Tired of Poverty? Expand Capitalism

Is capitalism a coercive system that creates poverty, as a recent article in the Washington Post argued, or is it a system of voluntary exchange that has led to the greatest reduction in poverty the world has ever seen?

According to the article, “capitalism is a coercive economic system that creates persistent patterns of economic deprivation,” and should be altered through the introduction of a universal basic income. While a guaranteed income is an interesting policy proposal with pros and cons, the article’s claims that capitalism is coercive and creates economic deprivation are both unfounded.

First, let us consider whether capitalism is “coercive.” The author writes,

The only way to break the coercion at the core of the employment relationship is to give people the genuine ability to say no to their employers. And the only way to make that feasible is to guarantee that [they] have some way to support themselves whether they work or not.

Of course, people already possess the genuine ability to say no to their employers. In the United States alone, around 2 million people voluntarily leave their jobs every month—and that’s despite a lackluster economy. Employees in a capitalist system choose to engage in a relationship of mutually beneficial exchange. Employers recognize this and companies compete to become more attractive as workplaces. According to Gallup, the majority of Americans are satisfied with most aspects of their workplace—particularly with their job security, the flexibility of their schedules, and with their immediate supervisors.

Second, let us examine the article’s claim that capitalism creates economic deprivation. According to the author, capitalism harms both workers and those who cannot work. If that is so, can the author, or anyone else for that matter, point to a time in history when the vulnerable were better off? In many ways, today’s poor live better than the kings of yesteryear.

Over the last few decades, infant and child mortality have been drastically reduced, lifespans are at an all-time high, fewer people are undernourished, educational attainment is growing, gender inequality is decreasing, and access to technology is expanding.

Free enterprise and innovation have done more to uplift humanity from a state of universal poverty than any international aid program or welfare scheme. Capitalism, far from being a cause of poverty, is the reason that there is enough wealth today to even contemplate a proposal like a universal basic income.

Waste in Military Purchasing

The longest running show on Broadway is The Phantom of the Opera at 27 years. The longest running show on television is Meet the Press at 68 years. The longest running show of waste in Washington is cost overruns on Pentagon weapon systems. That show has been ongoing for more than 220 years.

As one of the first major procurements under the Constitution, the federal government bought six Navy frigates in 1794. The ships were projected to cost $688,889, but a myriad of problems pushed the ultimate cost up 70 percent to $1,176,721. Nicole Kaeding and I mention that project and many recent ones in our new study “Federal Government Cost Overruns.”

The Washington Post reports today on yet another troubled defense program:

As the Gerald R. Ford-class aircraft carrier enters the annals of troubled acquisition programs—billions over budget, years behind schedule—it follows a familiar script, becoming yet another example of how the Pentagon struggles with buying major weapons systems.

The Navy’s program has become “one of the most spectacular acquisition debacles in recent memory. And that is saying something,” McCain (R-Ariz.) said during a Senate hearing on the troubled program Thursday.

The program is now $6 billion over budget, according to a review by McCain’s staff. And while the lead ship is expected to be delivered next year, the second ship in the fleet is five years behind schedule and won’t be ready until 2024.

Like many other programs, the Ford-class carriers suffered from unrealistic cost estimates and overly optimistic timelines. And key Pentagon officials pushed the program forward even though key technologies hadn’t been fully tested, developed or designed, officials testified.

The problem with Pentagon procurement is not just that federal officials deceive taxpayers about the costs of projects, but also that many cancelled projects—which never should have been started—end up throwing billions of dollars down the drain.

A story yesterday in the Washington Post put a staggering number on that aspect of waste:

The Pentagon spent $46 billion on at least a dozen programs, including a new fleet of presidential helicopters, between 2001 and 2011 that never became operational, according to an analysis by the Center for Strategic and Budgetary Assessments.

The Post reports that there are serious efforts to reform procurement currently moving forward. After 220 years of waste, military purchasing is long overdue for an overhaul.

Protecting School Choice from the State

As economists have understood for more than half a century, government agencies charged with regulating industries are often subject to regulatory capture. Rather than protect consumers from bad actors in the industries they were created to oversee, regulators too often develop cozy relationships with industry leaders and work at their behest to advance their interests. In Free to Choose, Milton and Rose Friedman detailed a particularly egregious example: the Interstate Commerce Commission (ICC).

Established in 1887, the ICC’s mission was to regulate the powerful railroad industry, which critics accused of engaging in cartel-like price fixing and market sharing. Instead, the railroad industry took almost immediate control of the ICC. The ICC’s first commissioner, Thomas Cooley, was a lawyer who had long represented the railroads and, as the Friedmans explained, many of the agency’s the bureaucrats “were drawn from the railroad industry, their day-to-day business tended to be with railroad people, and their chief hope of a lucrative future was with railroads.” 

Sorry, George Carlin, Plastic Is Biodegradable

Remember George Carlin’s hilarious skit about plastics? Here is the transcript:

“The planet … is a self-correcting system. The air and the water will recover, the earth will be renewed. And if it’s true that plastic is not degradable, well, the planet will simply incorporate plastic into a new paradigm: the earth plus plastic. The earth doesn’t share our prejudice toward plastic. Plastic came out of the earth. The earth probably sees plastic as just another one of its children. Could be the only reason the earth allowed us to be spawned from it in the first place. It wanted plastic for itself. Didn’t know how to make it. Needed us. Could be the answer to our age-old egocentric philosophical question, ‘Why are we here?’”

Not so fast! According to a new study published in Environmental Science and Technology by co-authors Professor Jun Yang and Yu Yang of Beihang University, and Stanford University engineer Wei-Min Wu, plastic is biodegradable.

“Plastic, long considered nonbiodegradable and one of the biggest contributors to global pollution, might have met its match: the small, brownish, squirmy mealworm. Researchers have learned that the mealworm can live on a diet of Styrofoam and other types of plastic. Inside the mealworm’s gut are microorganisms that are able to biodegrade polyethylene, a common form of plastic.”

Good news for the planet and for humanity.

The Intimidation Game: The Secret Service vs. Jason Chaffetz

Most of the controversy over government surveillance programs in the last few years has focused on fears of what the NSA or FBI might do with the personal data they’ve collected on Americans guilty of no crime. But what if you’ve applied for a federal job? Surely that information would not be misused or improperly accessed, particularly since it is protected by the Privacy Act?

That’s probably what now-Congressman Jason Chaffetz (R-UT) thought when he applied for a job with the Secret Service in 2003. But as the chairman of the powerful House Committee on Oversight and Government Reform Committee, Chaffetz earned the hatred of many in the Secret Service for his investigations into the agency’s many recent blunders and scandals. Thanks to a Department of Homeland Security Inspector General investigation into the leak of Chaffetz’ 2003 Secret Service application, we now have an idea of how extensive the leak of his personal information was throughout the agency. As the IG noted:

We were unable to determine with certainty how many of those individuals in turn disclosed this information to others who did not have a need to know, who
may have then told others. However, the disclosure was widespread, and recipients of the information likely numbered in the hundreds. Those agents
we interviewed acknowledged freely sharing it with others in the Secret Service, often contemporaneously with accessing the information. One agent reported
that by the end of the second day, he was sent on a protection assignment in New York City for the visit of the President of Afghanistan, and many of the
approximately 70 agents at the protection briefing were talking about the issue. 

With one exception, the IG also found that senior civil servants in the Secret Service did nothing to stop the propogation of Chaffetz’ personal data:

The Most Important Thing that NYT’s Nicholas Kristof Left Out

Today, Nicholas Kristof of the NYT wrote an op-ed entitled “The Most Important Thing, and It’s Almost a Secret.” According to Kristof, “The most important thing going on in the world today is something we almost never cover: a rapid decline in poverty, illiteracy and disease.”

Kristof makes a powerful case for the improving state of humanity and rightly bemoans the fact that the media all too often focus on war, hunger and despair. And that gives most readers the wrong impression that the world is falling apart.

But, where did all the progress that Kristof talks about come from?

The Homo sapiens has been on this earth for 200,000 years. For 99.9% of that time, we lived in ignorance, poverty and misery. What has changed? Reading the NYT, the reader is left with the impression that “good stuff,” like manna from heaven, suddenly was conjured up out of thin air.

Not so. The key to the improvements in the lives of ordinary people over the last 200 years were industrialization and trade, which generated historically unprecedented rates of growth. And the importance of growth cannot be overemphasized. There is not a single example of a country emerging from widespread poverty without sustained economic growth. As University of Oxford Professor Paul Collier writes, “Growth is not a cure-all, but lack of growth is a kill-all.”

Don’t let the headlines fool you. Explore the data for yourself.

Europe Must Abide TTIP’s Geopolitical and Security Implications

In today’s Cato Online Forum essay, Judy Dempsey of Carnegie Europe argues that the geopolitical and security implications of TTIP are immense, and that the EU and its member states need to wake up, smell the coffee, and acknowledge reality. This is the third essay focused on the geopolitical implications of the TTIP published in conjunction with the Cato Institute conference taking place October 12.  Previous essays – to compare and contrast – were written by Phil Levy and Peter Rashish

Read them. Provide feedback.  And please register to attend the conference.