So here's an old article I wrote for SwiftEconomics almost 10 years. I'm not as confident in this pronouncement now, but at the very least, political terminology has made for very simplistic categorization. Or perhaps it's just because the Left is kinda boring and monoculture while the Right is all over the place (seriously, this is scientifically proven now). Regardless, I still think there is a lot to gain from this piece and Part 2 which I will republish tomorrow:
At the risk of venturing to far from economic wit, I feel a need to comment on political terminology. Economics is, after all, related to politics, so I’m not venturing too far off base (or at least, I’ve deceived myself into thinking I’m not). Recently, there has been a litany of media reports and diatribes about a significant growth of “extreme” right-wing groups. Liberal economist and New York Times editorialist, Paul Krugman explained it as follows
“Back in April, there was a huge fuss over an internal report by the Department of Homeland Security warning… [of] an upsurge of right-wing extremism… Conservatives were outraged. The chairman of the Republican National Committee denounced the report as an attempt to “segment out conservatives in this country who have a different philosophy or view from this administration” and label them as terrorists. But with the murder of Dr. George Tiller by an anti-abortion fanatic, closely followed by a shooting by a white supremacist at the United States Holocaust Memorial Museum, the analysis looks prescient…[and this] right-wing extremism is being systematically fed by the conservative media and political establishment.” (1)
Krugman’s argument is interesting insofar that it is hyperbolic, hypocritical and paints with way too big of a brush, all at the same time. Sure, conservatives have been up in arms over Barack Obama’s policies and have said a multitude of vitriolic things, highlighted by the daily rants of Sean Hannity and Rush Limbaugh types. However, the same thing happened to George Bush during his presidency (most of which, Bush deserved, in my opinion). And Krugman was at the front of the line in that barrage of vitriol.
What this whole mess elucidates is, as far as politics (and subsequently, economic policy) are concerned, actual positions are of little importance. All that matters is that you root for your team, be they Democrats or Republicans. Thus, we see Fox News begin to attack every push for increased state power, while MSNBC defends such policies. Under Bush, it was the opposite. The truth is, political terms can mean just about anything and political parties have shifted their positions radically throughout history. Individual policy positions are important and Krugman certainly has firm beliefs on a myriad of issues. However, in this instance, Krugman is just rooting for his team: the Democrats. Much the way Rush Limbaugh roots for his team: the Republicans.
The key question we have to ask is what are the “extreme” right-wing groups that Krugman and his ilk are referring to? Certainly the murderers Krugman refers to are terrible individuals with terrible ideologies. However, on the larger question, is he referring to fascists, radical free-marketers, religious zealots or the racist, Confederate types? Or is he talking about all of these groups? For its part, the Department of Homeland Security report Krugman mentions, describes right-wing extremism as follows:
“Rightwing extremism in the United States can be broadly divided into those groups, movements, and adherents that are primarily hate-oriented (based on hatred of particular religious, racial or ethnic groups), and those that are mainly antigovernment, rejecting federal authority in favor of state or local authority, or rejecting government authority entirely. It may include groups and individuals that are dedicated to a single issue, such as opposition to abortion or immigration.” (2)
This covers an awful lot of ground. Under this definition, every group mentioned above could be considered part of the extreme right, yet they are, in many cases, the polar opposites of each other. Several even have fairly “liberal” beliefs.
Fascists, at least the fascists of the 1930’s, favored a massive welfare state, state control of industry and strict gun laws. Adolf Hitler and the Nazi’s even launched large campaigns to stop smoking. To list just a few of the Nazi’s 25 campaign points:
13. We demand the nationalization of all trusts.
Maybe the “socialist” part in National Socialists actually meant something. After all, even the BNP (British National Party) is usually decried as far right for being racist and anti-immigration. They are also in support protectionism, higher taxes and “[giving] workers a stake in the success and prosperity of the enterprises whose profits their labour creates by encouraging worker shareholder and co-operative schemes.” (4) Hardly right wing.
Radical free marketers, typically libertarians (who are very much anti-government and pro-local control), on the other hand, tend to favor drug legalization, gay marriage and a very dovish foreign policy; positions usually seen as being on the left. And given that, how can both of these ideologies be on the “extreme” right-wing? Anyone who really thinks fascists and libertarians are even remotely similar should strongly consider visiting their friendly, local neurologist.
The left can be seen in many of the same ways. The best example is that both communists (total state) and anarchists (no state) are seen as movements of the left. It is true that Karl Marx believed the state would magically “wither away” after capital was eliminated (a ridiculous proposition, given that those in power would have to voluntarily give up their power, preceded by an impossible task, since capital is anything of value and can’t be eliminated). Still, to advocate for eliminating the state (as anarchists would do) and having the state take over everything (as communists would do), would require the exact opposite policies. Yet, both groups are on the “extreme” left.
Furthermore, these terms also change over time, or by geographic region, or simply by which group of people you’re hanging out with. Take the term centrist. A centrist is a centrist only by modern and geographical definitions. For example, one of those white, nationalist crackpots who believe slavery was probably bad, but who also believe a “superior” and “inferior” race can’t coexist, would have been a centrist position 200 years ago in the United States, perhaps even progressive (forgive my use of such a vague phrase, to be discussed later). Thomas Jefferson, as enlightened as he was, unfortunately, was of this persuasion. Racism is a relic that comes to us from prehistoric tribalism. Our brains instinctually see different, as dangerous. This mental trait is to our advantage when say, that different thing is a hungry tiger. With race though, to put it mildly, this view is a bit outdated. Yet 200 years ago, it would have been a centrist position.
The same could be said for radicalism. By who’s definition is one a radical? By standard political dogma, of course. To be fair, radical is often used as a compliment: the founders of the United States were radical. Martin Luther King Jr. was radical. However, the term is often used in a derogatory fashion, especially when used in the present tense.
I define radicalism differently. I don’t think a Marxist or an anarcho-capitalist is a radical. They just have a different opinion than me. Radicalism isn’t bad, extremism is. Extremism, in my view, is the belief you are right, with such conviction, that nothing can change your mind and furthermore, that the ends justify the means. Blowing up abortion clinics or medical labs where research on animals is going on is extremist. Aside from being blatantly immoral, it is destructive to your cause. How much of the peace process in Israel has been stymied by terrorism? Even when in response to some justified grievance, it does more harm than good. This is the kind of radicalism that should be condemned, not just being radically outside the mainstream. After all, as Mark Twain said, “The radical of one century is the conservative of the next. The radical invents the views. When he has worn them out, the conservative adopts them.”
While time changes things drastically, geography presents similar problems for political terminology. I believe in the separation of church and state. In the United States, this is a fairly centrist position. Religion is personal; politics is public, and quite dirty for that matter. However, do you think this position is centrist in say, oh I don’t know, Iran?
When time and geography come into play, these things can get real messy. The term “libertarian” is a great example of this. The famous, leftist, intellectual Noam Chomsky considers himself a libertarian socialist. When a student asked him how he could be both, given that it’s a contradiction in terms, he responded as follows:
“You’re right, the terms I’m using are contradictory in the United States, but that’s a sign of the perversity of American culture. Here the term libertarian means the opposite of what it meant to everyone else all through history.” (5)
Professor Chomsky is right. I’ll leave out his diatribe about how “American” libertarians are “extreme advocates of total tyranny” and how the United States is responsible for every evil in the history of the world. However, his main point, that most of the world thinks libertarian is synonymous with anarcho-syndicalism or libertarian socialism, is correct. What Chomsky leaves out is why American libertarians are called what they are (other than our perverse culture). I mean, we have to have a name for these extreme advocates of total tyranny, don’t we?
Since “tyrannyians” would be a poor rallying cry, Americans of this political persuasion were forced to a look for a more appealing term. So how did they come up with libertarian? Well it’s not that complicated, though it requires a quick history lesson. Libertarians advocate a political ideology that is similar to classical liberalism; a philosophy popularized by the likes of John Locke and Adam Smith, and was very prevalent in the 19th century. The popular saying, “your right to swing your fist ends where my nose begins” sums it up quite succinctly. In more specific terms, both philosophies advocate free markets, social freedom, and limited government. Libertarians tend to emphasize freedom, whereas classical liberals emphasized utilitarianism; however, they each hold both in high regard. The main reason classical liberals in the United States are now known as libertarians is that the term “liberal” was no longer available.
Why, you ask? Well, politics in the United States started to change around the beginning of the 20th century with the famous progressive movement. Government had been a “necessary evil” in the U.S. for almost its entire history. However, with an industrial revolution and mounting poverty (or at least, more visible poverty), many people thought the government could be used as a tool for social improvement. The idea that “the government which governs least, governs best,” was replaced with an interventionist government appropriated with the tools to help the oppressed and down-on-their-luck types.
In sticking with our current theme, the progressives of the early 20thcentury bare little resemblance to the progressives of today. Both groups favor an activist government, but progressives of the early 20th century favored prohibition, were often infatuated with eugenics and many of them supported the United States’ entry into World War I. None of this resembles the drug legalizing, racism hating (albeit, identity politics loving), peaceniks of self-described progressives today.
Interestingly enough, this sheds light on what is the opposite of a progressive; labeled and derided as reactionary. Some things are obviously reactionary, say human sacrifice, although other terms, such as “bad,” would work better. However, to label many policies as reactionary, just because they’re old or passe, usually winds up in a contradiction. Take drugs, which progressives tend to want to legalize (a position I support). This is seen as progressive, perhaps because it is “enlightened,” perhaps because it is a better policy, or perhaps because it is new. Unfortunately, for consistency’s sake, legalizing drugs is in fact very old, thus not “progressive.” Not only is this position the opposite of what progressives of the early 20th century favored. After all, many helped pushed through the Harrison Narcotics Tax Act of 1914, the first major federal drug law, under progressive president Woodrow Wilson. What’s key to note is that the first significant federal drug law came in 1914! Drugs had been legal in the United States for most of its history. Thus, couldn’t drug legalization be seen as a reactionary position? Or do these terms even matter in the first place?
But I digress. Returning to our discussion on libertarianism, during the Great Depression, advocates of the free market, namely classical liberals, became harder and harder to find. Who could support free markets when unemployment was over 20%? It’s certainly difficult to advocate freedom when that freedom is the freedom to starve to death. Thus, the term liberalism shifted from advocates of a free market economy to a mixed economy. When Franklin Roosevelt, implemented the New Deal, the meaning of “liberal” had all but finished its transition. Those who wanted to reduce the size of the welfare state (or eliminate it entirely), took up the role of conservatives. However, conservatives maintained the belief that government had a role in monitoring moral values and have famously laxed on their free market ideology.
So while libertarians tend to favor conservatives over liberals, they have significant differences with each.
What’s interesting to note here, is that while a similar cultural shift happened in Europe, the terminology did not follow suit. In Europe, liberal political parties called themselves the labor party or for people further to the left, social democrats. It’s hard to say exactly why the shift in terminology happened here but not across the pond (well, I think it’s hard to say, I really just don’t feel like researching it), but ideologically, liberal Democrats and the labor party are quite similar. So the word “liberal” in Europe still, for the most part, represents what it did in the 19th century: free markets, small government and individual liberty. This, if you remember, is basically what “American” libertarianism stands for.
So to counterpoint Chomsky on this matter, one could say, if Chomsky ever called himself a liberal socialist, that would be a contradiction in terms; it’s only not considered a contradiction because of the perversity of American culture. However good Chomsky’s political arguments are, he’s simply demagoguing here.* There’s no real perversion, or conspiracy, or anything like that. This is just how the world works. Libertarians broke with the traditional right as it became more and more obsessed with fighting the Cold War and decided to use the term “libertarian” primarily because it simply put an “ian” on the word liberty. And if you’ve ever met a libertarian, you know they love the word liberty. Anyways, libertarian sounds a lot less hokey than their second choice: freedomian (tyrannyian came in third).
This muddling of terms is by no means a lone case. These types of political terminology shifts are quite common and can make history lessons even more confusing for socially awkward, self-esteem lacking, unquenchably horny, ADHD-inflicted adolescents to understand. Good thing they gave up trying to understand many years ago.
Just go back to the word liberal. Today, you may hear neo-liberalism tossed around, usually with a negative connotation regarding free trade. Neo-liberalism is often used synonymously with classical liberalism, though not to be confused with regular liberalism, which tends to oppose both. That is unless we are referring to “liberalizing” some part of the economy; say trade, which would reduce trade barriers. Then you can drop the neo/classical and just say “we are liberalizing trade,” despite the fact that most self-described liberals would like to “de-liberalize” trade.
Or how about neo-conservativism, which is neither neo (new) nor conservative. Neo-conservatism is fine with the welfare state (not conservative), dislikes federalism (very not conservative), is fine with policing morality (not particularly conservative, unless we’re talking about the religious right) and has an extraordinarily hawkish foreign policy (not conservative in the “old right” sort of way, at least). Neo-conservative founders, Irving Kristol and Leo Strauss, even drew much of their inspiration from Leon Trotsky (the concept of a world wide “permanent revolution” especially, except they replaced socialism with democracy). So neo-conservatives are not conservative, neo-liberals are not liberal, classical liberals are neo-liberals, but not regular liberals, libertarians are classical liberals in the United States but anarcho-socialists in Europe, reductio ad-absurdum.
Each term itself is filled with many subgroups to make things even more confusing and less relevant. What becomes obvious is that blanket terms such as the “extreme right-wing,” that the likes of Paul Krugman like to throw around, are simply used as cudgels to denigrate multiple groups that are not even remotely associated with each other. The only thing these groups tend to have in common is that they oppose Krugman’s team.
Continued in Part 2.
*On a side note related to this discussion, I should mention that Osama Bin Laden, a radical “right-wing” Islamist, promoted one of Noam Chomsky’s, a leftist, pseudo-cult leader, books in one of his recorded messages to the West. It should also be noted that these “right-wing” Islamic countries have very controlled economies (i.e. not free market economies), as you can see here.
(1) Paul Krugman, “The Big Hate,” New York Times, June 12, 2009, http://www.nytimes.com/2009/06/12/opinion/12krugman.html
(2) Department of Homeland Security Report, Rightwing Extremism: Current Economic and Political Climate Fueling Resurgence in Radicalization and Recruitment, Pg. 3n, April 7, 2009, a copy can be found here: http://video1.washingtontimes.com/video/extremismreport.pdf
(3) “The 25 Points of Hitler’s Nazi Party,” The History Place, retrieved June 25, 2009, http://www.historyplace.com/worldwar2/riseofhitler/25points.htm
(4) See Daniel Hannan, “There’s Nothing Right Wing About the BNP,” The Telegraph, February 22, 2009, http://blogs.telegraph.co.uk/news/danielhannan/8679468/Theres_nothing_Rightwing_about_the_BNP/
(5) “Noam Chomsky – Libertarian Socialism: Contradicting terms?,” retrieved June 25, 2009, http://www.youtube.com/watch?v=ugq86q9KyPE
Given all Facebook's recent problems, I think it's a good time to repost an article from SwiftEconomics I wrote about the economic destruction that is Facebook:
Well, I generally come in at least fifteen minutes late, I use the side door – that way Lumbergh can’t see me. After that I just sorta space out for about an hour. Yeah, I just stare at my desk, but it looks like I’m working. I do that for probably another hour after lunch, too. I’d say in a given week I probably only do about fifteen minutes of real, actual, work."
The Internet has certainly brought us a lot of great things; be it information at your fingertips, decentralized news and an expansion of alternative media, email, the ability to connect with people on the other side of the world and SwiftEconomics among other lesser things. But the Internet has also, unfortunately, brought with it an incredible number of mind-numbing ways to waste time; Facebook being the prime example.
As of this writing, Facebook.com garners 145.4 million visitors per month, second in traffic only to Google. Myspace snags another 46.5 million, Twitter comes in with 30 million, LinkedIn puts up 36.5 million and a host of other social networking sites add millions more. Then you got to throw in sites such as YouTube (109 million), PhotoBucket (30 million), DailyMotion (12 million), Cracked (5 million), FunnyOrDie (5 million) and of course, YouPorn (18 million).*
I guess it’s better to be a cyber-socialite who feels like telling me every time you go the bathroom than a video game addict or some computer hacker eating cheese puffs in his mother’s basement… but honestly, that’s not exactly a high standard to live up to. The sheer amount of time people spend on these sites updating their status via cell phone about their drive to work, writing witty remarks on other people’s status’ about their drive to work, installing some random application and whatever spyware it has attached to it, sending mass invitations to some raging drunkfest, joining groups about how much they like going to raging drunkfests or poking someone they want to have sex with is simply becoming ridiculous.
According to Nielsen, the average Facebook user (of which there are more than 400 million) spends 4.5 hours of each month on Facebook. And that doesn’t include time spent on Twitter, Myspace or any other social networking site. Nor does it include watching some dramatic chipmunk on Youtube or visiting a litany of comedy and ‘fail’ sites.
These may be all fun and good, I enjoy ‘Charlie bit My Finger’ as much as the next guy, but how much time do we lose to this kind of stuff? One study concluded that 77% of Facebook users use Facebook while at work. An analysis of the economic damage Web 2.0 is doing is in order.
Luckily for me, a law firm in Britain named Penisula actually attempted to do this. It estimated that Facebook costs Britain 2.8 billion hours of worker productivity each year! The cost ran up to £130 million ($200 million) each day or £47 billion ($73 billion) each year! If that’s true for the United States–which has about five times the population–it would be 14 billion lost hours and $365 billion; or just over 2% of GDP.
Now it’s certainly possible that time wasted on Facebook would just be wasted on other things if Facebook wasn’t around. Instead of discussing important matters by instant messaging, men could go back to ranking their female co-workers by do-ability around the water cooler before shushing to an extraordinarily uncomfortable silence when one of them walks by. And women could go back to talking about… well, you know… ummm… yeah, uhhh… whatever the hell it is that women talk about.
Still, Facebook makes such dazing off (or cyber-slacking as it’s called) much easier. Many companies are now simply blocking the website and others like it. But some advise against this, calling such bans an “overreaction” and saying that it’s “… unreasonable for employers to try to stop their staff from having a life outside work.” They assert that banning these websites hurts morale and thereby does more harm than good. This is the nuclear weapons theory applied to Facebook. Yeah, maybe the world would be better off without nuclear weapons, but since they exist, we can’t just get rid of them. After all, Facebook even has its business uses, such as spamming, I mean networking.
Regardless of the employer’s situation, employees themselves should be careful about these sites. Especially when it comes to posting too much information or pictures of oneself in a ‘compromised’ condition, as the following Facebook ‘Fail’ from Oddee.com makes clear (yeah I know, I’ve become what I hate):
Indeed, bad situations just seem to pop up all the time with Facebook. This post on FMyLife.com makes that pretty clear:
Today, my boyfriend hacked my facebook account and set my status to say that I was in love with my boss. Seeing the post, my boss called me into his office, and told me he loved me too… FML
Now, I have a Facebook account and I’m an active blogger and have spent hours upon end on Youtube (usually watching economics videos, yeah I’m a nerd, I know), so I don’t want to throw the baby out with the bathwater. But, honestly, how much more damage, economic and otherwise, can these sites do? Perhaps we should all just take a step back from all these social networking sites and just try talking to each other again (and maybe getting a little work done as well).
*All traffic statistics gathered from www.Quantcast.com
So this morning I noticed my lowly Twitter account had by far its most popular tweet ever as I stuck it to Bret Stephens and his neocon BS:
Perhaps we should be nice to neocons, after all, these recent pullouts has more or less put them on suicide watch. But they're a bunch of warmongers, so nevermind. Being nice to neocons is never a good thing. Anyways, the tweet blew up because the former neocon, now anti-interventionist nationalist Ann Coulter retweeted me to her 2.1 million followers:
So Ann Coulter, who said shortly after 9/11 that "We should invade their countries, kill their leaders and convert them to Christianity" is now the de facto leader of the antiwar movement in America. On the other hand, liberal icon and powerful mind-reader Rachel Maddow is claiming Muh Putin "ordered" Trump to withdraw from Syria and even the anarcho-syndicalist Noam Chomsky, who blames pretty much everything on American imperialism, has said the US should stay in Syria to protect the Kurds or something.
I got to be honest, 10 years ago I could have never predicted this political realignment.
Check out my latest livestream for BiggerPockets on how to estimate rehab expenses and put together a scope of work for a rehab.
And check out my previous livestreams with BiggerPockets as well:
- The I.D.E.A.L. Real Estate Investment
- Estimating Costs on an Investment Property
- The 10 Most Important Real Estate Calculations
- Should You Manage Yourself or Hire a Property Management Company?
- A Guide to BRRRR Investing
- How to Find Banks to Lend to You
- How to Work with Tenants
- How to Invest in Student Housing
- How to Convince a Bank to Lend to You
- Due Diligence for Real Estate
So oh boy are the neocons and the permanent establishment out in force to say that we must fight for Assad against ISIS and ISIS against Assad and Iran against Al Qaeda and Al Qaeda against Russia and the Kurds against ISIS and maybe the Kurds against Turkey all in order to accomplish something or other.
Here's how the founder of the Project for the New American Century, which dreamt up the war in Iraq we were later lied into put it:
We should all be alarmed because pulling out is crrrraaaaazzzzzzy! We must stay the course and follow through on our great plan. A plan that works something like this:
1. Fund and support every side of the Syrian conflict
3. Create a prosperous, Jeffersonian democracy.
American involvement in Syria is even dumber than when Obama and Clinton knowingly sided with Al Qaeda to overthrow the secular dictatorship of Libya. (A country which now has open-air chattel slave markets by the way.) So Trump took the gloves off on ISIS and they've lost 98 percent of their territory since his term began. But you can't really ever completely eliminate ISIS. As Scott Horton points out, even if you eliminate all of ISIS, if one guy picks up a rifle and says he's part of ISIS, ISIS is back. For all intents and purposes, ISIS as a political entity in Syria is gone.
The same liars who lied us into Iraq are throwing a hissy fit over Trump withdrawing our troops from Syria and possibly some of the troops from the forever war in Afghanistan. Oh the horror! Just like they did when the mainstream press and neocon traitors convinced 70 percent of Americans that Saddam Hussein was behind 9/11, they have tried to conflate the blatantly obvious point that ISIS and Assad or enemies. Here's one example from the lady who's done more for the institution of slavery than anyone since Jefferson Davis:
You get that folks? We're going to empower ISIS and the enemy of the ISIS. Uh huh...
The whole goal in Syria was regime change all along, make no mistake about it. That's why they were willing to make a de facto alliance with ISIS and Al Qaeda and pretend the mystical "moderate rebels" existed when they, of course, did not.
Just like with Iraq, Afghanistan and Libya, overthrowing another secular regime would be a catastrophe. This is so embarrassingly obvious it's painful. The idea that Trump would have to be a Russian agent or in the pocket of Putin to make such an obvious decision is beyond stupid and it makes one wonder whether our warmongering mainstream press may actually be the "enemy of the people" Trump claims they are.
And furthermore, there really is no other option than regime change for a "US victory" in a mission that was never approved by congress or the UN and has no clearly defined objective. This is also obvious because as Hillary so helpfully notes; we are opposed to everyone there! Everyone but the Kurds who only control a small part of northeast Syria. Indeed, protecting the Kurds is the only possible reason to stay. But what were the odds the US would forever side with a nonexistent state against its Nato "ally" in Turkey? Trump negotiated with Erdogan right before his announced pullout and Erdogan has announced he will delay any planned offensive, hopefully indefinitely. But in the end, as with our inevitable defeat in Afghanistan, whatever was going to happen there was going to happen.
Invading foreign countries and siding with head-chopping terrorists has consequences folks. Perhaps we should just stop.
An old piece I wrote for SwiftEconomics regarding liberal Kevin Baker's admission that Barack Obama actually acted a lot like Herbert Hoover during the Great Recession. Of course, he takes the exactly wrong lesson from this. As it appears the United States is likely to head back into recession, this lesson would be worth paying attention to.
There is a persistent myth floating around that Herbert Hoover sat back and fiddled while America burned during the Great Depression, á la Nero. Then, Franklin Roosevelt came riding in as the knight in shining armor to save the American economy through massive government intervention. With this myth firmly intact, government intervention is seen as an absolute necessity to deal with our current financial crisis.
The truth is embarrassingly different however: Hoover did plenty of intervening and to my knowledge, very little fiddling. Given this, I was pleasantly surprised to see a piece in Harper’s magazine by Kevin Baker called “Barack Hoover Obama: The Best and the Brightest Blow it Again.” The piece is written from a liberal perspective, asserting that Obama, by attempting not to rock the boat too much, hasn’t done enough intervening. This echoes many liberal economists, such as Paul Krugman, who said of the original $787 billion stimulus package that, “to appease the centrists, a plan that was already too small and too focused on ineffective tax cuts has been made significantly smaller…” (1)
Baker states, “…that we are at one of those rare moments in history when the radical becomes pragmatic, when deliberation and compromise foster disaster.” Or in other words, Barack Obama has the opportunity to vastly remake American society and the American economy. Instead, he has chosen to play it safe. Baker elaborates:
“Much like Herbert Hoover, Barack Obama is a man attempting to realize a stirring new vision of his society without cutting himself free from the dogmas of the past–without accepting the inevitable conflict. Like Hoover, his is bound to fail.” (2
What’s nice to see is that liberals are finally starting to realize that Hoover did not adopt a laissez-faire approach; Herbert Hoover was a protectionist and supported Theodore Roosevelt’s short lived progressive party. When the stock market crashed, Hoover ignored the advice of his Treasury Secretary, Andrew Mellon, and decided to attempt unprecedented government intervention to stabilize the economy. He proclaimed, “no laissez-faire, no unchanneled and unimpeded course of nature, no invisible hand will do it for us.” (3) So as we might expect, Hoover did plenty, much more than any U.S. president before him:
– He increased taxes on top wage earners from 25% to 63%
This misconception gets so absurd that during the 1932 campaign, Franklin Roosevelt’s first vice president, John Garner, accused Herbert Hoover of “leading the country down the path of socialism.” (5) Furthermore, FDR brain-truster, Rexford Tugwell admitted that, “most of what [Hoover] began would be taken over by Roosevelt and then called the New Deal.” (6)
Now that we can admit Hoover did more than any president before him in fighting off an economic recession, what should we conclude from this? In an interview with Stephen Colbert, Baker concludes that “Hoover was a great man, probably kept more people from starving to death than anyone in history… what he was trying to do was expand the role of government, he just couldn’t quite get himself to do it [enough].” (7)
So let me get this straight: The first time the Federal Government significantly intervenes to stop an economic downturn just happens to be at the beginning of the worst depression in American history, thus proving the government didn’t do enough? Again, at least Baker is honest, but he is also, oh how can I put this kindly… incredibly dense. He simply assumes that the government helps the economy by spending money that it can only get from taxing the population, or running deficits (taxes in the future). This is the broken-window fallacy. As economist Henry Hazlitt explains:
“A young hoodlum, say, heaves a brick through the window of a baker’s shop… [however] this misfortune has its bright side. It will make business for some glazier… After all, if windows were never broken, what would happen to the glass business… The logical conclusion from all this would be… that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor… But the shopkeeper will be out $250 that he was planning to spend on a new suit… They have forgotten the potential third party involved, the tailor… They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made.” (8)
Simply put, the government can’t create anything; it can simply reshuffle the deck. So why should anyone assume that public spending “kept people from starving to death?”
Baker would have been well served to look just a little further into the past, to the not-so-great depression of 1920. Warren Harding, usually decried by historians, was, in fact, an incredible depression fighter. Jim Powell, of the Cato Institute, describes what he had to take on:
“Harding inherited [Woodrow] Wilson’s mess—in particular, a post–World War I depression that was almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933 that FDR would later inherit. The estimated gross national product plunged 24 percent from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million to 4.9 million.” (9)
So what did Harding do? He cut government spending from $6.3 billion in 1920, to $5 billion in 1921, to $3.2 billion in 1922. This would amount to a negative stimulus package! Income taxes were left as is and corporate taxes were cut. (10) There was no push for new regulations and the Federal Reserve did nothing (it didn’t begin open market operations until 1922). (11)
Warren Harding: Depression Fighter Extraordinaire
What was the result? By 1922 unemployment was down to 6.7% and the Roaring Twenties had begun. The economy set new production records year after year until the infamous Black Tuesday on October 29th, 1929; a downturn, that was dealt with in a much different and obviously less effective way. (12)
A comparison of how Hoover and Harding dealt with these severe downturns and the results that came from the policies they pushed through is quite elucidating. It’s nice to see that liberals such as Kevin Baker have finally come to realize what Hoover actually did. Now it would be nice if they could simply draw the proper logical conclusions from their realizations.
(1) Paul Krugman, “What Have the Centrists Wrought,” New York Times, 2/7/2009, http://krugman.blogs.nytimes.com/2009/02/07/what-the-centrists-have-wrought/?apage=2
(2) Kevin Baker, “Barack Hoover Obama: The best and the brightest blow it again,” Harper’s Magazine, July 2009, http://www.harpers.org/archive/2009/07/0082562
(3) Quoted from Tom Woods, 33 Questions About American History You’re Not Supposed to Ask, Pg. 182, Random House Inc., Copyright 2007
(4) See Ibid., Pg. 180-188, Amity Shlaes, The Forgotten Man, Pg. 85-104, and Murray Rothbard, America’s Great Depression
(5) Quoted in Otto Freidrich, Hays Gorey and Ruth Mehrten Galvin, “F.D.R.’s Disputed Legacy,” Time Magazine, 2/1/1982, http://www.time.com/time/magazine/article/0,9171,954983-4,00.html
(6) Quoted from Tom Woods, 33 Questions About American History You’re Not Supposed to Ask, Pg. 188, Random House Inc., Copyright 2007
(7) Kevin Baker, Interview with Stephen Colbert, Colbert Report, 7/29/2009, http://www.comedycentral.com/colbertreport/full-episodes/index.jhtml?episodeId=240118
(8) Henry Hazlitt, Economics in One Lesson, Pg. 11-12, Laissez Faire Books, Copyright 1996
(9) Jim Powell, “Not-So-Great Depression,” Cato Institute, 1/7/2009, http://www.cato.org/pub_display.php?pub_id=9880
(11) Malcom Mitchell, “The Dangers of Deflation,” Investment Policy Magazine, September 2003, http://www.investmentpolicy.com/dangers_deflation.html
(12) Jim Powell, “Not-So-Great Depression,” Cato Institute, 1/7/2009, http://www.cato.org/pub_display.php?pub_id=9880
New BiggerPockets Article: 5 Types of Real Estate Financing to Consider for Your First Real Estate Investment
My newest article for BiggerPockets is up on how finance your first real estate investment. First I start with the four things you need before even looking for a loan:
1. Clean up your credit
Then comes the five main ways to finance real estate for new real estate investors:
1. FHA Financing
Check out my latest livestream with BiggerPockets on why real estate is the IDEAL investment, which stands for:
E: Equity Buildup
I also go into the ins and outs of buy and hold real estate and how to approach real estate investment in a market that appears to be peaking.
And check out my previous livestreams with BiggerPockets as well:
- Estimating Costs on an Investment Property
- The 10 Most Important Real Estate Calculations
- Should You Manage Yourself or Hire a Property Management Company?
- A Guide to BRRRR Investing
- How to Find Banks to Lend to You
- How to Work with Tenants
- How to Invest in Student Housing
- How to Convince a Bank to Lend to You
- Due Diligence for Real Estate
And here is the follow up to my article on market alternatives to global warming from SwiftEconomics.com. This time, I discuss all the corporate welfare and cronyism going on with the new "global warming industry." No matter how big a threat you believe global warming is, this type of cronyism should concern you.
“It’s hard to get a man to understand something when his job depends on him not understanding it.” (1)
Those are the words of Al Gore, quoting Upton Sinclair, in his Academy Award/Nobel Prize winning documentary An Inconvenient Truth. It’s the good ol’ follow-the-money line. It presupposes that American corporations oppose any measure to cap carbon emissions because it will hurt their profits. And this makes sense: if we move away from oil, oil companies will be devastated. Thus, we must push through a carbon trading scheme to offset emissions, even if, no, because corporations oppose it. Paul Krugman went so far as to call anyone who opposed such a bill a “traitor to the planet.” (2) This same sentiment is best articulated by the most liberal member of congress, Dennis Kucinich
“[H.R. 2454, the cap-and-trade bill] is regressive. Free allocations doled out with the intent of blunting the effects on those of modest means will pale in comparison to the allocations that go to polluters and special interests. The financial benefits of offsets and unlimited banking also tend to accrue to large corporations. And of course, the trillion dollar carbon derivatives market will help Wall Street investors. Much of the benefits designed to assist consumers are passed through coal companies and other large corporations, on whom we will rely to pass on the savings.” (3)
Wait a minute Dennis, carbon trading is a regressive tax to benefit the rich, well-connected corporations? Nonsense! Or perhaps, we should go ahead and take Al Gore’s advice and follow the money. And perhaps, we should start with Al Gore’s own words, taken from the bonus material on the DVD release of An Inconvenient Truth:
“A lot of business leaders are changing their positions. New businesses and CEO’s and corporations every week are now joining this new bandwagon saying ‘we want to be part of the solution and not part of the problem.’” (4)
Where did Al Gore’s skepticism go? I thought businessmen just wanted to pad their bottom line; now they want to save the planet? If we follow the money, we can see that there’s a lot of money in “being green.” Just the image of being green helps a company’s brand name, as IBM seems to have taken note of:
Saving millions on energy costs is one of those win/win things they talk about in business school so often; unfortunately, it goes deeper than that. Dennis Kucinich is right. The carbon trading scheme that passed the House and is making its way to the Senate is a new derivatives market set up at the behest of Goldman Sachs and other major Wall Street financial firms. Out of curiosity, how did the last financial derivatives market turn out? And yes, it is also a regressive tax, (Who do you think is hurt most by higher energy bills?).
While it’s true that major energy companies are not fond of having to cap their emissions, financial firms can only gain by having a new market to trade in. What people miss when looking at the corruption caused by corporations and government being in bed together is that different corporations have different goals. Many companies may oppose government health care, but companies such as GM and Ford, who are drowning in health care costs, could benefit significantly from government-run health care. Google supports net neutrality, AT&T opposes it. And on and on it goes.
So who stands to benefit from cap and trade? Well, Goldman Sachs for one. In January of 2009, Goldman Sachs bought Constellation Energy’s carbon trading operation. (5) Maybe, just maybe, they see a potential market to exploit. Even Al Gore himself is getting in on the take. Al Gore is an owner of the venture capital company Kleiner Perkins Caufield & Byers. His company backed a small start-up firm named Silver Spring Networks, which produces equipment to make electricity grids more efficient. In October of 2009, the U.S. Department of Energy gave out $3.4 billion of “smart grid” grants; $560 million went to utilities with which Silver Spring has contracts. (6) The Telegraph predicts that “Al Gore could become the world’s first carbon billionaire.” (7) Maybe that’s where Al Gore’s skepticism went: right to the bank.
This may seem outrageous, but that whole mess of corruption pales in comparison to the company that helped draft the initial concept for a carbon trading system: everyone’s favorite, now-defunct, energy trading firm, Enron.
In 1997, then Enron CEO, Ken Lay wrote an op-ed entitled “For Prevention’s Sake: Focus on Climate Solutions.” In it he strongly advocated the Kyoto Protocol, which would cap carbon emissions worldwide. On August 4th, 1997, Ken Lay met with Bill Clinton, Al Gore and others at the White House to discuss Kyoto. Ken Lay was an enthusiastic supporter. This may seem odd to some because George Bush was a close friend of Ken Lay, but Bush refused to sign the Kyoto Protocol. Apparently, George Bush either had other special interest groups to appease, or he simply disagreed with his friend (almost certainly the former). Ken Lay never gave up, though. In 2001, Lay sent an emissary to the Bush administration to lobby for Kyoto. Why would Enron support cap and trade? The answer is the same as the answer for Goldman Sachs: it created a new energy market for them to trade in. Enron went bankrupt soon afterwards however, before it could influence any more politicians. (8)
But even though Enron is now gone, its baby lives on. Investigative Magazine, a New Zealand journal, concluded that “…without Enron there would have been no Kyoto Protocol.” (9) This may be a bit hyperbolic, but Enron did help establish and trade extensively in the $20 billion-per-year sulphur dioxide cap and trade scheme the EPA set up to deal with acid rain. Enron’s link to carbon trading is simply undeniable.
Furthermore, making money off of global warming solutions extends beyond trading carbon credits. Archer Daniels Midlands, the company TJ Rodgers, CEO of Cypress Semiconductors Corporation, calls “the pork barrel champion of all time,” (10) has made a fortune off of corn ethanol subsidies. Regardless of whether corn ethanol reduces carbon emissions (it doesn’t), it should be quite telling that Archer Daniels Midlands has received billions of dollars from the federal government to grow corn, (and you thought farm subsidies went to poor farmers and not big corporations). Does the president of ADM care whether corn ethanol is effective? Perhaps, but he certainly cares that it is effective in padding the bottom line.
Archer Daniels Midlands has consistently donated to both parties and received massive direct subsidies as well as sweetheart regulations. Dan Carney, writer for the liberal Mother Jones magazine, states “no other U.S. company is so reliant on politicians and governments to butter its bread.” (11)
ADM benefits in three ways. First are direct subsidies, which are notably the least important. The second is an enormous tariff on sugar, (at the behest of both ADM and the Fanjul family’s sugar dynasty, which has also donated consistently to both parties) (12). This makes sugar more expensive in the United States and thereby increases the demand for corn ethanol. The final relates to corn ethanol, which Dan Carney describes as follows:
“The third subsidy that ADM depends on is the 54-cent-per-gallon tax credit the federal government allows to refiners of the corn-derived ethanol used in auto fuel. For this subsidy, the federal government pays $3.5 billion over five years. Since ADM makes 60 percent of all the ethanol in the country, the government is essentially contributing $2.1 billion to ADM’s bottom line.” (13)
And while it’s true that Mother Jones is very skeptical of corporations and the free market itself (not that ADM represents a free market) it’s worth noting that the libertarian Cato Institute agreed with them completely, calling Archer Daniel Midlands a “case study in corporate welfare.” (14)
It becomes quite obvious that there’s a lot of green to be made in being green. But since we’re following the money, why stop with just corporations? Two other institutions come immediately to mind as possible global warming benefactors: the government and universities.
Government’s incentive should be obvious. If corporations all too often seek money without regards to the human cost, governments all too often seek power without regards to the human cost. An extremely short glance at the blood-soaked 20th century should be evidence enough of this. And the more of the economy that the government controls, taxes, or regulates the more power they have. European governments have gone so far as to ban the sale of incandescent light bulbs. (15)
Universities are a little more complicated. It works like this: many academics are reliant on government grants to fund their research. Donald Miller, of the Science and Public Policy Institute describes how a system so reliant on government financing creates—what he refers to as—”scientific dogmas.” (16) Namely, once a “consensus” has been reached, funding dries up for any alternative theories. This is what I would refer to as the “anti-scientific method.” The scientific method involves proposing a theory and then watching as everyone and their brother attempts to obliterate said theory and make a fool out of you. If a theory can withstand the initial barrage, then it simultaneously becomes accepted while awaiting the next onslaught of skepticism. So what happens when scientific theory becomes “dogma” and scientists are reliant on government funding? It creates a major incentive for scientists to fall in line. And when that “dogma” involves a political hot-ticket, there’s major incentive to get in line for government grant money.
The recently-released emails between leading climate scientists lend a lot of creditability to this argument. For example, look at this one from climatologist, Kevin Trenberth:
“If you think that Saiers is in the greenhouse skeptics camp, then, if we can find documentary evidence of this, we could go through official AGU channels to get him ousted.” (17)
Basically, Trenberth is trying to oust a scientist from a professional organization for disagreeing with him. Dogma indeed. Other emails allude to manipulating data to fit with this “dogma.” Furthermore, we have to ask whether academics and scientists proposing solutions such as cap-and-trade (a system that would give the government more power) would be more likely to receive grant money and political attention than those proposing, say, deregulating nuclear power. It may sound a bit conspiratorial, but it’s a question worth asking.
Now none of this is to say that corporate-financed research is any less biased. It would seem that smoking isn’t bad for you if you trusted the tobacco companies’ research back in the day. It’s just to say that skepticism needs to be applied everywhere. And the money needs to be followed everywhere.
And following the money leads to some interesting conclusions doesn’t it Mr. Vice President? As I illustrated in my previous article, there are plenty of other, better ways to deal with global warming than cap-and-trade, assuming it’s worth dealing with at all. Unfortunately, those methods don’t enrich the special interests. So understandably, albeit shamefully, those methods are ignored.
Previous: The Market and Global Warming: Alternatives to Cap and Trade
(1) Al Gore, An Inconvenient Truth, Lawrence Benders Productions, 2006
(2) Paul Krugman, “Betraying the Planet,” The New York Times, June 26, 2009, http://www.nytimes.com/2009/06/29/opinion/29krugman.html?_r=1
(3) Dennis Kucinich, “Passing a weak bill today gives us weak environmental policy tomorrow,” Speech on House floor, June 26, 2009, http://kucinich.house.gov/News/DocumentSingle.aspx?DocumentID=134813
(4) Al Gore, An Inconvenient Truth, Lawrence Benders Productions, 2006, the bonus section can be seen at http://www.youtube.com/watch?v=TPem4XLr-Bc
(5) “Update 1-Constellation to sell London unit to Goldman,” Reuters, January 20, 2009, http://uk.reuters.com/article/idUKN2031523720090120
(6) John M. Broder, “Gore’s Dual Role: Advocate and Investor,” The New York Times, November 2, 2009, http://www.nytimes.com/2009/11/03/business/energy-environment/03gore.html?_r=1&em
(7) “Al Gore could become world’s first carbon billionaire,” The Telegraph, November 3, 2009, http://www.telegraph.co.uk/earth/energy/6491195/Al-Gore-could-become-worlds-first-carbon-billionaire.html
(8) See Dan Morgan, “Enron Also Courted Democrats,” Washington Post, January 13, 2002, http://www.washingtonpost.com/ac2/wp-dyn/A37287-2002Jan12?language=printer and Timothy P. Carney, The Big Ripoff: How Big Business and Big Government Steal Your Money, Pg. 200-203, John Wiley & Sons Inc., Copyright 2006
(9) Thomas Lifson, “Enron, Kyoto, and trading pollution credits,” American Thinker, March 12, 2007, http://www.americanthinker.com/blog/2007/03/enron_kyoto_and_trading_pollut.html
(10) T.J. Rodgers, “The Free-Market Case for Green,” Uncommon Knowledge, September 26, 2008, http://www.youtube.com/watch?v=jCjM2leF5F8
(11) Dan Carney, “Dwayne’s World,” Mother Jones, July/August 1995, http://www.motherjones.com/politics/1995/07/dwaynes-world
(12) Timothy P. Carney, The Big Ripoff: How Big Business and Big Government Steal Your Money, Pg. 56-63, John Wiley & Sons Inc., Copyright 2006
(13) (11) Dan Carney, “Dwayne’s World,” Mother Jones, July/August 1995, http://www.motherjones.com/politics/1995/07/dwaynes-world
(14) James Bovard, “Archer Daniels Midlands: A Case Study in Corporate Welfare,” September 26, 1995, http://www.cato.org/pubs/pas/pa-241.html
(15) James Kanter, “Europe’s Ban on Old-Style Bulbs Begins,” The New York Times, August 31, 2009, http://www.nytimes.com/2009/09/01/business/energy-environment/01iht-bulb.html
(16) Donald Miller, “The Trouble With Government Grants,” Science and Public Policy Institute, April 21, 2008, http://scienceandpublicpolicy.org/reprint/gov_grant_system_truth_or_innovation.html
(17) See “ClimateGate – Climate center’s server hacked revealing documents and emails,” Examiner.com, November 20th, 2009, http://www.examiner.com/x-25061-Climate-Change-Examiner~y2009m11d20-ClimateGate–Climate-centers-server-hacked-revealing-documents-and-emails#update
This is one of my favorite articles I wrote for SwiftEconomics.com on global warming and some market-oriented solutions to it. Following this is an upcoming article on all the corporate welfare that exists in the global warming "industry."
There’s been a lot of discussion lately about a series of emails among climate scientists that were released after some hackers got into the computer networks of a top university. The emails, some of which you can see here, show that many of these global warming scientists had doubts, possibly manipulated data and attempted to censor skeptics. It’s certainly caused an uproar and is pushing public opinion against the cap and trade scheme that has made its way through Congress and is awaiting a vote in the Senate. But let’s ignore the emails and skepticism for now and simply assume global warming is man-made. Is a carbon trading system really the best we can come up with to deal with the problem?
The carbon trading concept seems very reminiscent to the history buff in me. Back in the Middle Ages, the Catholic Church and some other unaffiliated snake oil salesmen, sold what were called indulgences. These indulgences offered penance for a variety of sins and could either commute or completely eliminate one’s arduous trip through Purgatory.
Today, we have a similar situation; we have an entire market of carbon credit traders (even now, when in the United States, it is not mandatory). Basically, you buy offsetting carbon credits (for someone, probably in a third world country, to plant trees or something like that) to make up for your “carbon footprint.” This allows one to pollute conscience free and Al Gore has notoriously used these to “offset” his enormous personal “carbon footprint.” Hmmm, perhaps we should consider this for other “sins.” As Michael Kinsley of Time magazine analogized:
“What’s needed is a market in child-abuse credits. Somewhere in the world there is a parent who is slugging his kid every night. For a price, he would refrain for a night, or even two. By paying that parent not to slug his kid twice, you gain the right to slug your kid just once.” (1)
Maybe that’s going just a wee bit too far; regardless, carbon credits will hereafter be referred to as carbon indulgences. And now, the Obama administration is trying to institutionalize these indulgences throughout the entire economy, via cap and trade.
Cap and trade works like this: carbon dioxide emitting industries will be given certain arbitrary quotas, which they cannot exceed. If they are above their quota, they must buy offsetting carbon credits from firms that are below their quota.
Cap and trade is undeniably a tax increase. Unless the carbon indulgences are set so high that no firm ever has to buy any (making the whole scheme pointless), firms will have to raise their costs to meet the expenses imposed by the new quotas. The Congressional Budget Office estimates that it will cost $175 per family, annually (2). The conservative Heritage Foundation estimates that the CBO has grossly underestimated this figure by not including the effect the bill could have on reducing the nation’s GDP, among other issues. According to their own estimates, by 2020, institutionalized carbon indulgences will reduce GDP by a $161 billion, translating to $1870 per household. (3)
It’s also not, as John McCain called it during the election, “a market-based solution.” Yes, there is a market, but it’s a market the government created at its own whim. It would be similar to calling the lobbying industry a free market system for political favors. As economist Robert Murphy put it, “the number of permits is an arbitrary scarcity imposed by government fiat” (4), i.e: not a free market.
However, it should be noted that there is some validity to a carbon indulgences trading scheme. First a little background, though. As shocking as it may be to environmentalists, one of the best ways to protect the environment is property rights. People always take better care of their own property than someone else’s (think used cars) and no one has the right to pollute someone else’s property without due compensation. Furthermore, the tragedy of the commons comes into play with collectively owned resources. Essentially, if land is not privately owned (or properly regulated), there is no incentive for people to use the resources of that land judiciously. Biologist Richard Dawkins explained it well when describing Port Meadow in 1987:
“Ecologically speaking we do have the makings of a tragedy here…ragweed is poisonous plant and cattle won’t eat it. And it’s an indicator plant of overgrazing…for the past fifteen years [ragweeds have] been taking over this meadow as there has been an increasing overgrazing problem… which is of the city government’s own making. Fifteen years ago they asked each commoner how many animals he would like legal rights to graze on this common land. Naturally each of them, being human, submitted his own selfish estimate of the most he could possibly want. All those bids got accepted. So even if each farmer is only grazing what he’s legally entitled to, there’s a huge overgrazing problem.” (5)
When land is either privately owned or regulated properly (which, given the influence of various special interests, is rare), maintaining the land increases its value. There is a natural, economic incentive to be environmentally conscious. But with the lack of either private ownership or proper regulation, that incentive is removed. Thus, it should be no surprise that the worst environmental degradation has taken place in communist countries and countries that lack de jure property rights. Contrary to popular wisdom, Stalin was not a tree hugger and Mao did not spend his nights drenched in patuli oil, singing “Kumbaya” around a campfire while smoking some dank ganja he picked up in Amsterdam. A 1970 article for Time Magazineentitled “Communist Pollution,” concluded, “[The environment] is often worse in Communist countries, where technocrats toil to boost industrial production with little thought to environmental consequences.” (6) And Chinese expert, James Kynge, assessed China’s state-run capitalism, without de jure property rights, effect on the environment as follows:
“Streams and rivers are drying up all over the northern half of the country… Acid rain falls over 30% of its territory…The U.S. Environmental Protection Agency recently reported that a third of the nation’s lakes and nearly a quarter of its rivers are now so polluted with mercury that children and pregnant women are advised to limit or avoid eating fish caught there.” (7)
Unfortunately, pure, unfettered capitalism runs into an environmental stumbling block with the oceans and an environmental roadblock with the air. How could you possibly privatize the air? Regulation is almost a must, assuming the regulatory burden is worth the cost it would impose to protect the environment. So government regulation is almost certainly necessary regarding air pollution. Furthermore, indulgence trading is also supported by the successful use of a similar program for acid rain in the early 1990’s.
However, air pollution and carbon dioxide emissions are not exactly the same thing. Set aside the fact that the European’s version of cap and trade basically failed: why are the only solutions being proposed government programs and tax increases? Carbon dioxide is harmless to people, the danger it poses is to hasten global warming. Compare a factory, bellowing out mercury or other toxic fumes, to a one bellowing out carbon dioxide. If it were the only factory emitting carbon dioxide, it would be irrelevant. It’s the grand total of carbon dioxide emissions, not individual ones which cause the problem. Given that distinction, as well as the large costs institutionalized indulgence trading would bring, why not look at some market alternatives that seem to have been mostly, if not completely, ignored. Five that come to mind:
1. Strictly enforce property rights. We’ve been getting away from this for years, but in obvious cases where a company causes significant harm to other people or property via pollution (be it air pollution or otherwise), they should be liable for those damages. In some ways, regulation can simply allow a company to violate other people’s property rights to whatever extent the regulation deems acceptable.
Furthermore, there are many cheaper methods that could be done with limited government involvement, if any at all. Environmental economist, Bjorn Lomborg discusses global warming in an almost unique way; namely, a purely rational way. He discusses proposed solutions in terms of costs and benefits. We have to remember that not only will cap-and-trade cost the industrialized world a lot, it will make development in the third world much more difficult, if not impossible.
Lomborg invited a group of eight top thinkers, including four Nobel Prize Winners (sorry, Al Gore and Barack Obama were not among them) to form the Copenhagen Consensus. They looked at 10 major problems in the world from malnutrition to government corruption to global warming. Their goal was to determine which areas would investment yield the best returns for humanity. They voted micro-nutrient supplements for children first and lowering trade barriers second. The first solution to global warming comes in at 14th; and it’s research into new technologies, not cap and trade. (11)
Indeed, technology seems to offer much more cost-effective solutions. We could go with nuclear power or hemp fuels like I mentioned above, or other technologies that have, for the most part, been ignored. Steven Levitt and Stephen Dubner, authors of Superfreakonomics, propose geoengineering to combat global warming. Levitt describes one possibility, we could implement today if we wanted to, as follows:
“[One possible solution is] a cloud whitening scheme. Dark things absorb a lot of heat and the oceans are very, very dark. There are not very many clouds over the ocean because there are not the nuclei that seed the clouds which is usually from dust. There’s not much dust over the ocean. Salt can also seed clouds. And so what you need to do is figure out how to spray some salt water up into the air and that can serve to make the clouds. The belief is, from the models, that if you can just have 10,000 little, solar powered dingies that just puttered around in the ocean and flipped up some salt water into the air, that that would generate enough cloud cover over the oceans that would reflect enough of the sunlight that through that channel you could also lower the temperature of the Earth to offset any effects of warming.” (12)
These projects could be government funded for sure, but they’re cheap and would require very little interference in the economy. They would also be more effective. The Kyoto Protocol for example, was expected to make very little, if any difference, even when it was enacted. By 2050, it’s supposed to reduce the mean temperature by perhaps 0.2 degrees Celsius, or maybe as little as 0.07 degrees. (13) Either way, it’s an irrelevant reduction. It would be just about as useful to simply burn money (as long as burnt money is carbon neutral of course).
Furthermore, we have to ask whether dealing with the consequences of global warming would be a more effective than trying to prevent it. Despite the hysteria, many of the consequences could very well be manageable. For example, the International Panel on Climate Change estimates that sea levels will rise between 0.6 and 2 feet over the next century. (14) That sounds quite manageable.
Yet the solutions being discussed, such as indulgence trading, are all big government solutions. Despite the existence of alternatives, our wise leaders can think of little other than massive tax hikes and intrusive schemes. This makes me very skeptical of our noble politician’s goals. Could politicians be looking for a power grab? Or perhaps well-connected firms are looking to profit off the new system? Oh, there I go again, questioning our wise, benevolent leaders. I’m trying to break the habit… honest.
Next: The Market For Global Warming: Green is the Color of Money
(1) Michael Kinsley, “Credit for Bad Behavior,” Time Magazine, June 21, 2007, http://www.time.com/time/magazine/article/0,9171,1635840,00.html
(2) “Cap-And-Trade Costs,” Congressional Budget Office, June 19, 2009 http://www.cbo.gov/ftpdocs/103xx/doc10327/06-19-CapAndTradeCosts.pdf
(3) David Kreutzer, Karen Campbell and Nicolas Loris, “CBO Grossly Underestimates Cost of Cap and Trade,” The Heritage Foundation, June 24, 2009, http://www.heritage.org/Research/energyandenvironment/wm2503.cfm
(4) Robert Murphy, “Cap & Trade Is Not A Market Solution,” Institute of Energy Research, June 4, 2008, http://www.instituteforenergyresearch.org/2008/06/04/cap-trade-is-not-a-market-solution/
(5) Richard Dawkins, “Nice Guys Finish First,” copyright 1987, http://video.google.com/videoplay?docid=-3494530275568693212
(6) Author unnamed, “Environment: Communist Pollution,” Time Magazine, November 30, 1970, http://www.time.com/time/magazine/article/0,9171,904549,00.html
(7) James Kynge, China Shakes the World, pg 151-152, First Mariner books, Copyright 2007
(8) See “Nuclear Power Now,” NuclearPowerNow.com, http://www.nuclearnow.org/ and “Nuclear Power in France,” Wikipedia.org, http://en.wikipedia.org/wiki/Nuclear_power_in_France
(9) Robert Bryce, “Corn Dog,” Slate Magazine, July 19, 2005, http://www.slate.com/id/2122961/
(10) See “Pollution: Petrol vs Hemp,” Hempcar.com, http://www.hempcar.org/petvshemp.shtml
(11) See Copenhagen Consensus Center, http://www.copenhagenconsensus.com/CCC%20Home%20Page.aspxand “Copenhagen Consensus,” Wikipedia.org, http://en.wikipedia.org/wiki/Copenhagen_Consensus
(12) Steven Levitt, “Superfreakonomics with Steven Levitt and Stephen Dubner,” Commonwealth Club, Fora Tv, http://fora.tv/2009/11/04/SuperFreakonomics_with_Steven_Levitt_and_Stephen_Dubner
(13) For a 0.2 degree reduction from a proponent of Kyoto, see Niklas Hohne, “Impact of Kyoto Protocol on Stabilization of Carbon Dioxide Concentrations.” ECOFYS energy and environment, http://www.stabilisation2005.com/posters/Hohne_Niklas.pdf, from a skeptic claiming 0.07 degrees see “Kyoto Count Up,” Junkscience.com, http://www.junkscience.com/MSU_Temps/Kyoto_Count_Up.htm
(14) Parry, Martin L., Canziani, Osvaldo F., Palutikof, Jean P., van der Linden, Paul J., and Hanson, Clair E. (eds.), IPCC. 2007 – Climate Change 2007; Impacts, Adaption and Vulnerability, Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge University Press, Cambridge, United Kingdom, Pg. 1000, http://www.ipcc-wg2.org/index.html
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