Wednesday, June 04, 2014

The Free Market Ignores the Poor?

It ignores the rich too

Once an activity has been socialized for a spell, nearly everyone will concede that that’s the way it should be.

Without socialized education, how would the poor get their schooling? Without the socialized post office, how would farmers receive their mail except at great expense? Without Social Security, the aged would end their years in poverty! If power and light were not socialized, consider the plight of the poor families in the Tennessee Valley!

Agreement with the idea of state absolutism follows socialization, appallingly. Why? One does not have to dig very deep for the answer.

Once an activity has been socialized, it is impossible to point out, by concrete example, how men in a free market could better conduct it. How, for instance, can one compare a socialized post office with private postal delivery when the latter has been outlawed? It’s something like trying to explain to a people accustomed only to darkness how things would appear were there light. One can only resort to imaginative construction.

To illustrate the dilemma: During recent years, men and women in free and willing exchange (the free market) have discovered how to deliver the human voice around the earth in one twenty-seventh of a second; how to deliver an event, like a ball game, into everyone’s living room, in color and in motion, at the time it is going on; how to deliver 115 people from Los Angeles to Baltimore in three hours and 19 minutes; how to deliver gas from a hole in Texas to a range in New York at low cost and without subsidy; how to deliver 64 ounces of oil from the Persian Gulf to our Eastern Seaboard—more than half-way around the earth—for less money than government will deliver a one-ounce letter across the street in one’s home town. Yet, such commonplace free market phenomena as these, in the field of delivery, fail to convince most people that “the post” could be left to free market delivery without causing people to suffer.

Now, then, resort to imagination: Imagine that our federal government, at its very inception, had issued an edict to the effect that all boys and girls, from birth to adulthood, were to receive shoes and socks from the federal government “for free.” Next, imagine that this practice of “free shoes and socks” had been going on for lo, these 173 years! Lastly, imagine one of our contemporaries—one with a faith in the wonders of what can be wrought when people are free—saying, “I do not believe that shoes and socks for kids should be a government responsibility. Properly, that is a responsibility of the family. This activity should never have been socialized. It is appropriately a free market activity.”

What, under these circumstances, would be the response to such a stated belief? Based on what we hear on every hand, once an activity has been socialized for even a short time, the common chant would go like this, “Ah, but you would let the poor children go unshod!”

However, in this instance, where the activity has not yet been socialized, we are able to point out that the poor children are better shod in countries where shoes and socks are a family responsibility than in countries where they are a government responsibility. We’re able to demonstrate that the poor children are better shod in countries that are more  free than in countries that are less free.

True, the free market ignores the poor precisely as it does not recognize the wealthy—it is “no respecter of persons.” It is an organizational way of doing things featuring openness, which enables millions of people to cooperate and compete without demanding a preliminary clearance of pedigree, nationality, color, race, religion, or wealth. It demands only that each person abide by voluntary principles, that is, by fair play. The free market means willing exchange; it is impersonal justice in the economic sphere and excludes coercion, plunder, theft, protectionism, subsidies, special favors from those wielding power, and other anti-free market methods by which goods and services change hands. It opens the way for mortals to act morally because they are free to act morally.

Admittedly, human nature is defective, and its imperfections will be reflected in the market (though arguably, no more so than in government). But the free market opens the way for men to operate at their moral best, and all observation confirms that the poor fare better under these circumstances than when the way is closed, as it is under socialism.



An obsolete Indian car as a model for the U.S. Post Office

Thomas Sowell

At one time, people in India had to get on a waiting list to buy Hindustan Motors' Ambassador automobile, even though it was an obvious copy of Britain's Morris Oxford of some decades earlier. The reason was simple: the Indian government would not allow cars to be imported to compete with it.

The fact that the Ambassador was a copy is hardly an automatic reason for condemnation. The first Nikon camera was an obvious copy of a German camera called the Contax, and the first Canon was an obvious copy of the Leica. The difference is that, over the years, Nikons and Canons rose to become state of the art, during both the era of film and in the new digital age.

Not so the Ambassador car. It was notorious for poor finish and poor handling. But, since it was the only game in town -- and "town" was all of India, people were on waiting lists for it for months, and sometimes even years.

By contrast, Nikon and Canons were good cameras from day one and they just got better as the companies that produced them gained more experience. With a highly competitive international market for cameras, they had no choice if they wanted to survive.

But the Hindustan Ambassador had no such problem. Only those who bought them had problems.

Toward the end of the 20th century, India began to loosen up some of its jungle of rules and regulations that were strangling India's businesses. Though India is still a long way from a free market, just the relaxing of some of its economic restrictions was enough to promote a higher rate of growth and a substantial reduction in poverty.

They even allowed a Japanese car maker to build cars in India. This resulted in a car called the Maruti, which quickly shot to the top as the most popular car in India. Even more remarkable, it led to some improvements in the Ambassador. A British newspaper said that the Ambassador now had "perceptible acceleration."

Now that there was competition, the distinguished British magazine "The Economist" announced, "Marutis too are improving, in anticipation of the next invaders."

Perhaps the last chapter in the story of the Ambassador has now been written. Hindustan Motors recently announced that it was closing -- indefinitely -- the factory where the Ambassador was built.

According to the Wall Street Journal, "The company cited low productivity, 'a critical shortage of funds' and a lack of demand for its core product, the Ambassador."

Doesn't that sound a little like our post office?

Our post office, like the Hindustan Ambassador, has had a long run as a government protected monopoly. But just a partial erosion of that monopoly, with the appearance of United Parcel Service and Federal Express, has threatened the viability of the post office.

As for "a critical shortage of funds," that has truly gotten critical as the post office has seen its $15 billion line of credit at the U.S. Treasury shrink to the vanishing point. For years that line of credit allowed the post office's defenders to tell the big lie that it got no subsidy and was costing the taxpayers nothing.

I don't know who they thought put that money in the Treasury that the post office has been "borrowing" all these years, with no one foolish enough to think that they would ever be either willing or able to pay it back.

We could all use a line of credit from which we could get a few billion dollars, here and there, to cover our losses from time to time. But we are not all the post office.

Ironically, India has partially privatized its post office by letting private companies deliver mail. The government post office's deliveries of mail dropped from 16 billion to less than 8 billion in just six years, even though the population of India was growing.

You can always keep anything old, clunky and inefficient still in business, if you are willing to pour unlimited amounts of the taxpayers' money down a bottomless pit.

Hindustan Motors had to shut their doors when they ran out of money. How long will we continue to keep our own version of the Hindustan Ambassador on life support at the expense of the taxpayers, and of captive customers who are not even allowed by law to decide who can put mail in the boxes that the customers bought?



Liberal Austin homeowners surprised to find they have to pay all the taxes they voted for

“I’m at the breaking point,” said Gretchen Gardner, an Austin artist who bought a 1930s bungalow in the Bouldin neighborhood just south of downtown in 1991 and has watched her property tax bill soar to $8,500 this year.

“It’s not because I don’t like paying taxes,” said Gardner, who attended both meetings. “I have voted for every park, every library, all the school improvements, for light rail, for anything that will make this city better. But now I can’t afford to live here anymore. I’ll protest my appraisal notice, but that’s not enough. Someone needs to step in and address the big picture.”

I’m really just bringing this to your attention for this quote alone. Voting and paying are different endeavors entirely. Often, when one has to pay for the things one has voted to fund, that decision becomes less flippant. This is a comment, less on the specifics of Texas’ or Austin’s tax system than the blaring disconnect between liberals in Austin who are voting for higher taxes and the actual paying of the taxes. Which, as it turns out, is painful, discouraging, and can be a detriment to the fabric of the city.

The Texas Public Policy Foundation offers this on the complexity and salience of Texas property taxes:

In Texas, there are more than 3,900 localities that impose property taxes, including school districts, counties, and special districts. Texas’ property tax burden has grown from approximately 1 percent of value in the early 1980s to nearly 3 percent today.

The rising burden from property tax is worse for the housing-rich but income-poor elderly homeowners. For example, elderly homeowners tend to move more often to reduce their property tax burden, which is an additional cost of owning a home for those who can least afford to move.

Interestingly, another reason voters hate property taxes is because they are more “salient.” A salient tax means that the burden is transparent, easy to understand, and hard to avoid. If paid directly, property taxes are found to be more salient compared with sales taxes applied at checkout or income taxes withheld from a paycheck.

In 2012, the free-market think tank suggested swapping the local property tax for a sales tax:

New research suggests that if Texas eliminates its local property tax system, ranked as the 14th most oppressive in the nation, and instead replaces those lost revenues with an adjusted sales tax, then the ensuing flood of capital investment and business activity could ignite the Texas economy for years to come.

That’s right, just by changing how Texas governments collect public dollars—but not how much they spend—the Legislature can give the economy and people’s wallets a major boost.

By how much, you ask? Our estimates suggest quite a bit.
Either way, I don’t think Gretchen Gardner is ever going to make the connection between her voting pattern and her bill.


The Slow Erosion of the Fourth Amendment

WarrantThe Fourth Amendment protects citizens from unlawful and unreasonable search and seizure. Yet that protection is being slowly eroded away. Thanks to the “War of Drugs” and the “War on Terror” government, at the state and federal level, has worked alongside the courts to gradually diminish the range and force of the protections that were meant to be inviolable rights of all citizens.

This year has seen two serious blows to the constitutionally-protected freedoms of the Fourth Amendment. The first was a ruling by the US Supreme Court in February that makes it easier for police to enter and search private homes without warrants. Previous interpretations by the court had held that in cases of disagreement between residents on whether to admit police to search a residence without a warrant, one resident’s permission was sufficient to prevent the search. Under the new ruling, one resident is sufficient to admit police, even over the protest of another resident.

This ruling inherently dilutes the right of individuals to their own private domicile and to be protected from police searching their property without their permission. This outrageous decision will no doubt further damage the guarantees and protections promised by the Constitution.

The second assault on protections against search and seizure happened in Pennsylvania this month. Pennsylvania has for many years been more resistant than other states to the destruction of Fourth Amendment rights. The constitution of the commonwealth has traditionally been interpreted as going even further than the Fourth Amendment, extending protections to property such as motor vehicles. In fact, police officers had to call a judge in order to obtain permission to search a car.

That protection has now been overturned by the Supreme Court of Pennsylvania. Now police can search cars on their own initiative, as they can in most states. The commonwealth was one of the last hold-outs on this issue. Without it, the norm of searching citizens’ vehicles at police discretion is unchallenged in statutes of the state and federal governments.

These attacks at the federal and state levels on a core constitutional right have angered people across the political spectrum. Even the usually left-leaning Huffington Post has reported angrily on the rulings.

The US Supreme Court ruling in particular is demonstrative of the problems that can arise when the political leadership of both parties holds a convergent view of policy that does not align with the desires of the broader polity. In a duopolistic political system, the political agenda can be almost impossible to challenge when such convergences occur. If the major political agents agree to act in a way that is contrary to that of the people, the system often denies any redress.

The only way to challenge the system, as it stands now, would be to mount primary challenges. The Republican Party is being convulsed by such a process now, but the Democrats remain largely unperturbed. Citizens who value their rights cannot permit the political actors who represent them to ossify policies directly antithetical to their express will. It remains to be seen whether Americans can successfully band together to protect their rights from government encroachment. On this issue, with sufficient anger from both left and right, there is reason to hope.



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