost of borrowing all the money that was needed to finance the government’s make-work “stimulus” programs and to incentivize purchases of everything from houses to golf carts.
All of these factors and more suggest that the 3.5% increase in GDP will have absolutely no positive effects whatsoever on the lives of most Americans, and even Obama knows it. The official jobless rate will continue its relentless push into double-digit territory. Since the Feds are dead-set against allowing the economy to liquidate bad debts and realign itself with actual consumer preferences, the outlook for employment will continue to be bleak in this country for the foreseeable future. People who are out of work might hope for change, but they’re in for a long wait unless they can find an industry with serious long-term growth potential.
The employment problem will be particularly acute for recent college graduates with little or no work experience. When researching schools and planning one’s major, the question is always “Where will the jobs be when I graduate?” For the students graduating in the near future, the answer is probably China. But given the fact that relatively few Americans speak Mandarin, incoming college students will need to plan their education very carefully in order to maximize their chances of landing jobs in the few remaining fields that are still hiring. Fortunately, we here at A Beginner’s Guide to Freedom have identified one sure-fire career path that virtually guarantees full employment, offers unlimited earnings potential, and doesn’t require relocating to Beijing. The premier job of the future is…professional rent-seeking.
Unfortunately, there aren’t any college-level degree programs that specialize in Professional Rent-Seeking yet. For now, those who are interested in this growing field may find suitable coursework in most Sociology or Political Science degrees. George Washington University seems to be a good place to start. I don’t know if the George Washington University College Democrats were getting college credit, but from what I gathered during a recent visit to D.C. they seem to have a pretty good rent-seeking internship program going.
For those readers who are unfamiliar with the term “rent-seeking,” don’t worry. It won’t last. Rent-seeking is all the rage these days, and may soon surpass baseball and monster truck rallies as the quintessential American pastime. Rent-seeking is an economics term that refers to the use of the political process to obtain certain financial advantages that can’t be achieved through voluntary free-market transactions. Other related terms include mercantilism, corporatism, and participatory fascism, but the important thing to remember here is that rent-seeking is a way for certain politically favored groups to get what they want without having to go through all the trouble of earning it honestly in the free market. Nevertheless, most rent-seekers will still use free-market terminology as cover – further distorting the true meaning of capitalism in most people’s minds.
Perhaps an example will help illustrate how rent-seeking works in practice. Let’s say I own a corner store. I could eke out a living selling the various and sundry products that are desired by my customers. In order to succeed, I will have to make sure that I carry the items they want, when they want them, and at the price they want to pay, while at the same time covering all of my operating costs. That’s the free market in action. Sure, it’s voluntary. And sure, it’s precisely that kind of activity that has increased the standard of living for mankind steadily over the years. But it’s really hard work. A much easier way for me to make money would be to find a politician who (for a price) will pass laws that protect my corner store from competition. That way I can safely raise my prices beyond what my customers would otherwise pay, thus increasing my earnings at their expense. An even better option (for me, anyway) would be some sort of law that would forcibly extract money from the community at large and funnel it to me whether they shop at my store or not. Maybe some sort of tariff imposed against any stores not located on my block. There are infinite variations, of course, but they’re all just forms of rent-seeking. And brother, I’m here to tell you that it’s the wave of the future!
The beauty of professional rent-seeking is that it’s both booming and bipartisan. Whether you’re a Republican or Democrat, you will easily be able to find a business in the formerly capitalist US economy that is looking for someone with your skills to help them navigate the ever-changing Washington landscape. For years and years companies operated under the rule that the customer was king, but those days are long gone. From now on the government bureaucrat is king, and companies will need some help adjusting to this new reality.
That’s where you, the professional rent-seeker, come in. Not only will you find any number of lucrative employment opportunities in this fast-paced and exciting career, but you’ll also discover that the job itself is both easy and enjoyable. After all, bringing a product to market is hard, but taking a Congressman to the Bahamas is easy.
To be perfectly honest, though, I can’t say that professional rent-seeking is all fun and games. If it were, they wouldn’t call it work. There are a few unpleasant aspects of the job that you’ll just have to get used to. The biggest negative, of course, is that the whole operation is highly unethical. At first, many professional rent-seekers experience a few qualms about fleecing their neighbors in order to line their own pockets. After a while, though, most rent-seekers become quite comfortable with the idea. Within just a few short weeks, they manage to convince themselves and the elected representatives they work with that fleecing one’s neighbors is actually a good thing, because it funnels money and jobs to the politically connected constituency that wouldn’t otherwise have them.
Another potential negative that the professional rent-seeker has to deal with involves some uncomfortable questions that are occasionally raised by the economically literate. These people are the bane of the professional rent-seeker’s existence, but fortunately their numbers are dwindling so it’s becoming less of a problem (but you should probably avoid taking any calls from John Stossel, just in case). And if you do happen to run into one of these unmutual libertarian types at some point in your career, just be sure to focus the conversation on the people who benefit from your larceny, and avoid at all costs any mention of all the other people whose money is taken from them by force to support those industries that are either unwilling or unable to support themselves. Senator Chuck Schumer (D-New York) is a master of this technique.
And from time to time the professional rent-seeker will have to deal with the tedious Congressional ethics probe. But this shouldn’t dissuade anyone from pursuing a career in rent-seeking. The results of those probes always come back negative, because Congress is immune to ethics.
And finally, you will be the subject of scorn by those who decry the influence of “lobbyists and special interests.” This can certainly be annoying, but this criticism completely misses the point. As long as those in government are able and willing to dictate winners and losers in the marketplace, market actors will always seek to influence those decisions. This is simply a matter of self-defense. And once those market actors have influenced the government to shield them from the worst effects of the regulatory state, it is simply a matter of time before they realize that the same regulatory structure can be molded into a competitive advantage at the expense of their competitors and everyone else. The only way to avoid this problem would be to limit the government’s power to dictate market outcomes, and no one (with the exception of a few reactionary elements who still cling to outdated notions of property rights and individual liberty) would ever seriously consider doing that.
So aside from these relatively minor drawbacks, most people find the world of rent-seeking to be quite rewarding and varied. Most major industries these days have a real need for people who can lobby politicians on their behalf to ensure that they get a bigger piece of everyone else’s pie. Let’s look at a few examples, industry by industry.
Healthcare
It goes without saying that healthcare represents the single largest opportunity for professional rent-seekers these days, and it will continue to offer lucrative employment for years to come. The Obama administration is determined to handcuff this industry with ever-increasing government regulations. This, of course, will simply exacerbate the problems that have been caused by all of the previous government interventions, thus ensuring that rent-seekers will always be in demand, no matter what part of the industry is involved. You can rent-seek for pharmaceutical companies, the American Medical Association, insurance companies, or for anyone else even remotely associated with socialized medicine. The sky’s the limit.
Environmentalism
After healthcare, environmentalism may represent the next-largest field for rent-seeking. Al Gore, the Bill Gates of rent-seeking, is a pioneer in this field, and it’s paid off for him in a big way. Al has convinced his buddies in Congress that they should funnel $560 million of your money to Mr. Gore’s company, whether you wanted whatever it is he’s selling or not. This, in part, allows Mr. Gore to live in a mansion that burns more fossil fuels in a month than you or I will burn in our lifetimes. The lesson here is clear – you can make a lot of green by forcing other people to go green.
Not everyone can be Al Gore, of course. Some professional rent-seekers may just have to settle for being the next T. Boone Pickens, who’s so convinced his windmills are the best thing since sliced bread and sunshine that he doesn’t want to risk the deal by trying to persuade others to invest voluntarily. He just wants government to take their land, thus forcing them to shoulder a considerable part of the cost of his project.
Financial Services
No shortage of opportunities here. In fact, the worse your financial services business is run the more money you can make through government bailouts. The only downside that I can see here is that your pay may be capped for PR purposes by some Washington czar, but on the whole it’s still a lot easier than working long hours trying to please your customers. The key for the professional rent-seeker in the financial sector is to convince some Senator that you’re too big to fail. Shouldn’t be too hard.
Manufacturing
Maybe you’re a steel-toed boots, lunch pail kind of guy. No problem. You, too, will find a wealth of opportunities for professional rent-seeking in the manufacturing sector. I’d suggest focusing on the UAW, Chrysler, or GM. And the steel industry’s rent-seeking roots stretch all the way back to the Lincoln administration.
Agriculture
Do you enjoy being outdoors, working with the land? No problem. The agricultural sector may be the longest-running rent-seeking game going. Farmers have been using Congress to reach into your pocket longer than anyone else, and as competitive pressure from foreign producers makes food more and more affordable, the professional rent-seeker’s services are needed now more than ever. If this is an area that interests you, you’ll find most of the opportunities around the offices of Congressmen from the Midwest, such as Charles Grassley (R-Iowa), who sees absolutely no downside to corn subsidies and ethanol mandates.
Sports
Are you a big sports fan? Then maybe you should consider a career in sports and entertainment rent-seeking. Here, you can hobnob with quarterbacks and major-league sluggers while you lobby local governments to steal other people’s land for your new multi-gazillion dollar stadium. Jerry Jones could be a useful mentor in this “arena.”
These days the government seems determined to choke the life right out of the private sector. This trend shows no sign of letting up, so it will become harder and harder to find honest work in the private sector. But professional rent-seekers will find their services are in ever-greater demand because, as P.J. O’Rourke once said, “When the legislature controls what is bought and sold the first thing that is bought and sold is legislators.”
Filed under Economics, News, US Politics
Virology Meets Jurisprudence – Speaking from the floor of Congress this week, Rep. Sheila Jackson Lee of Houston said, “I listened to some challenge to the Constitution about the right to health care. I frankly believe that the Bill of Rights does embrace this concept because the Fifth Amendment suggests the question of due process. And one does not have due process under the Constitution if your neighbor can have health insurance and save his children from the scourge of H1N1, not losing their lives because they might have vulnerabilities as a child, and you cannot.” I don’t think there’s any doubt that the swine flu is a very serious problem for those who contract it, but to my knowledge the virus has not yet mutated into a strain that is capable of denying citizens due process. Until it does, we’ll continue to rely on Congress for that.
Dallas Police Can’t Even Protect Themselves From Thieves – Dallas SWAT was burglarized again this week. Thieves entered the unmarked SWAT SUV and then broke into a heavy-duty safe, taking weapons, body armor, uniforms and a badge. This is the third SWAT vehicle to be burglarized in six months.
Would You Spend $24,000 For A Clunker? – Back in August, Cato’s Chris Edwards suggested that the government’s Cash for Clunkers was the dumbest program ever – and that was based solely on the $4,500 incentive being offered. Edmunds.com now reports that the program cost $3 billion and only generated 125,000 incremental sales, putting the cost per clunker at $24,000. No word yet from Edmunds on whether the Cash for Golf Carts or Cash for Appliances programs were any more effective.
Filed under News
Note: I’m a big fan of The Daily Reckoning, and they have been kind enough to allow me to reprint some of their material here. The following piece was written by Bill Bonner. If you like this article, be sure to check out their site – there’s a lot more where this came from.
“He who goes a-borrowing, goes a-sorrowing.”
The quote comes from Ben Franklin. But it was recalled to us neither by America’s president, nor Britain’s Prime Minister. Instead, the Telegraph in London reported it from the mouth of Cheng Siwei, a “top member of the Communist hierarchy.”
What goes around comes around. The Anglo-Saxons have forgotten what makes a successful economy. The Chinese have remembered.
Just look up Warren Harding on Wikipedia. The first entry you will find is not the 29th president of the United States of America, but a rock climber with the same name. But what do you expect? History is nothing but a long list of disasters in chronological order. Historians love calamity. And they reserve their highest accolades for those who cause them. The same is true in financial history. Those who make it big are those who make it worse.
It is safe to assume that no one working at the Federal Reserve or at the White House has a picture of Warren Gamaliel Harding over his desk. Yet, if American presidents were ranked on the basis of how well they faced up to financial disaster, Warren G. Harding might be somebody. His handsome face would be carved on Rushmore. His likeness would grace the $100 bill. Harding was the last American president to deal honestly with a major financial crisis. Every president since has tried to scam his way out of it.
By the time Harding took office in ’21 the Panic of 1920 was taking the unemployment rate from 4% to nearly 12%. GDP fell 17%. Then, as now, the president’s subordinates urged him to intervene. Secretary of Commerce Herbert Hoover wanted to meddle – as he would 10 years later. But Harding resisted. No bailouts. No stimulus. No monetary policy. No fiscal policy. Harding had a better approach; he cut government spending and went out to play poker:
“We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity…it will be an example to stimulate thrift and economy in private life.
“Let us call…for a nationwide drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic.”
Within a decade, Harding’s views were collectibles. But in 1921, he still saw the economic world as a moral world ordered not by man, but by God. This was not the result of long study or deep reflection on his part. He was probably the dummy everybody said he was. As Keynes pointed out, politicians are always in thrall of some dead economist. At least Harding was in thrall to the good ones.
“No statute enacted by man can repeal the inexorable laws of nature,” he announced. “Our most dangerous tendency is to expect too much of government…”
Harding was not the first to see the economy as a ‘natural’ order…one that you disturbed at your peril. A Taoist named Zhuangzi, who lived about the same time as Alexander, observed: “Good order results spontaneously when things are let alone.”
Later, economists of the Scottish enlightenment, notably Adam Smith and Adam Ferguson elaborated. Smith, like Harding, saw the economy ordered by the invisible hand of God. Ferguson saw markets as a ‘spontaneous order,’ which were the “result of human action, but not the execution of any human design”.
The same basic insight led Irving Fisher – the greatest economist of the 1920s – to come up with his debt-deflation theory of depressions. After people had borrowed, they needed to pay back. Busts followed booms; there was no getting around it.
Warren Harding may never have been the brightest bulb on the White House porch, but intuitively he understood that proper macro-economic policies were more the product of virtue than of genius. Debt led to trouble; that’s all he needed to know.
Keynes came along a few years later. Keynes was a genius; everybody said so. And he had an answer for everything. Nature? Government could do better. Debt? Don’t worry about it, he said. Why not just let capitalism sort itself out? Without government intervention, it will only get worse, said Keynes.
But Harding had already proved him wrong. Harding did the very opposite of what Keynes recommended. Instead of increasing government spending, he reduced it. He cut the budget almost in half. He slashed taxes too…and cut the national debt by a third.
Japan at the time struggled with the same downturn. But it had no Harding at the helm. Instead, its masters prefigured Keynes, trying to stay the correction using price controls and other interventions. The result was a long-drawn-out affair that lasted until 1927 and ended in a bank crisis. In America, meanwhile, by 1922 unemployment was back down to 6.7%. By 1923 it was down further – to 2.4%.
This lesson was entirely lost on the world’s economists. When the next crisis hit a decade later, they turned to Keynes. Of course, it turned out to be a moral world after all. They got what they deserved.
Regards,
Bill Bonner,
The Daily Reckoning
Macro for Dummies originally appeared in the Daily Reckoning. Reprinted with permission.
My daughter is bouncing up and down with excitement. This afternoon she lost another baby tooth (her third to date) and she knows that the tooth fairy will visit her tonight and leave her some money. I remember the feeling. As a kid, whenever I lost a tooth I could look forward to finding a shiny new quarter under my pillow the next morning.
Times have changed.
These days the tooth fairy is a dollar skeptic. I know this because instead of putting a quarter under the pillow, the tooth fairy now leaves an American Eagle for each tooth lost. By the time my daughter’s adult teeth have all come in, she’ll be sitting on two pounds of silver (and unlike her father, she won’t be able to blow all her tooth fairy loot on Donkey Kong).
Perhaps the tooth fairy has been reading the recent financial news. The Independent reports that Japan, France, Russia, China, and the Gulf Arab states have realized that the American dollar really is backed by the full faith and credit of the US government, and they’d prefer a reliable guarantee instead. The US government’s debt is expected to reach 100% of GDP within the next two years, and “Helicopter” Ben Bernanke has created trillions of new dollars in the past year alone. Given the astronomical amounts of money some of these foreign central banks have loaned the Feds to cover their wild-eyed bipartisan spending spree, one can understand why they might not appreciate being paid back with a rapidly depreciating currency like the US greenback. This may explain in part the recent uptick in the price of gold, which has been mentioned as a possible replacement for the dollar in international transactions.
It’s as if foreign central banks (and the rest of us, for that matter) are locked in an international game of musical chairs. When the music stops, the last one holding dollars loses. It won’t be easy for the countries that are sitting on trillions of US dollar reserves to divest themselves of their holdings without accelerating the currency’s demise, but for my part I hope they figure it out soon – and that they let me know how to do it, too. I think I hear the music winding down, and I’m all out of baby teeth to leave under the pillow.
(Tooth Fairy painting by Jenedy Paige).
Filed under Economics, International, News, US Politics
I have been stuck in Washington, D.C. for the past three days listening to a bunch of bureaucrats attempt to justify their existence while simultaneously threatening me and a thousand other people with fines and/or imprisonment if we don’t do exactly what they say. For someone with my political leanings, it’s a lot like having a 72-hour root canal without all the Novocain-fueled fun.
Once my conference finally ended, I decided to do a little sightseeing in our nation’s capital. I had hoped to take a few decent photos, but the afternoon sky had turned a dull, washed-out gray, leaving me with little chance of getting a shot worth printing. I was about to return to my hotel when I suddenly heard the unmistakable chanting of a protest march coming my way. As I turned to identify the source of the commotion, I caught sight of the George Washington University College Democrats moving down 17th Street. One would think that young adults working toward an undergraduate degree would simply name their group the George Washington University Democrats and leave it at that, but evidently redundancy is as popular with the college crowd as the Dave Matthews Band, so they named themselves the George Washington University College Democrats instead.
During the short trip from their campus to the White House, the kids were chanting, “What do we want? A PUBLIC OPTION! When do we want it? NOW!” Not terribly creative, but it’s nice to see that the youth today still have a healthy respect for tradition – I just wish the tradition they respected was that of individual freedom. Oh well.
I have to admit, though, this was the politest protest I’ve ever seen, if not the most effective. They obeyed all of the traffic signs, stayed on the sidewalks, and not a single one of them threw a rock through the plate glass window of a multinational corporation en route to the demonstration site. And these kids were so good-looking that for a moment I thought the public option was actually being demanded by an Abercrombie and Fitch catalog.
The march came to a halt once the crowd reached Lafayette Square, just in front of the White House. At that point one of the student leaders took charge of the gathering. Using a portable speaker, she explained why a public option is so vital.
“How many of you have insurance because you’re on your parents’ plan?” (Most of the crowd yelled out).
“How many of you think you’re going to graduate with a job in this economy?” (No one, apparently).
The young lady continued, saying “I’m a senior, and when I graduate this year I won’t be covered on my parents’ plan anymore. That means that if I get sick and need an operation, I’ll have to pay for it with my own money!” (Angry shouts expressing outrage over such a rank injustice).
Another one of the student leaders then took control of the mike, and laid down some statistics.
“The US ranks just above Slovakia in public health care. In the richest country in the world, is that acceptable?” (The crowd didn’t think so. I, on the other hand, wondered where they’d rather get sick – the US or Slovakia?)
He continued, highlighting the crowd’s might-makes-right philosophy:
“We voted for the Democrats last year. Because of us, they now control the Congress and THIS HOUSE!” (Pointing behind him to the White House). “And we’re not going to let a minority tell the majority what to do! We demand A PUBLIC OPTION! AND OBAMA’S GOING TO GIVE IT TO US!” (Raucous cheering).
George Washington University is a well-respected school. And judging by the caliber of the protestors, I can see why. Some of the demonstrators clearly have some first-rate ideas for improving health care in this country:
Make sickness not be costly. Genius. That’s exactly the kind of innovative thinking and piercing intellect that we need in Washington. Why didn’t anyone think of that before? This kid’s going to go places.
As illuminating as this glimpse into our nation’s future was, I do have some constructive criticism that I’d like to offer the leaders of tomorrow. If you really want to get the attention of the power elite in this country, don’t go to Lafayette Square on a Friday afternoon. Our Senators and Representatives aren’t out taking snapshots with the tourists. If you want to get visibility, you have to go where they are. So consider staging your next protest at a bar, or possibly a whorehouse. That way you can be sure that your message will be heard by the politicians. Otherwise, the only coverage you get will be a snarky blog post.
And what good would that do?
Filed under US Politics
Hugo Chavez has carried out a multi-pronged attack on the liberties of the Venezuelan people ever since he became “president.” This attack includes (but is not limited to) the nationalization of large swaths of the economy, confiscation of private property, price controls, currency controls and various other restrictions on trade, socialist indoctrination in schools, a court packing scheme, and a relentless effort to silence any and all opposition.
Earlier this year, the Venezuelan government revoked the licenses of 34 broadcasters that had been critical of the Chavez administration. Another 240 radio stations and 45 television channels are also on thin ice with the Venezuelan government for alleged violations of the Telecommunications Law, and could well be next on Chavez’s hit list. The suppression of opposition voices in Venezuela has been so blatant that even the United Nations, an organization which never met a dictator it didn’t like, felt obliged to express some misgivings.
“I am deeply concerned over the reduction in the number of outlets through which citizens can exercise their right to receive information from diverse sources,” said UNESCO’s Director-General Koichiro Matsuura. “The people of Venezuela have the right to benefit from a diversity of perspectives in reports and analyses of events that concern them.”
President Chavez remained unfazed by the obscure UN bureaucrat’s blistering remarks, however, and the Venezuelan government’s long-standing policy of media intimidation continues apace. In fact, it now seems to be taking on a new dimension. Whereas in the past Chavez limited his abuse of power to those media outlets that dared criticize government policies, his administration is now threatening to impose fines on television stations simply for broadcasting shows that certain government officials just don’t like.
What kind of program could be so offensive, so subversive, so bourgeois and counter-revolutionary that it could call down the wrath of the Venezuelan high command? Family Guy. That’s right – Family Guy. Evidently the zany antics and shenanigans of Peter Griffin and his family are so antithetical to Chavez’s “21st Century Socialism” that they must be expunged from the airwaves of Caracas. According to the Associated Press, Venezuelan Justice Minister (insert your own joke here) Tareck El Aissami was outraged by a recent episode in which the show’s characters started a campaign to legalize marijuana, and he has indicated that any stations that continue to air the offensive (to him, at least) program will be fined.
I understand that pointing out the loss of liberty in Venezuela under Hugo Chavez is a lot like pointing out that the sun rose in the east this morning, but some stories are just too good to pass up. As the AP article mentions, one of the proposed changes to the Telecommunications Law is a requirement that all stations carry Chavez’s speeches. To that end, kicking Family Guy off the air may just be a necessary first step to free up the additional time slots el Presidente needs. Given how much Hugo Chavez enjoys hearing himself talk, the requirement to carry all of his speeches could easily fill up the entire day’s programming. Soon television in Caracas will be like radio in North Korea – all dictators, all the time.
I used to watch Family Guy quite a bit, but I stopped because it seemed to take them forever to get any new episodes on the air. But the fact that the Venezuelan dictatorship hates the show may just be reason enough for me to start watching it again.
Filed under International, News, Pop Culture
