Archives: December, 2012

North Korea’s Hyperinflation Legacy, Part II

By
Steve H. Hanke

Following North Korean supreme leader Kim Jong-il’s death last December, many around the world had high hopes that his successor (and son), Kim Jong-un, would launch much-needed economic and political change. Unfortunately, in the months since the new supreme leader assumed power, little has changed for North Koreans outside of the small, communist upper class. The failed communist state has not delivered on its advertised economic reforms.

One thing it has delivered, however, is weapons, which have flowed through its illegal arms-trafficking pipelines. And, if that’s not enough, North Korea is planning another missile test  in the near future. But, as it turns out, the only thing that is certain to blast off is inflation.

In my recent blog post, I pointed out that one of North Korea’s communist legacies is hyperinflation (in addition to starvation). Indeed, hyperinflation may soon plague North Korea once again.

From what little data are available, it would appear that, in the span of six months, the price of rice has increased by nearly 130%. This is par for the course in North Korea, where the price of rice has increased by roughly 28,500% over the last three years (see the chart below).

 

 While the North Korean government worries about rocket launches and how to supply Syria with weapons, and while its archaeologists “discover” ancient unicorn lairs, its citizens’ food bowls are becoming quite expensive to fill. The supreme leader’s priorities, it would seem, are supremely out of whack.

Topics: 
Finance, Banking & Monetary Policy, Foreign Policy and National Security, International Economics and Development

Obama Mulling Response to State Marijuana Initiatives

By
Tim Lynch

From today’s New York Times:

Senior White House and Justice Department officials are considering plans for legal action against Colorado and Washington that could undermine voter-approved initiatives to legalize the recreational use of marijuana in those states, according to several people familiar with the deliberations.

Even as marijuana legalization supporters are celebrating their victories in the two states, the Obama administration has been holding high-level meetings since the election to debate the response of federal law enforcement agencies to the decriminalization efforts.

Next week Cato will host a policy forum to explore the legal doctrine of federal supremacy, state prerogatives under the Tenth Amendment, and other issues related to drug policy reform. Asa Hutchinson, former head of the DEA and Vanderbilt University law professor Robert Mikos will be making presentations. Event details are here.

Richard Branson has some thoughts here. And check out the new film, “Breaking the Taboo.”

Topics: 
Law and Civil Liberties

International Solidarity? Not So Much.

By
Sallie James

Trade unions and other workers’ rights groups often oppose trade liberalization, especially agreements with developing countries where labor is relatively cheap. To have any chance of securing organized labor’s support, preferential trade deals must, they insist, include references to International Labor Organization norms (which include things like the right to organize and the right to bargain collectively ).

The labor groups commonly give two plausible-sounding justifications for these demands: First, the requirements are supposed to protect American workers in import-competing industries from facing competition from “sub-standard” employers abroad. Second, they say that access to the U.S. market is a compelling incentive to encourage countries that would not normally sign up to ILO standards to do so. In other words, there is an element of international union solidarity in their insistence on enforceable labor standards.

But a telling quote in a story in today’s Inside U.S. Trade [paywall] exposes that explanation as being…shall we say…incomplete:

The International Brotherhood of Teamsters could oppose a final Trans-Pacific Partnership (TPP) deal if it grants more dairy market access and threatens the jobs of 31,000 dairy workers the union represents in the United States, Teamsters legislative representative Mike Dolan said in a Dec. 7 presentation to negotiators here.

He highlighted that the union has no “beef” with Fonterra [a New Zealand dairy cooperative] and recognizes it as a global leader on labor practices. Fonterra has adopted a “global labor agreement” that adheres to principles found in key International Labor Organization conventions, such as the right to freedom of association and collective bargaining, he said. In this respect, Dolan said Fonterra is a “model” for the U.S. dairy industry.

But Dolan stressed that opening the U.S. market to New Zealand, the largest dairy exporter in the world, could have a dramatically negative impact on an industry that is already being forced to sell much of its product well under the price of production. [emphasis added]

The TPP is being negotiated with a number of different countries, some of which are not as labor-friendly as New Zealand, so clearly the Teamsters’ opposition is more nuanced than the above quotes suggest (as the full article makes clear). But Dolan’s admission that his union opposes increased dairy imports from New Zealand even though it is “a model” of labor rights is telling. It suggests that trade negotiators wanting to appease the unions by more explicitly incorporating stronger labor protections are embarking on something of a Sisyphean task, at least so long as import competition is the real driver of organized labor’s opposition, as it appears to be here.

Topics: 
Trade and Immigration

NJ Gov. Vetoes ObamaCare Exchange; SD Gov. Rejects Medicaid Expansion

By
Michael F. Cannon

On the same day he met with President Barack Obama (D) at the White House, New Jersey Gov. Chris Christie (R) vetoed a bill that would have implemented a key part of ObamaCare:

New Jersey Gov. Chris Christie (R) became the latest state chief executive to rebuff President Barack Obama’s health care reform law Thursday by vetoing a bill that would have created an online marketplace for uninsured residents to shop for health insurance.

For the second time this year, Christie rejected legislation passed by New Jersey’s Democratic-controlled legislature that would have established a state-run health insurance exchange under Obamacare.

Meanwhile, South Dakota Gov. Dennis Daugaard (R) said his state will not implement ObamaCare’s Medicaid expansion:

There are far too many unanswered questions for me to recommend adding 48,000 adults to the 116,000 already on our rolls.

The Huffington Post reports that 19 states have refused to establish an Exchange, and 9 states have refused to expand Medicaid. I’ve heard higher counts, though.

Topics: 
General, Government and Politics, Health Care

A Perfect Holiday Album for the Keynesians on Your Christmas List

By
Daniel J. Mitchell

I’m understandably partial to my video debunking Keynesian economics, and I think this Econ 101 video from the Center for Freedom and Prosperity does a great job of showing why consumer spending is a consequence of growth, not the driver.

But for entertainment value, this very funny video from EconStories.tv puts them to shame while also making important points about what causes economic growth.

The video was produced by John Papola, who was one of the creators of the famous Hayek v Keynes rap video, as well as its equally clever sequel.

Topics: 
General, Government and Politics, Tax and Budget Policy

Trade Will Do More than Sanctions for Russian Rights

By
K. William Watson

The Senate will vote today to grant permanent normal trade relations to Russia.  The House already voted overwhelmingly to do so last month by a vote of 365-43.  The Senate vote, followed by certain presidential signature, will enable the United States to take advantage of Russia’s WTO membership, which it secured last December after 18 years of negotiation.  I’ve written before about why it took Congress so long to act on something despite its wide bipartisan support.  The culprits include self-defeating election year politics and foreign policy timidity.

Substantively, the debate has been about how best to sanction human rights abuses in Russia and/or elsewhere.  Should the bill impose financial and travel sanctions on Russian officials who’ve mistreated their people or on all foreign officials from all countries who we think have done so?  The sanctions have nothing to do with trade but they seem relevant because granting PNTR requires Congress to repeal the Jackson-Vanik Amendment that makes trade with the Soviet Union conditional on the latter not restricting Jewish emigration in 1970s.

But the bill would do more for human rights in Russia if it didn’t include any sanctions at all.  Rather than cause trouble with Russia (which has said it will respond strongly to any sanctions), those in Congress wanting to look like they care about human rights could have simply and correctly pointed out the substantial benefits to the Russian people that come from freer trade with the United States.

Trade liberalization is, of course, not a panacea for corruption and official lawlessness in Russia, but it does actually and directly make the people of Russia more free.  Moreover, a wealthier and more cosmopolitan population is more likely to demand accountability from its leaders.  More trade on market terms will connect the Russian people with the world, increasing their expectations and exposing their plight.

WTO membership will require Russia to be more transparent and enable foreign countries to use law, rather than politics, to pressure Russia to further liberalize its economy.  PNTR will ensure that the United States is a part of that effort.  Poking Russian officials in the eye with sanctions is at best merely emotionally satisfying and at worst counterproductive to helping the Russian people hold their own officials accountable.

Topics: 
Regulatory Studies, Trade and Immigration

A SANE Immigration Reform Proposal

By
Alex Nowrasteh

Arizona has been the source of immigration contention for years.  Representative Jeff Flake (R) and Senator McCain (R) have been at the center of many recent immigration reform proposals before the firestorm over the Legal Arizona Workers Act and SB 1070.  From former governor and now head of DHS Janet Napolitano (D) to current governor Jan Brewer (R) and Sheriff Joe Arpaio (R) of Maricopa County, Arizona is home to politicians who have made their careers in immigration.

It’s only fitting that now reform plans are coming from the state.  Arizona Employers for Immigration Reform, a non-partisan immigration reform group, came out with just such a plan yesterday called SANE.  It is similar to past immigration enforcement proposals and includes the 4 legs of the stool common to all such plans:

1.  Security increases on the border.

2.  Account for unauthorized immigrants here through earned legalization.

3.  Necessary increases in lawful immigration and work visas.

4.  Employment sanctions and other reforms.

This is merely the first plan of the new season and I predict there will be many more that are similar.  Border security is already at historic heights, unauthorized immigration at lows, and employer sanctions and workplace identification requirements like E-Verify have reduced the liberty of American workers without reducing the size of the informal labor economy.  However, increasing lawful immigration and a large and flexible guest worker visa, depending on the details, will be the most important components of any reform that will greatly diminish unauthorized immigration going forward.

Topics: 
Trade and Immigration

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