1 August 2012
Jessica Irvine had a good piece on, well, basic economics in the Sydney Morning Herald this past weekend. One part I particularly appreciated:
And because things are limited, we also have to sort out, from an economy-wide point of view, who gets what. One way could be to appoint someone, or a group of people, to apportion resources equally. Everyone could get a standard issue car, house, DVD collection, wardrobe and pet. But just as our wants are infinite, so too are they infinitely varied. If $1000 were to fall into your lap, you might want a surfboard; in the same scenario, I might want a bike.
As it happens, I'm good at making surfboards, and you're good at making bikes. I could try to be content with making myself a surfboard, which I'd never use, or we could come to some sort of arrangement, a trade.
Most economists agree that markets consisting of individuals coming together to make mutually beneficial trades are the most efficient way of allocating resources. An efficient market is one that maximises the consumer's and the producer's ''surplus''; that is, the surplus of wellbeing created when I pay less than I would have been willing and able to pay for a bike and you sell it for more than you would strictly need to recoup your costs. Such transactions maximise total wellbeing because I get a bike for less than it would cost me to make (if I could make it at all) and you get to sell me a bike for a marginal gain.
There's nothing even slightly illuminating about this quote, really, but it's useful in that it functions as a dispassionate explanation of why communism is a failed doctrine and a sober, politically-removed description of how capitalism works. It's very Economics 101, and that's helpful: so much of the political rhetoric surrounding "capitalism" ignores that, right now, in the Western world, we almost all agree, with no controversy whatsoever, that capitalism is a good and sensible way of running an economy. Contra Charles Murphy, capitalism doesn't have an "image problem."*
When Americans argue about "capitalism," what they're really arguing about is not capitalism at all, but a set of conservative policies on regulation and taxation that we've decided to pretend are the same thing as capitalism. It makes sense why conservatives would do this: they get to adopt a positive rhetorical frame as their own, but it makes less sense why lefties allow them to get away with it. But look at Irvine's discussion of bikes and surfboards. No one really disagrees that the situation she outlines is beneficial and sensible. Barack Obama doesn't. Those people at Occupy Wall Street protests don't. The gun-owner listening to talk back radio doesn't, and the grad student shopping for arugula at her local farmer's market doesn't either. All the real communists vanished with Trotsky — or, if not then, when the Berlin Wall came down.
The other aspect to this, which everyone also agrees on — even if they don't admit it — is that the benefits of the market Irvine describes are only apparent when the market includes the features she outlines. You only get the benefits of a free and properly functioning market if the market in question is free and properly functioning.
Irvine goes on to describe the causes and results of market failure:
Sometimes they fail because individuals in markets aren't always called to account for the cost of their actions — such as pollution. And even when strictly efficient, markets don't always deliver a result that most people would judge fair. By enforcing rules and imposing taxes, governments can correct some failures of the market.
Indeed, this is what many of our political debates are about: How to identify a non-functioning market and what is the best way to improve its functionality once it's been identified. We're not arguing about whether surfboard makers should be able to engage in trade with bicycle-manufacturers.
And, incidentally, that's why we need to treat libertarians not as valuable political contributors, but as the extremists they are. Like communists, libertarians are disconnected from the way the world really works. Communists imagine away human variation; libertarians fantasise markets that function because of magic, even though no serious economist has thought that true — particularly not that most classic of classical liberals, Adam Smith. In the same way communism co-opts the rhetoric of equality in an effort to build a society based on anything but, libertarianism hijacks the language of liberty in the pursuit of ends that diminish the same.
*Oh, good lord, that mess of a Murray piece. I could waste your time and fricassee it, but let's just launch one quick shot at it and be done.
Murray laments that Mitt Romney isn't adored by the American people:
Capitalism has lifted the world out of poverty because it gives people a chance to get rich by creating value and reaping the rewards. Who better to be president of the greatest of all capitalist nations than a man who got rich by being a brilliant capitalist?
Yet it hasn't worked out that way for Mr. Romney.
Capitalism isn't an awards show. We don't hand out statuettes and pats on the back for Best Capitalist 2012. Capitalism is a means of distributing scarce resources. Even if, like Murray, you take it as given that the financial services sector is so profitable because the liquidity and efficiencies it provides are equivalently beneficial to the economy at large, Romney's reward for his work at Bain Capital is the quantity of scarce resources he's amassed. His success doesn't make him a swell guy or a good person or someone talented at governing or even someone necessarily worthy of respect.
21 February 2012
USSC Associate researcher and American Review contributor Tom Switzer had a great article in this weekend's Australian on President Richard Nixon's opening of diplomatic relations with China. The conventional wisdom is that this was a diplomatic coup that could only be achieved by a hardline anti-communist like Nixon. Not so, argues Tom:
The conventional wisdom is wrong. Why? Because the American consensus to isolate communist China had collapsed by 1966, more than five years before Nixon's visit. So swiftly had the political climate changed that even a liberal Democrat president could have negotiated with Mao Zedong and Chou En-lai in 1972 without arousing the anger of middle America. Moreover, it was in 1966 when the pliant Nixon had begun his own ideological odyssey.
Tom argues that during the late '60s, American opinions on China were undergoing a rapid change:
The answer lies in understanding the broader US reconsideration of China policy. In 1966, as serious doubts emerged about the Vietnam war, a great debate began. Opinion leaders — politicians, journalists, business, think tanks — began to criticise the two-decades-old policy of isolating Peking. Even the Sinophiles who had been dismissed as academic fringe-dwellers had suddenly gained a new legitimacy in congressional hearings.
It was widely agreed that China, far from being a reckless dragon bent on world revolution, had been more moderate and cautious; and that Washington should make every effort to integrate Peking into the world community.
Clearly, a new era in US understanding of China had begun in 1966. Meanwhile, Nixon was uncharacteristically silent. From August 1966 until the second half of 1967, there is no evidence to suggest he had said anything publicly about China policy. Nothing. The silence was significant.
This seems pretty reasonable to me. Nixon was a canny observer of the public mood, and had a great talent for putting himself on the more popular side of the divisive issue. I wonder though whether, even if a liberal Democratic president could have gone to China as Nixon did, whether latent fears of McCarthyism might have dissuaded him? Was Nixon's exceptional quality not his ability to go to China, but his recognition that it was now within the realm of the possible?
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