Friday, September 7, 2007

Lou Dobbs, China, and "Idiot Libertarians"

So, I accidentally turned Lou Dobbs on for exactly one minute this afternoon. He was talking about the Chinese toy and food import "scandals" that were in the news over the summer. After ranting about Mattel's corporate greed, he then went into a diatribe against free marketers, asking where are the "free marketers and libertarians now?" regarding this whole Chinese import debate. Continuing his rant, he stated that the whole scandal should prove to "idiot libertarians" that government regulation of trade is necessary to protect the safety of the American people. Finally, he drew the connection - as usual - between corporations and their ability to influence government in order to screw the consumer.

I did some research and found that, indeed, the libertarian movement has been less than concerned about the China toy recalls. Most libertarian commentary on the issue has discussed it only tangentially discussing other issues of China trade policy. Of course, the reason for this silence is mostly because libertarians aren't overly concerned with toy "defects" that have apparently caused little or no actual harm to US consumers (so far as I can tell).
Nonetheless, I figured that I will answer Mr. Dobbs' challenge (since I'm sure he's a regular reader of Publius Endures).
So, here are 6 reasons why the Chinese toy recalls do not represent a failure of the free market:
1. As far as I have been able to tell, the tens of millions of recalled toys that Dobbs complained about have resulted in exactly zero reported injuries. Indeed, the Consumer Products Safety Commission, in the most recent round of recalls, indicated that no injuries have occurred as a result of the allegedly defective products. So, I can't see how the market has created an unacceptable danger to the consumer if tens of millions of the toys subject to the recalls have caused exactly zero harm, or at least such a low level of harm as to be statistically irrelevant.
2. The fact that US government rules have apparently been violated in terms of the materials contained in the products is not in itself proof of a market failure and of the need for stronger government rules. If rules had been followed, and a statistically significant number of injuries had resulted nonetheless, then one could say there was a market failure and new rules could be justified. But the fact that rules have been broken does not justify stricter rules.
3. In fact, since many millions of products were imported and sold in violation of the government's rules and few if any injuries resulted over a substantial period of time, the evidence would suggest that the government regulation is either far more strict than necessary or is totally without value. This means that the only possible reasons for the rules are either to act as a means of protectionism for US manufacturers or they are completely arbitrary since the government lacks the ability to precisely set its standards at the most economically efficient point.
4. Dobbs' ad hominem attack on libertarians clearly shows his absolute ignorance of fundamental libertarian and free market principals. Most importantly, it ignores the fact that a true free market approach opposes corporate welfare just as vehemently as it opposes social welfare programs. Corporate welfare such as government subsidies, special tax breaks, and - most importantly for these purposes - limitations on liability are completely anti-free market. Obviously, corporate welfare significantly reduces the economic incentives to provide a safe product for the consumer since the government policies artificially reduce the corporation's marginal costs for defective products. Corporate legal protections and subsidies diffuse liability costs amongst the entire company rather than on a handful of individuals with a personal stake in the company. As a result, a corporate decisionmaker will only see his earnings reduced by a comparatively small amount if the company is found liable for defective products; without corporate welfare, that individual might be personally liable for all legal damages.
5. The fact that the products in these cases were recalled despite a lack of any significant injuries actually suggests a market success rather than a market failure. Even in the case of the dog food recall fiasco, only a few dozen of the millions upon millions of dogs that had eaten the "tainted" food wound up dying or with permanent health problems- the risk of serious injury was statistically only slightly higher than the chances of winning the lottery. Most -if not all- of the relevant toy and food recalls were voluntary, despite absurdly high costs to the companies. This means that the companies involved were concerned about permanent or long term damage to their consumer image in the unlikely event of injuries occuring. The recalls, by and large, were not the result of government enforcement, then, but of the profit motive.
6. Tariffs. I don't know what, if any, tariffs were involved in the questioned imports. However, the existence of the tariffs has a perverse effect on market incentives. A realistic hypothetical can demonstrate how this is relevant: ABC Co. currently makes a particular product in the US; however, the cost of producing the product in the US is increasing, but demand for the product will not support a correspondingly higher retail price. ABC Co. also knows that, for a variety of reasons, it can produce this product for much less in China and keep its price at current levels or even less. Therefore, it agrees with a Chinese company to produce the product in China at a particular price. Suddenly, however, a tariff is put in place or an existing tariff increases. This creates an increase in production cost to ABC Co. However, it still must keep its retail price point the same. As a result, ABC Co. must choose between either discontinuing the product or obtaining a lower price from the Chinese manufacturer. If ABC Co. chooses to pursue a lower price from the Chinese manufacturer, that manufacturer will almost certainly have to choose between ending its production of the product or finding a cheaper way of producing the product - including, perhaps, lower quality materials.

Having proven that the "unsafe" Chinese imports are not a market failure but a failure of too much regulation, I would like to suggest that Mr. Dobbs take a refresher course on free-market economics. Hazlitt's "Economics in One Lesson" should do the trick.

Thursday, September 6, 2007

Romney Didn't Say That, Did He?

From the debate tonight:

"And I hear from time to time people say, hey, wait a second. We have civil liberties we have to worry about. But don't forget, the most important civil liberty I expect from my government is my right to be kept alive, and that's what we're going to have to do." - Mitt "Battlefield Earth" Romney

I know this sounds great to those who call themselves conservatives nowadays, but really this is a blatant justification of authoritarianism/totalitarianism. Indeed, it was the underlying (if sometimes unspoken) justification for every authoritarian or totalitarian government action in history.

If the right to be kept alive by the government is the single most important civil liberty, then there are no other civil liberties. If the government's primary job is keeping people alive, then anything which can be potentially perceived as dangerous to life can be prohibited: "dangerous" speech, "dangerous" press coverage, the habeas corpus rights of "dangerous prisoners" held without trial, "dangerous" property rights like the right to buy or sell "dangerous" products (ie, guns, drugs, cigarettes, McDonald's, etc.). And this says nothing of the socialist implications of Romney's statement, since the "right to be kept alive" by the government necessarily implies that the government must provide its citizens free healthcare, free food, free water, and free anything that would tend to lengthen an individual's life.

Wednesday, September 5, 2007

Freedom IS Free

After 9/11, self-titled "conservatives" frequently liked to use the phrase "freedom isn't free," or talk about the "Cost of Freedom" as justification for sacrificing civil liberties in the name of so-called national security. It's time that this silly, self-contradictory exercise in Orwellian doublethink was put to rest.

The fact is that freedom IS free - it is the restriction of freedom that costs money and lives. For instance - freedom of speech and freedom of the press cost not a penny in a truly free society; the only cost of these freedoms is that of burnt calories from exercising one's mouth and mind, or that of the printing press. But when government regulates those freedoms, the cost is very real, not just because of the marginal loss of freedom but also because someone has to pay to enforce the regulation of those freedoms by the FCC, Secret Service, etc. We call those costs taxes. When we restrict guns and declare war on drugs, those restrictions cost money to enforce, not to mention lost freedoms in terms of civil liberties, lost production due to an excessive prison population, increased costs of imprisonment, shifted resources from more pressing priorities, etc.

Of course the foundation of the claim that "freedom isn't free" is that freedom must be protected by a strong national defense, characterized by a strong military, heightened surveillance by law enforcement, and "dirty" tactics by our intelligence agencies, and restricted due process rights. I will deal with the military question last, but the biggest problem is the assumption that these three things actually protect freedom. This assumption is faulty because all of these (particularly the last three) actually restrict freedom quite severely. The assumption thus becomes, in effect, that we must kill freedom in order to save it- a horrible case of doublethink. And this says nothing of the monetary and unintended consequences of these increased government powers.

As for the need for a strong military, it is difficult to argue that some form of national defense/public law enforcement is unnecessary. Legendary anarcho-capitalist Murray Rothbard famously made an attempt at such an argument, but I think he falls short because I am unconvinced that private security firms would have adequate incentive to avoid war with each other; a constant turf war amongst private security firms would be, in effect, the current state of Iraq or 1990-present Somalia. Thus, a publicly-funded military with constitutional restrictions is by far the lesser of two evils. Even if necessary, though, the existence of a taxpayer-funded military still requires coerced tax payments by the government and is thus a restriction on freedom. If it is a restriction on freedom, then by definition it cannot be a protection of freedom, and thus it is not a cost of freedom but a cost of regulation.

Even if the coercive payment of taxes for national defense is not a restriction of freedom, a national military offensive or occupation of a foreign country is most certainly not an actual cost of freedom. To engage in an offensive or to occupy a sovereign country is inherently to act to restrict freedom in that country because offensive military force is the most violently coervice action in which one can engage. Some would say that it is the freedom of the other country that we are restricting, rather than our own. This is true as far as it goes, but ignores other consequences:

1. "Blowback"- restriction of other people's freedom by coercive aggression creates an understandable justification for the victims of that aggression to act aggressively towards us (resulting in increased needs for law enforcement and defensive military posturing on our part).

2. It is impossible to be simultaneously free and justify the restriction of other people's freedom. To do so ultimately requires doublethink or an acceptance of restrictions on one's own freedoms (or at least that of their countrymen).

3. Most importantly, it implicitly assumes that freedom is not a human birthright, but is instead a birthright only of those fortunate enough to be born in a particular nation.

To the extent that governments are necessary (and they unfortunately are), we are deluding ourselves in thinking that even necessary government functions actually protect freedom when those functions still rely on coercive tax payment or regulation of individual behavior. The fact of the matter is that if (and only if) government did not exist at all, humans would be completely free- freedom does not need protection, and thus does not have a cost as defined by the Fox News Republicans.

Ultimately, when someone claims that freedom isn't free, they are really making the self-evident claim that the American system of government isn't free. But just because American-style government allows for more freedoms than most doesn't make it synonymous with freedom.

Not since Reagan and Thatcher...

In the last 20 years, has there been a nationally elected leader in any country who has been willing to say something like this (from the President of Georgia, per an article in the WSJ):

"A day or two later, at a dinner for Georgian businessmen, the president delivers a speech hammering home his well-honed message of self-help. "The government is going to help you in the best way possible, by doing nothing for you, by getting out of your way. Well, I exaggerate but you understand. Of course we will provide you with infrastructure, and help by getting rid of corruption, but you have all succeeded by your own initiative and enterprise, so you should congratulate yourselves."Mr. Saakashvili's style of leadership feels like a permanent political campaign -- which it is, in a way. He seems determined to show citizens how it's being done, visibly to demonstrate accountability, transparency and political process, so they grow accustomed to the sight of politicians answering to them -- in short, to Western political habits. All the while, he's exhorting and explaining, striving to change attitudes ingrained through decades of Soviet rule and 15 years of stagnation, strife and corruption. "I keep telling people that this is not a process like some silver-backed gorilla leading them to new pastures. They must do it themselves, and they are."" (emphasis added).