Monday, August 28, 2006

Sebastian Mallaby Agrees With Me

Sebastian Mallaby writes in his WaPo editorial today about the Democratic political suicide that is Wal-Mart hatred: (Hat Tip: Cap'n Ed)

Once upon a time, smart Democrats defended globalization, open trade and the companies that thrive within this system. They were wary of tethering themselves to an anti-trade labor movement that represents a dwindling fraction of the electorate. They understood the danger in bashing corporations: Voters don't hate corporations, because many of them work for one.

Then dot-bombs and Enron punctured corporate America's prestige, and Democrats bolted. Rather than hammer legitimately on real instances of corporate malfeasance -- accounting scandals, out-of-control executive compensation and the like -- Democrats swallowed the whole anti-corporate playbook.

More than anything else, this article is a beautiful rebuttal to the drivel that comes out of Washington. Politicians, more than anything else, love votes. They're continuously willing to sacrifice their party positions and in many cases the economic security of this country on the altar of reelection. The fact that the Dems are bullying Wal-Mart around is laughable in that they claim to do it for Wal-Mart employees, the "poor" folks in America; again, the facts just aren't there:
...The idea that Wal-Mart pays below-market wages is false. Otherwise nobody would work there.

Hillary Clinton and Sen. John Kerry have attacked Wal-Mart for offering health coverage to too few workers. But Kerry's former economic adviser, Jason Furman of New York University, concluded in a paper last year that Wal-Mart's health benefits are about as generous as those of comparable employers. Moreover, Clinton and Kerry know perfectly well that market pressures limit the health coverage that companies can provide. After all, both senators have proposed expansions in government health provision precisely on the premise that the private sector can't pay for all of it.


Because Wal-Mart's price-cutting also has a big impact on the non-food stuff it peddles, it saves U.S. consumers upward of $200 billion a year, making it a larger booster of family welfare than the federal government's $33 billion food-stamp program.
The statement that "none of these Democrats can resist dumb economic populism" is dead on. But its not just Democrats: people on both sides of the aisle continually toss their economically brain-dead ideas into the foray. For some reason, people cannot simply accept the idea that the market works on its own accord, much like the human body. If you feed it, exercise it, prevent it from having holes poked in it, it will just work. The first time you try to actually think about what you're doing when you're walking, you fall.

As soon as government begins to dictate what goes where, and who gets what, you're straying down the wrong path. The slider of inefficiency is directly related to government involvement, as shown below in my super-cool Excel graph:

As you can see in my scientific results, the more you monkey with the system, the more broken it gets. There's a great article on this topic at The Ludwig Von Mises Institute's website. I'll excerpt some choice passages here:

The characteristic feature of the market price is that it tends to equalize supply and demand. The size of the demand coincides with the size of supply not only in the imaginary construction of the evenly rotating economy. The notion of the plain state of rest as developed by the elementary theory of prices is a faithful description of what come to pass in the market at every instant. Any deviation of a market price from the height at which supply and demand are equal is--in the unhampered market--self-liquidating.
Economics does not say that isolated government interference with the prices of only one commodity or a few commodities is unfair, bad, or unfeasible. It says that such interference produces results contrary to its purpose, that it makes conditions worse, not better, from the point of view of the government and those backing its interference. Before the government interfered, the goods concerned were, in the eyes of the government, too dear. As a result of the maximum price their supply dwindles or disappears altogether. The government interfered because it considered these commodities especially vital, necessary, indispensable. But its action curtailed the supply available. It is therefore, from the point of view of the government, absurd and nonsensical.

If the government is unwilling to acquiesce in this undesired and undesirable outcome and goes further and further , if it fixes the prices of all goods and services of all orders and obliges all people to continue producing and working at these prices and wage rates, it eliminates the market altogether. Then the planned economy, socialism of the German Zwangswirtschaft pattern, is substituted for the market economy. The consumers no longer direct production by their buying and abstention from buying; the government alone directs it.

I've saved the best for last:

What brought about the decline of the empire and the decay of its civilization was the disintegration of this economic interconnectedness, not the barbarian invasions. The alien aggressors merely took advantage of an opportunity which the internal weakness of the empire offered to them. From a military point of view the tribes which invaded the empire in the fourth and fifth centuries were not more formidable than the armies which the legions had easily defeated in earlier times. But the empire had changed. Its economic and social structure was already medieval.

The freedom that Rome granted to commerce and trade had always been restricted. With regard to the marketing of cereals and other vital necessities it was even more restricted than with regard to other commodities. It was deemed unfair and immoral to ask for grain, oil, and wine, the staples of these ages, more than the customary prices, and the municipal authorities were quick to check what they considered profiteering. Thus the evolution of an efficient wholesale trade in these commodities was prevented.

And, the coup de grace:

The marvelous civilization of antiquity perished because it did not adjust its moral code and its legal system to the requirements of the market economy. A social order is doomed if the actions which its normal functioning requires are rejected by the standards of morality, are declared illegal by the laws of the country, and are prosecuted as criminal by the courts and the police. The Roman Empire crumbled to dust because it lacked the spirit of liberalism and free enterprise. The policy of interventionism and its political corollary, the Fuhrer principle, decomposed the mighty empire as they will by necessity always disintegrate and destroy any social entity. (emphasis mine).

Reading well written, well thought out pieces is always so refreshing for me. So lovely. Read it all!