American Elephants

“We Are Not Manufacturing Anything Anymore” And Other Fables of the Left. by The Elephant's Child

A common complaint bandied about is that we are not manufacturing anything any more, and there are no manufacturing jobs. But we should always check on ‘common complaints’ to see if they are actually true. The reality is a bit different. America is manufacturing more than ever. Mark J. Perry is the proprietor of the Carpe Diem blog at AEI, and a professor of economics and finance at the University of Michigan’s Flint campus.

America is a very big and prosperous country — even in the slowest recovery since 1945. Obama liked to call it the worst recession since the Great Depression (blamed entirely on Bush) and he’s been talking up his recovery ever since, which has been the slowest since 1945. Obama clearly wants America to be a smaller influence in the world (stop being a bully) perhaps turn us into a gentle giant? An odd ambition for an America president. But during campaign season a frequent claim is that we don’t manufacture anything anymore.  Not so.

Our manufacturing workers are more productive than ever before. Europeans worry more about vacation time and time off. Americans for the most part expect and like to be productive, and consider that to be the way to get ahead. They hate union rules which mean that you have to wait for someone from another union to replace the lightbulb, and support right-to-work laws.

The real recession was short, ending in June 2009 — it’s the recovery that has been problematic. Keynesian economics doesn’t work. Neither does adding on hundreds of new regulations, new restrictions, higher corporate taxes, and ObamaCare.

We are manufacturing more stuff, making more profit, and increasing productivity per worker— with fewer people. Jobs that are simple and repetitive are being replaced by robots. Manufacturing output has increased more than five-fold over the last 67 years — from $410 billion in 1947 to a record-setting level last year of $2.09 trillion. The number of manufacturing employees has steadily declined to a low in 2010 of 11.6 million workers to rebounding slightly to more than 12 million last year. Remember that the jobs replaced by robots were mostly those that the worker hated. Doing exactly the same thing every 8 hours can get poisonously boring, and building robots would be way more interesting.

The ability of the U.S manufacturing sector to produce increasing amounts of output with fewer workers is a sign of economic strength and vitality. Disruptive for displaced workers, of course — but it only happens because of new inventions and new processes with more opportunity involved. Automation is here to stay, and results in lower prices and a healthier economy. Robots don’t get hurt, have pensions, make mistakes or take vacations, and they don’t join unions.

The clever engineers who devise robots will devise more machines, which will also have to be manufactured. But manufacturing isn’t really the romantic idea of “working with your hands” anymore either. For that scroll down to the clever parody of “Artisanal Firewood

Donald Trump was grumbling the other day about having to buy televisions manufactured in South Korea and wondering why the US would defend a nation that sells such reasonably priced products. “I don’t think anybody makes television sets in the United States anymore. We don’t make anything anymore.” Let’s cut the talk about “bringing jobs back.” Bad idea.

Free Enterprise Does Not Fit Into Obama’s Vision for America by The Elephant's Child

Once upon a time, in the first days of November of 2010, all that was right about the world was shattered by one of the biggest electoral swings in congressional history. Democrats are still trying to grasp what has happened.

Conservatives don’t particularly dislike Liberals, but they detest their ideas. Liberals detest Conservatives and don’t understand their ideas at all.

Conservatives believe that reality suggests we are all flawed human beings, who must be set free to learn from our mistakes and grasp for opportunity. We make a lot of mistakes, but we turn around and correct them, muddle through and do amazing things in the process. The great innovations usually originate in a single mind, not in a committee.

A transaction in the free market does not happen unless both parties find it to their advantage. Competition keeps prices low and fosters innovation. Competition increases the quality and choices of products and services. Competition is hard work for businesses, and they have to fight for customers. They  have to keep track of what their competitors are doing, and find ways to innovate. Because it is hard, they lobby lawmakers to constrain the free markets in which they originally achieved success.

The most effective way to control capitalists is through competition, not regulation. Liberals are sure that rapacious big business will cheat customers, abuse workers and charge too much if  uncontrolled. In the free market, who wants to be a customer of such a business? They’ll go where they’re treated well.

Liberals offer to control the forces let loose in the free market. But control is seldom evenly applied. Those in control will, because they are human, favor one business over another. Or they will favor the unions, or  pick winners and losers, and subsidize a favored business while ignoring the competition.

Liberals are suspicious of competition. They have tried hard to stamp it out in the schools, eliminating winners and losers. Everybody gets a medal and nobody is a winner— lording it over the others.  But if there are no winners, there is no point in trying to be best. It is failures that make us work harder to succeed.

President Obama said that “the free market is the greatest force of economic progress in human history,” but he didn’t mean it. No president in history has worked so hard to expand state control over health care, energy, the environment, the financial sector, education, and American business. If the free market fits into Obama’s vision of America, he hasn’t explained how.

Obama assumes that progress begins with the administration of government money to jump-start a business. Government investment will somehow foster innovation and create jobs and prosperity. “Government money” is not taken as seriously as is the money from the pockets of individual investors. If you run short, there is usually more government money to be had, because failure would make the giver of government money look bad. Individual investors do more due diligence in the first place, and monitor operations more carefully— it’s their money at stake.

Nobody ever said that the free market is easy. It’s hard, but it works. We have evidence over and over— from history, from developing countries, from our own successes and failures.

We are fallible human beings, yet we rise to opportunity. One fallible human being’s success opens doorways for many more. The United States of America has been a beacon to the world in demonstrating the freedom and possibilities of the free market, and more and more nations are growing and prospering because of it.

How very odd that in” the worst recession since the Great Depression,” we should forget the simple rules that made us Americans.

ObamaCare Gummed Everything Up. by The Elephant's Child

ObamaCare is in the lap of the Supreme Court, and in spite of all the analysis and dissection of motives and personalities, we don’t know what the justices will do.  The battle has changed America, derailed the recovery, and changed health care in ways that we don’t really understand yet.

Traditionally, many doctors were pleased if their children chose to go into medicine. A family with many members in the medical profession was not unusual.  Now physicians aren’t as happy with their chosen life’s work, no longer advise family members or friends to go into medicine, and according to polls are thinking about getting out.

Hospitals are consolidating, many are putting doctors on salary. Our hospital is developing satellite centers for urgent care, classes, outreach, while the hospital itself grows and expands. They are developing a different model, in reaction to ObamaCare and ObamaCare’s potential development in the future. I can’t say that I fully understand the ways in which it is changing, but it is different.

Business has examined their operations and ways of doing business in an effort to protect themselves from what the future might hold, in the light of what it has done so far. The body of regulation that has descended on companies has made them cautious, careful. The National Federation of Independent Businesses (NFIB) is a co-plaintiff in the lawsuit challenging the constitutionality of ObamaCare. That, as Liz Peek suggests, should give the supporters of the legislation pause.

And for the rest of us, our health care has changed— no matter what the Supreme Court does.  Are we stuck with the socialized medicine model that a vast majority of Americans hate? If it is not struck down, do we then engage in a tremendous civil war to get it repealed?  If it remains, can we abide the endless tinkering it would require to make an unworkable law even begin to be functional? What were liberals thinking? Did they not understand that the American people…well, no they didn’t.

Liberals do not understand the American people, though they are Americans. They don’t understand human nature. They think they can fix it, so the people who disagree with them don’t disagree any more.  In extremis, they speak of putting the’ far-right wing nuts’ in camps where they can’t annoy the better people any more. They hate to be disagreed with because they don’t know how to answer — except to call names.

They don’t understand the free market, because there are no guarantees. There is risk. There’s a reason why liberals flock to government work and to foundations. They can feel safe. The free market rewards people who take risks and face up to challenges. Life is a risk, and there is no sure security except in hard work and striving. We have safety nets, but what government gives today, it can take away tomorrow.

Obama recently said that in America, we are greater together, when everyone engages in fair play, everyone gets a fair shot, everyone does their fair share. That may be true, but in Obama’s America, the hard-earned dollars of taxpayers are turned over to union supporters, regulations are devised to shut down legitimate businesses, take away people’s rights to their own land, deprive people of their jobs. Ringing phrases come easy, but accomplish nothing.

Obama brags that he saved the auto industry, but the future was yanked away from hundreds of private businesses overnight—auto dealers with hundreds of employees were summarily put out of business. Bondholders, depending on a consistent flow of interest from their holdings in the car companies were guaranteed first call on the assets of a company in case of bankruptcy, were suddenly broke. Taxpayer money goes, not to governmental tasks, but to cronies— buddies who helped the president to get elected.

If ObamaCare is overturned, the world cannot be put back the way it was. Everything is changed, no matter how it all turns out — and not in a good way. Trust is gone or diminished. Security is damaged. And for what? Good governance is not a cheap political game — but you made it so.

Milton Friedman on the Power of the Free Market! by The Elephant's Child

Soak the Rich, Bash Business, Cripple Confidence and Create Jobs? by The Elephant's Child
September 10, 2010, 7:15 am
Filed under: Capitalism, Economy, Liberalism, Taxes | Tags: , ,

There is a lot of confusion out there about “the rich.” Politicians want to tax the rich and give to the poor — on the theory that everybody loves Robin Hood. Politicians do so want to be loved.

Americans don’t naturally think of the rich with envy.  Americans have always believed that America is a place where everyone has the opportunity to get rich, or at least richer.  And they have always believed that their children can do better than they did.  One of our national characteristics is a distinct lack of envy.  Listen to the voices of immigrants and the children of immigrants. They find America a magical place full of opportunity for everyone.  Listen to Marco Rubio’s story.

Liberals worry politically about the poor. But they don’t worry much about them when they aren’t campaigning.  Thomas Sowell noted back in 2000:

What do the poor most need?  They need to stop being poor.  And how can that be done on a mass scale, except by an economy that creates more wealth?  Yet the political left has long had a remarkable lack of interest in how wealth is created.  As far as they are concerned, wealth exists “somehow” and the only interesting question is how to re-distribute it.

The re-distributors have an excellent record of making everybody poor, but that was not what they intended.  Even Fidel Castro just admitted that the Cuban social model doesn’t work.  It apparently did make Fidel one of the world’s richest people— at least on Forbes list — as Cuban soap and food money went into Fidel’s own bank account.  This is a frequent side-effect of re-distribution.

Barack Obama said in the Labor Day speech he gave in Milwaukee:

Anyone who thinks we can move this economy forward with a few doing well at the top, hoping it’ll trickle down to working folks running faster and faster just to keep up—they just haven’t studied our history.

Mr. Obama’s economic messages have consistently focused on the idea that the “well off”, the “special interests”, the fat-cats”, the “well-connected” have somehow screwed the middle class.  He demonstrates a complete lack of understanding in how market economies operate. Entrepreneurs are non-existent,  and ideas come from the inventiveness of government bureaucrats.

The president believes that the middle class owes everything it has to the government, rather than to wealth-creating entrepreneurs or businesses or their own efforts.  He does not grasp the difference between a  truly free market where individuals decide where  to invest their resources and energies, and a government-directed economy that sets collective priorities which require individuals to follow specific policy objectives defined by the political class.

This is a president that supposedly has an economics meeting every morning. Yet he suggests that private business should be focused on pursuing non-economic objectives.  You don’t restore business confidence by bashing business.  Does this sound like a clear definition of business in a market economy?

That means making sure corporations live up to their responsibilities to treat consumers fairly and play by the same rules as everyone else.  Their responsibility is to look out for their workers, as well as their shareholders, and create jobs here at home.

Ah, and how are those jobs created?  There is the problem.  Apparently nobody knows.

Financial Regulation, As Designed by Sen. Chris Dodd. by The Elephant's Child
April 22, 2010, 5:53 pm
Filed under: Capitalism, Economy, Law, Statism | Tags: , ,

President Obama went to Manhattan today to lecture Wall Street and make a lot of promises about the financial bill that is now before the Senate that have nothing to do with the actual bill, only what he thinks you would prefer to hear.

I was going to link to several articles that explained about the importance of eliminating the notion of “too big to fail,” and ideas for accomplishing this. But then I read this editorial  from the Wall Street Journal, where they have a particular knack for getting right down to the essence:

This is the most important fact to understand about the current financial reform debate. While the details matter a great deal, the essence of the exercise is to transfer more control over credit allocation and the financial industry to the federal government. The industry was heavily regulated before—not that it stopped the mania and panic—but if anything close to the current bills pass, the biggest banks will become the equivalent of utilities.

The irony is that this may, or may not, reduce the risk of future financial meltdowns and taxpayer bailouts. A new super council of regulators will be created with vast new powers to determine which firms pose a “systemic” financial risk, to set high capital and margin levels, to veto certain kinds of business for certain firms, and even to set guidelines for banker compensation—or maybe not. The point is that these crucial questions will be settled not by statute, but by regulatory discretion after the law passes. [emphasis added]

Do take the time to read the whole thing.  Especially note the first two paragraphs. We deluged Congress with emails and phone calls about the Health Care bill,  and if it didn’t keep  the bill from passing, it certainly heightened the debate, and gave members of Congress support.

The House has already passed the Barney Frank version, and the debate goes on in the Senate.

Let’s Hear it For “Greed.” by The Elephant's Child
January 10, 2010, 11:43 pm
Filed under: Capitalism, Freedom, History | Tags: , ,

Many inventions are created by small annoyances.  Papers were fastened together for around 600 years by cutting two parallel slits in the paper and threading a ribbon through the slits.

Playing around with a piece of wire may have created the idea.  The impulse to follow through with the idea, develop it until it is not only usable, but able to be produced in quantity and marketed simply doesn’t happen without a healthy dose of “greed.”

Many on the left are deeply suspicious of money and the acquisitive instincts that make the accumulation of wealth possible.  Roger Kimball quotes an observation of Anthony Trollope in his novel Can You Forgive Her? He gives it to Plantagenet Palliser who responds to a character who announces that he lacks “mercenary tendencies,” thusly:

There is no vulgar error so vulgar, — that is to say, common or erroneous, as that by which men have been taught to say that mercenary tendencies are bad.  A desire for wealth is the source of all progress.  Civilization comes from what men call greed.  Let your mercenary tendencies be combined with honesty and they cannot take you astray.

Ideas pop into your head.  Developing them and marketing them takes effort, time, money and persistence.  How many ideas have been carelessly tossed on the rubbish pile through the absence of persistence, effort and unwillingness to spend the time.  What makes the difference?  The potential of reward — greed.

Six hundred years of tying papers together with a ribbon, and  then a small invention makes life simpler, and its use spreads and spreads.

Actually, Johan Vaaler, a Norwegian inventor, invented the paperclip in 1899.  He received a patent for his design from Germany in 1899 since Norway had no patent laws at that time.

It was a company called the Gem Manufacturing Ltd. of England who first designed the double oval-shaped standard-looking paperclip.  William Middlebrook of Waterbury, CT patented a machine for making paper clips of the Gem design in 1899.  The Gem paperclip was never patented, but the name stuck.

During World War II, Norwegians were prohibited from wearing any buttons with the likeness or initials of their king on them.  To protest, they began wearing paperclips because paperclips were a Norwegian invention whose original function was to bind together.  This was a protest against the Nazi occupation, and wearing a paperclip could have meant arrest.

What About the “Fat Cats” in the United States Congress? by The Elephant's Child
December 15, 2009, 1:00 am
Filed under: Capitalism, Domestic Policy, Economy, Taxes | Tags: , ,

Obama met with Wall Street Bankers after announcing on 60 Minutes that he “did not run for office to be helping out a bunch of fat cat bankers on Wall Street.” Obama has made it clear that he prefers to blame Wall Street for the financial crisis; ignoring the real cause — which began with the Community Reinvestment Act passed in the Carter administration and was often amended to force banks to make more home loans to people who did not qualify for loans under normal prudent banking rules.

Those mortgages were bundled as in large packages as investments which were rated by the agencies that rate bonds who said they were good investments.  A big part here was played by misguided computer models  in the risk management area; the same sort of computer models that have been predicting the future of climate.

The Prudent Bear explains:  “Investment banks managed their risks based on the “Value-at-Risk” risk management paradigm, which assumed that the distribution of securities’ returns was approximately …normally distributed, with a very low probability of high losses.  The “Basel II” system of global capital adequacy standards for banks, which came into effect in 2008, just in time for the crash, was so impressed with these models that it ruled that any bank using such obviously sophisticated and superior modeling techniques could calculate risks on its own, without reference to the crude guidelines deemed appropriate for smaller, less mathematically attuned houses. The Securities and Exchange Commission (SEC) essentially agreed with the Basel Committee; from 2004, it allowed the largest U.S. investment banks to manage their own leverage, under the theory that no mere regulator could match the exquisite precision of a modern VaR-based risk management system.”

The gist of that is that predicting the future depends on very complex models, and nobody really knows enough to program adequate models.  Doesn’t work for investment banks, doesn’t work for climate science.  There are simply too many unknowns, and the math is too complicated.

In Wall Street’s case the faulty models led to losses in the financial system in excess of $1 trillion; and the costs to governments of moneys wasted in the futile attempt to stop “global warming” haven’t even begun to be totaled up.  It will reach shocking sums even if we manage to avoid cap-and-trade or the EPA’s ridiculous attempt to regulate carbon dioxide.

The banks should have known better, for they have had prior experience with faulty financial models, and governments should have known better than to bet their GDP on controlling something that we all exhale.

Obama’s anger is misplaced.  He voted for expansion of  sub-prime lending, he worked with ACORN, encouraging them to demonstrate and protest, to force banks to make more loans to unqualified borrowers.

What Obama is angry about are bonuses awarded to investment bankers.  He claims to be angry because it is so unconscionable when so many Americans are unemployed, but this is sheer hypocrisy when the government is spending money in the trillions of dollars in completely unaccountable ways.  The excesses of government salaries, often twice as much as the wage for the same work in the private sector, are all over the front pages.  The left has always been angry with Capitalism, their name for the Free Market.

The bankers listened politely, but they have no intention of making new loans to risky borrowers, in spite of the President’s urging in the hopes that they will loan to small business, getting the economy that Obama is doing so much to destroy, creating jobs again.  The left has never understood how to create jobs, but they sure know how to destroy them.

Free Enterprise, Capitalism, Free Markets, Free Trade and Other Unfashionable Notions. by The Elephant's Child
December 5, 2009, 2:59 am
Filed under: Capitalism, Economy, Taxes | Tags: , , ,

The United States lost another 11,000 jobs last month, and everyone is celebrating because 11,000 is fewer jobs lost than in September, and the smallest monthly number since the recession began.  I guess that if you are grasping at straws you grab onto anything that floats.

Democrats are really concerned about the unemployment situation.  People vote their pocketbooks and mid-term elections are coming next year. If you include those who involuntarily have only part-time work and those who want a job but have stopped looking, the under-employment rate is 17.5 percent, a postwar peak.  When everyone is really concerned it is important to look as if you are doing something, so the President held a “Jobs Summit.

He invited union people and environmentalists, liberal economists from academia, some high-tech companies and Wall-Street types, but not the U.S. Chamber of Commerce nor the National Federation of Independent Business.  Liberals labor under the illusion that jobs are created largely by the government.

They are still dreaming of non-existent “green jobs,” though so far all the green-job money is going to China, where wind turbines are being manufactured.  We have all sorts of businesses in the private sector here who replace windows, install insulation, caulk doors and windows, but they are mostly hurting for business, in spite of government rebates.

Government does not create jobs.  Government takes taxpayer money and gives it to people for performing a task.  No product is created, and less money goes back into the economy than was taken from taxpayers. The ‘multiplier-effect’ doesn’t seem to work.

Jobs are created by the private sector, and mostly by small business. (Not mom-and-pop small business or free-lance small business, but growing businesses with 15-50 or so employees) hoping to get bigger.

Businesses will hire when they feel some confidence that they can succeed in their endeavors.  Right now, all they see in the near future is uncertainty.  Taxes are going up, but how much is unknown.  Health care reform is claimed to save money, but anyone who has been paying attention knows that it will cost in the trillions.  The government is intent on cap-and-trade in spite of the revelations of ClimateGate, which will also cost the economy trillions of dollars.  Credit for small business has dried up and there is uncertainty about new financial regulation, more bank failures and bailouts.

No administration going back as far as Teddy Roosevelt  has had a cabinet with so little experience in the private sector.   It is no wonder that they simply have no idea how jobs are created.  They are notably unenthusiastic about capitalism and  free enterprise, which they blame for most everything that they cannot blame on Bush.The President says he will have a plan by next Tuesday.  Congress is wondering about spending the rest of the TARP money, the remainder of the stimulus funds that are not being saved for just before the election, or leftover bailout money.  Quite a bit of that is supposed to be our money, but once the government get their hands on it it is government money.

My bet is that the plan will not include tax-relief  for business, health care reform will neither be dropped nor scaled back, and there will be continued war on coal companies and  subsidies for uneconomic wind farms and solar arrays will continue or increase.  Freedom is not really on the table.

Meet Vaclav Klaus, President of the Czech Republic. by The Elephant's Child
November 12, 2009, 10:18 pm
Filed under: Capitalism, Economy, Environment, History | Tags: , , ,

I have often recommended the videos of the Hoover Institution’s Uncommon Knowledge.  Each is about 7 minutes long, presented one each day, for a week. Peter Robinson interviews serious people with serious ideas about current events and history.

This week’s guest is Vaclav Klaus, the President of the Czech Republic.  He was born in Prague in 1941 during WWII, grew up in Czechoslovakia during the Cold War.  After earning a doctorate in economics he pursued a career in academia and at the Czechoslovak State Bank. Immediately after the Velvet Revolution of 1989, Klaus entered politics.  A founder of the Civic Democratic Party, he served 1992 to 1997 as prime minister of the Czech Republic. In 2003 he was elected president, a position to which he was reelected in 2008.

The first segment concerns the events of 1989, the year the Berlin Wall came down.  The second segment is about the parallels to be drawn between a united Europe and the late Warsaw Pact. In the third, Mr. Klaus takes on Al Gore and points out the similarities in ideology between communism and environmentalism. And the Thursday segment is about how he became an advocate for the free market while studying economics under communism.

The previous interview was with Victor Davis Hanson, classical scholar and military historian and Robert Baer, former CIA agent who served in the Middle East, discussing with Peter Robinson the problem of Iraq. It is a stunning conversation.

All of the previous Uncommon Knowledge interviews are available in the NRO archives. I cannot recommend them highly enough.  Try one segment of your choice.  I’ll bet you get hooked!

Not All Prices Always Go Up. Some Prices Go Down. Why Is This A Mystery? by The Elephant's Child

Everyone is talking about the increasing costs of health care. Prescription drug prices are up. the cost of health insurance is increasing, even the cost of a visit to the doctor is up. Doesn’t anything ever go down?

Laser eye surgery has the highest patient satisfaction of any surgery. The operation has been performed more than 3 million times in the past ten years. Health insurance doesn’t cover the cost, and the cost has declined by 38 percent over the past decade. In 1998, it cost about $2,200 per eye. Today the average price is $1350. How can this be?

Lasik eye surgery is not only not covered by insurance, not covered by Medicaid or Medicare, but it is not heavily regulated. It is sold in the free market with advertised prices, competition and customer choice. When the operation first appeared, there were few doctors qualified to perform the surgery, but as more clinics opened, competition began to work.

In a free market, more suppliers are free to enter. Regulation does not restrict the number of suppliers. Competition forces efficiency and lower prices, and encourages innovation. Pew Research found, in a March, 2009 poll, that most Americans felt that “People are better off in a free market economy.”

Have you ever heard President Obama utter the words “free market?” If so, in just what context?

Everything You Ever Wanted to Know About Pre-Existing Conditions. by The Elephant's Child

The problem of “pre-existing conditions” is one that is vastly misunderstood.  The house health care plan admits all, including those with pre-existing conditions.  Essentially, that means that someone can sign up for insurance right after they are diagnosed with severe heart problems and expect the insurance to pay for their heart bypass.  Or a young couple can decline insurance until they get pregnant and then expect insurance to pay for the obstetrician and the hospital delivery.  This after-the-fact freeloading is an expensive problem.

I am not a lawyer, but John Hinderaker at the Power Line Blog is, and he explains the problems and definitions very clearly.   Mr Hinderaker is commenting on an article in the Wall Street Journal in which John H. Cochrane of the University of Chicago offers a free market solution instead of the budget-busting proposal before Congress.  The same article is linked in the Power Line post.  I would urge you to read both pieces, for the more you understand, the more you can protect yourself.

There are free market solutions to almost every problem that the Democrat Congress sees as a problem that demands government control of our lives and our privacy by the wise minds in Washington D.C.

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