"Truly free markets are also free of privilege"

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Sheldon Richman, the editor of The Freeman, adds another nail into Jacob "end of libertarianism" Weisberg's coffin:

According to Weisberg, editor in chief of Slate, the financial turmoil taking place worldwide is the fault of . . . libertarians. That must mean libertarians have been in a position to repeal generations of deep-seated government intervention in the financial and related industries, including the Federal Reserve system. That would have taken a long time, yet I don't recall reading that a libertarian revolution occurred in the United States. Surely it would have been in the newspapers. Hence, I must conclude that I, like old Rip [van Winkle], was slumbering all those years. I missed the revolution! It's the only possible explanation.

Unless Weisberg is wrong.

[…]

Weisberg obviously hasn't been paying attention. For him the Community Reinvestment Act, Fannie and Freddie, and past bailouts make up three separate libertarian explanations, when in fact they are all parts of a single integrated explanation of how government intervention created the problem. That he doesn't know this suggests that he doesn't understand the libertarian case. One ought to understand something before dismissing it.

Whole thing here. reason on Weisberg's lousy article here and here.

NEXT: Bozos On & Off the Bus

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  1. Don’t worry, all this talk of free markets will end soon.

    We’re going to spread the wealth!

  2. Still nothing on Chinese democracy activist Hu Jia, imprisoned by Chinese authorities before the Olympics? (He was jailed for “inciting subversion of state power and the socialist system.”)

    We still care about democracy, right?

  3. We still care about democracy, right?

    Yes, Tall Dave, libertarians love mob rule…

  4. I missed the revolution! It’s the only possible explanation.

    Me too!!!one !!1111!!

    Now, when can I go down to the corner liquor store and buy me a pack of legal cannabis? Can’t do that? Then we ain’t in any kind of Libertopia.

    Fuck people who confuse the system we’re enduring with Libertarianism.

  5. tarran,

    Hmmm? He was awarded the Sakharov prize. What does “mob rule” have to do with advocating for civil rights in China?

    Now, when can I go down to the corner liquor store and buy me a pack of legal cannabis?

    I’m always amused to read the Wikipedia entry on the United States which states cannabis is our #1 cash crop.

  6. Well, for anyone interested:

    Hu Jia is a prominent human rights activist and dissident in the People’s Republic of China. He has embraced a wide range of causes, including environmental issues, HIV/AIDS advocacy and a call for an official enquiry into the 1989 Tiananmen Square massacre. He has also acted as a coordinator of the ‘barefoot lawyers movement’.

    Having already been arrested several times, he spoke to MEPs in November 2007 from house arrest via conference call during a public meeting of the EP Human Rights Subcommittee on human rights in China in the run-up to the Olympic Games. As a result he was charged by the authorities with “inciting subversion of state power” and sentenced on 3 April 2008 to three-and-a-half years in jail.

  7. What does “mob rule” have to do with advocating for civil rights in China?

    What do civil rights have to do with democracy?

  8. What do civil rights have to do with democracy?

    Voting is a civil right.

  9. What do civil rights have to do with democracy?

    Voting is a civil right.

    Ummm… yeah. I fail to see what that has to do with oppression in China. China could have real elections and still throw people in prison for dissent.

    The correct answer to my question, Dave, is that they are opposites: democracy is mob rule, which precludes civil rights. Democracy is tyranny of the majority. Civil rights are a product of classical liberalism, which was firmly anti-democracy, and resulted in constitutional republics like the United States used to be.

  10. Ummm… yeah. I fail to see what that has to do with oppression in China. China could have real elections and still throw people in prison for dissent.

    But not for voting for the wrong candidate.

    The correct answer to my question, Dave, is that they are opposites: democracy is mob rule, which precludes civil rights.

    Yes, if you want to quibble over semantics, obviously constitutional democracy is obviously better than direct democracy. Most people just assume “democracy” means constitional democracy.

    It’s also equally obvious that replacing Communist dictatorship with (constititional) democracy is desirable from the standpoint of maximizing liberty.

  11. Are people actually arguing that elections in China would be a bad thing?

  12. Yes, if you want to quibble over semantics, obviously constitutional democracy is obviously better than direct democracy. Most people just assume “democracy” means constitional democracy.

    Really? In the UK, democracy is democracy, sans-constitution. And look at what is happening to their civil liberties. Our 4th amendment is mostly meaningless today, but UK subjects lost any semblance of a right to privacy long, long ago.

    It’s also equally obvious that replacing Communist dictatorship with (constititional) democracy is desirable from the standpoint of maximizing liberty.

    Perhaps; perhaps not. The “communists” are doing a wonderful job at improving the capital value of China, while the western democracies are doing their best to bankrupt theirs.

    We currently have many more individual freedoms than the Chinese, but how long do you think that is going to last once the US falls into the deep, prolonged inflationary recession that is required to eliminate our staggering debt? OTOH, the Chinese are building real wealth, and that increasing wealth will result in the populace demanding more freedoms.

    Like George Bush, you wrongly conflate the means (Democracy sometimes, but not all the time) with the ends (liberty). The two concepts are not the same.

  13. What does Hu Jia have to do with this thread at all?

  14. squarooticus, every polity has a constitution, whether written or unwritten. In fact, a country like ours has both.

    This isn’t a new idea. It is at least as old as Aristotle.

    Kevin

  15. squarooticus, every polity has a constitution, whether written or unwritten.

    Does it matter that there’s no point to having a constitution if changing public opinion can change its provisions?

    Unwritten constitutions are completely useless; written unfortunately only slightly less so.

  16. Does it matter that there’s no point to having a constitution if changing public opinion can change its provisions?

    That’s not necessarily bad. Changes to our constitution and laws ended slavery and gave women the vote.

  17. squarooticus, every polity has a constitution, whether written or unwritten. In fact, a country like ours has both.

    Althought, to be fair, the written one is mostly a historical artifact, and the operative Constitution is the unwritten one, which is explicated annually for us by the SCOTUS, much like Joseph Smith with his golden tablets.

  18. We currently have many more individual freedoms than the Chinese, but how long do you think that is going to last once the US falls into the deep, prolonged inflationary recession that is required to eliminate our staggering debt?

    Our debt isn’t that staggering. It’s fairly reasonable as a percent of GDP.

    OTOH, the Chinese are building real wealth, and that increasing wealth will result in the populace demanding more freedoms.

    I remember hearing similar arguments in the 1980s about how Japan was going to rule the world. The Chinese have the same problem: they are dependent on American consumers, so when we get a cold they get pneumonia. Also, the wealth they’re building is dollar-denominated, so when they stop inflating out currency it evaporates like dew. And anyways, they’re still poorer than Mexico on a per capita GDP basis.

  19. OTOH, the Chinese are building real wealth, and that increasing wealth will result in the populace demanding more freedoms.

    Such as two new coal powered electrical generators each week? They will kill their billions before anyone has a chance for freedom.

  20. Our debt isn’t that staggering. It’s fairly reasonable as a percent of GDP.

    And increasing at a 30% annual rate over the last year. There is no way to manage debt that rises more quickly than the economy’s overall growth: when that happens, you end up with the debt explosion scenario, which I suspect we are playing out now.

    I remember hearing similar arguments in the 1980s about how Japan was going to rule the world.

    I don’t remember hearing any arguments from the mid-to-late 1980’s about how the US, with the dollar in a firm position as the world’s reserve currency and with low inflation, was on the verge of bankruptcy as a result of having its bond market collapse. We are in that position now.

    Also, the wealth they’re building is dollar-denominated

    Most of their wealth is factory-denominated and US property-denominated, not dollar-denominated. The Chinese have been on a tear building physical capital throughout their country for the last 15 years, and are starting to spend their dollar reserves in the US buying up tangible assets while those dollars are still worth something. We’ve spent the last 15 years buying cheap Chinese merchandise that is about to be not-so-cheap anymore.

    The financial system near-collapse and resulting nationalization will have consequences: one of them will (thankfully) be the end of US hegemony. Unfortunately, a lot of very ignorant and short-sighted USians and Europeans are going to be hurt as a result. Omelettes, eggs, yadda yadda yadda. Mencken said it even better than de Tocqueville: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

  21. Such as two new coal powered electrical generators each week? They will kill their billions before anyone has a chance for freedom.

    All they have to do is repeal the one-child policy to compensate. 🙂

    Laugh all you want, but those electrical generators (and smog-spewing factories, etc.) are real productivity, not the imaginary productivity of worthless modern finance. Those generators will still be worth a lot to a growing population when all of our credit default swaps are worth the paper they’re printed on.

  22. Axl Rose FTW

  23. The Chinese have been on a tear building physical capital throughout

    And what is that capital used for? Making products for U.S. consumers.

    We’ve spent the last 15 years buying cheap Chinese merchandise that is about to be not-so-cheap anymore

    What happens to export economies when their export markets dry up?

    I don’t remember hearing any arguments from the mid-to-late 1980’s about how the US, with the dollar in a firm position as the world’s reserve currency and with low inflation, was on the verge of bankruptcy as a result of having its bond market collapse

    S&L crisis.

    The savings and loan crisis of the 1980s and 1990s (commonly referred to as the S&L crisis) was the failure of 2412 savings and loan associations (S&Ls) in the United States. The ultimate cost of the crisis is estimated to have totaled around $560.1 billion, about $324.6 billion of which was directly paid for by the U.S. government-that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts[1]-which contributed to the large budget deficits of the early 1990s.

    The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990-1991 economic recession. Between 1982 and 1991, the number of new homes constructed per year dropped from 1.8 million to 1 million, the lowest rate since World War II. [2]

    Sound familiar?

  24. Here’s an example of the problem for China.
    My gf is a pretty little Filipina Java programmer, working here on an L1 visa with a consulting company. Her and all her friends from the Philippines buy tons of consumer electronics made in Asia because the dollar exchange rate is so much more favorable to them here vs. back at home.

    Most countries have tariffs or other mechanisms that defeat this kind of arbitrage on a commercial scale. But, with our free trade emphasis, we allow it, so we’re commonly referred to as the “consumer of last resort.”

    The trade gap is a Damoclean sword hanging over the Chinese economy. They can’t just go out and find 300 million rich consumers somewhere else. For now they are growing quickly, but that’s largely a result of starting from a dysfunctional Communist basket-case bottom.

  25. What happens to export economies when their export markets dry up?

    When import (i.e., debt-financed) economies dry up, their people are left destitute and without factories.

    When export markets dry up, their people are left destitute but with factories.

    Which position would you rather be in?

    A major US recession would spell pain for most of the world; but the difference between the West and everyone else is that we have depleted our capital assets and taken on massive debt in a quest to buy foreign goods. When the entire debt obligation structure unwinds, their economies will be hurt for sure, but will be in a much stronger relative position.

    The ultimate cost of the crisis is estimated to have totaled around $560.1 billion, about $324.6 billion of which was directly paid for by the U.S. government

    Spread over half a decade. The US government alone has incurred an additional $2 trillion of debt this year (most of it off-the-books due to fancy accounting by the boys at Treasury and the Fed), the mess isn’t even close to over, and the economy is contracting at the same time. I think the two situations are incomparable.

  26. The hardest part about this whole thing is that libertarians are the only ones who were and are right about this, and yet through some strange space/time continuum warp, we’re being blamed for everything.

    We have increasing volatility in markets, which parallel directly with increased market regulation and Fed intervention. This is the second major market routing in the last ten years and yet we’re told that without fed intervention, our market cycles would be so much worse.

  27. When import (i.e., debt-financed) economies dry up, their people are left destitute and without factories.

    Wrong, domestic producers benefit — exactly what happened this year.

    When export markets dry up, their people are left destitute but with factories.

    A factory that cannot operate at a profit has negative value.

    massive debt in a quest to buy foreign goods. When the entire debt obligation structure unwinds

    What series of trades do you see unwinding? The people we owe our debt to have to keep buying it or their companies go bankrupt when the dollar falls and we stop buying their goods as they become more expensive.

  28. Libertarians, by and large, aren’t right about what’s going on here, because most of them are monetarists. Until you get the government out of the business of centrally-planning the currency supply and thus centrally-planning the price of capital, these conditions are inevitable.

  29. When import (i.e., debt-financed) economies dry up, their people are left destitute and without factories.

    When export markets dry up, their people are left destitute but with factories.

    Which position would you rather be in?

    I think this is slightly oversimplified. A destitute country with decaying, idle factories is not necessarily worse off than a destitute country full of the stuff those factories made.

    $2 trillion of debt this year (most of it off-the-books due to fancy accounting by the boys at Treasury and the Fed), the mess isn’t even close to over

    Sounds like it’s time for the Fed to invoke a credit default swap.

    /snark

  30. Wrong, domestic producers benefit — exactly what happened this year.

    Until there isn’t enough capital available to finance new production.

    A factory that cannot operate at a profit has negative value.

    Are you trolling? This is patently absurd. If there’s any expectation of increased demand, the factory is worth something as an investment while waiting for that demand. What you mean is that a factory that cannot operate at a profit has negative cash flow, which says very little about its value.

    Revise the rest of your post to reflect this insight.

  31. I think this is slightly oversimplified. A destitute country with decaying, idle factories is not necessarily worse off than a destitute country full of the stuff those factories made.

    It is when the stuff those factories made is useless crap that Americans didn’t really need in the first place. Factories can be retooled from producing miniature knick-knacks and wrought-iron candelabras into producing gears and frying pans. The knick-knacks and candelabras OTOH are not as easily transformed.

  32. Until there isn’t enough capital available to finance new production

    New capital is continually produced through profit.

    Are you trolling? This is patently absurd.

    No, this is basic NPV accounting. A future negative cash flow has negative value.

    If there’s any expectation of increased demand, the factory is worth something as an investment while waiting for that demand.

    Great, you’ve just introduced an assumption of future increased demand that destroys your whole model of the export market drying up.

    Let’s start with the most basic: Why do assets have value to a business? Because they produce profit. An asset that is not producing profit has negative value.

  33. Factories can be retooled from producing miniature knick-knacks and wrought-iron candelabras into producing gears and frying pans.

    Kind of. Maybe. Who knows? The problem is retooling factories requires capital and a functioning economy. And in reality not every factory can be cost-effectively retooled into something else. When your economy’s not functioning, you can’t (and won’t) retool the factories. Well, ok, there’s always communism and central planning to fall back on.

    “You, you, and…you! You get to work. Start retooling, and you guys over there, start farming. And you guys? Start drilling for oil, there are some tools in that old factory over there.”

  34. Great, you’ve just introduced an assumption of future increased demand that destroys your whole model of the export market drying up.

    Stop covering up your inanity with the statement that I’ve introduced a new assumption. I have always assumed that economies will recover; the difference is that the guys with the factories (read: capacity for production) will recover faster than the guys without the factories because they will have the tools to meet future demand.

    Insert random ad hominem remark here. I’ve tired of this.

  35. Kind of. Maybe. Who knows? The problem is retooling factories requires capital and a functioning economy.

    Better
    than
    starting
    from
    scratch.

    What is so difficult to understand about this?

    /me throws up his hands.

  36. You have to realize that all capital investment decisions are made on the basis of ROI. If a factory cannot produce an item to be sold at a profit, it is sold because it does not meet the ROI requirement. The company will take the money it receives from the sale and invest it somewhere where it can get better ROI.

    Now imagine you have a whole country full of factories everyone is trying to sell because the national exchange rate has shifted and the factories are no longer profitable. It’s a nightmare of mass bankruptcy.

    Meanwhile, back in the country that was buying your stuff, factories are opening up because suddenly the goods they produce are more competitive.

  37. I have always assumed that economies will recover; the difference is that the guys with the factories (read: capacity for production) will recover faster than the guys without the factories because they will have the tools to meet future demand.

    Ah, I see the root of your error.

    Production capacity is never as important as a market in which to sell the products.

  38. I am a glutton for punishment.

    Now imagine you have a whole country full of factories everyone is trying to sell because the national exchange rate has shifted and the factories are no longer profitable. It’s a nightmare of mass bankruptcy.

    The factories will be repossessed by creditors, who will then have acquired the productive capacity of the factories when demand rises. The price of the factory going down due to a prolonged recession doesn’t destroy the factory’s intrinsic value.

    Ah, I see the root of your error.

    Production capacity is never as important as a market in which to sell the products.

    Ah, I see the root of your error: assuming that the US is the only possible market for Chinese goods.

    Well, good luck with that.

  39. Better
    than
    starting
    from
    scratch.

    Not
    Necessarily

    See my followup about cost-effectiveness of retooling a plamsa screen factory into a brick factory.

    In fact, take this statement you made:

    Wrong, domestic producers benefit — exactly what happened this year.

    Until there isn’t enough capital available to finance new production.

    This is the point I’m trying to make. Idle factories remain idle when there isn’t enough capital available to finance new production.

  40. See my followup about cost-effectiveness of retooling a plamsa screen factory into a brick factory.

    That’s a straw man fallacy. There are plenty of brick factories in China already, so there probably won’t be the need to retool a plasma screen factory into a brick factory, at least not early in a recovery. 😉 I want to be the guy owning the brick factory, or the copper cable factory, or the toothbrush factory, etc.

    Idle factories remain idle when there isn’t enough capital available to finance new production.

    But then when capital becomes available… you have a factory to start with.

  41. The price of the factory going down due to a prolonged recession doesn’t destroy the factory’s intrinsic value.

    No, of course not. The lack of a market (due to the exchange rate changing) does that.

    Ah, I see the root of your error: assuming that the US is the only possible market for Chinese goods.

    Please let me know where you’re going to find a replacement for the largest market in the world. You think Europe is going to pick up that slack? Ha.

    Which do you suppose is harder, to find new markets, or to make more production capacity to serve an underserved market?

    It’s sort of amusing some people think this is a chicken-and-egg argument. It isn’t. You must have a market first.

  42. Please let me know where you’re going to find a replacement for the largest market in the world. You think Europe is going to pick up that slack? Ha.

    Ah, I see the root of your error: assuming that a single market has to replace the 5% of the world that is the US, or assuming that the Chinese will not tighten their belts to allow a smaller market to finance growth from the bottom they hit.

    Is this annoying yet?

  43. Ah, I see the root of your error: assuming that a single market has to replace the 5% of the world that is the US

    Fine, please let me know what market or combination of markets you think is going to adopt the massive U.S. trade deficit.

    Again, the root of your error is assuming you can just magically conjure up a new market. Consumers are harder to come by than producers.

    assuming that the Chinese will not tighten their belts to allow a smaller market to finance growth from the bottom they hit.

    Oh, they’ll tighten their belts. Well, that should solve everything.

  44. Are people actually arguing that elections in China would be a bad thing?

    huh?

    Read what people write not what your tea leaves are telling you.

  45. Read what people write not what your tea leaves are telling you.

    It looked to me like people were calling it “mob rule” and asking why we should care.

  46. Fine, please let me know what market or combination of markets you think is going to adopt the massive U.S. trade deficit.

    Wrong question, because it assumes that these new consumers will make the same mistake Americans did of buying mostly stuff worth nothing with dollars, worth something at the time, that created real capital in China. Smart people limit their purchases mostly to what they need to be productive; markets made of smart people therefore don’t run huge trade deficits.

    The numbers speak for themselves: I’m sure the 80% of the world’s population that is neither Chinese nor American will be able to provide at least half the demand the 5% that are Americans have over the past two decades.

  47. “The Chinese have the same problem: they are dependent on American consumers, so when we get a cold they get pneumonia.”

    The US accounts for only 16% of Chinese exports now, down from 25% in 2001. Although Chinese domestic demand has recently slowed down due to current economic conditions, it is still trending upward, as well as personal incomes. As these trends continue, it is foreseeable that the Chinese economy will become based more on their own internal market as opposed to external ones.

    “They can’t just go out and find 300 million rich consumers somewhere else.”

    This assumes that US consumption rates will continue to grow at historical rates, that all other export destinations are closed and not growing and that Chinese domestic consumption will not grow enough to substitute for lost markets in the US. It is very possible that as the US enters a recession and US consumers have to tighten their spending habits, demand for Chinese-made inexpensive goods will actually increase rather than decrease, IMO.

  48. Wrong question, because it assumes that these new consumers

    It doesn’t assume anything except that Chinese producers find a new market for the goods they are currently selling us.

    Consumers uber alles.

    Smart people limit their purchases mostly to what they need to be productive; markets made of smart people therefore don’t run huge trade deficits

    Heh, is this the old fallacy that only “productive” purchases make sense, and America has a trade deficit because we buy stuff we don’t need? Oddly, we are also the richest major country in the world by most PPP estimates.

    The US accounts for only 16% of Chinese exports now, down from 25% in 2001. Although Chinese domestic demand has recently slowed down due to current economic conditions, it is still trending upward, as well as personal incomes

    Yes, this is a very positive trend, partly because it allows China to import more U.S. goods. However, many goods made for a $40K per capita market will not sell in a $10K per capita market.

    It is very possible that as the US enters a recession and US consumers have to tighten their spending habits, demand for Chinese-made inexpensive goods will actually increase rather than decrease, IMO.

    Right, but the assumption was exchange rates went higher.

  49. Don’t the Europeans get their goods from China, too?

  50. Yep, and they sell to us too. They would love to see the US-China exchange rate become more favorable to their producers.

    I guess fundamentally, squar believes producers will be harder to find than consumers, and I believe consumers are more necessary than producers. Shrug. We’ll see if the predictions of doom pan out.

  51. squar believes producers will be harder to find than consumers

    No, that’s not what I’m saying.

    Producers and consumers are equally necessary.

    I’m simply saying that those people who own the factories are closer to being producers whenever demand for products appear than those people who don’t own the factories. This almost seems like a syllogism to me, but… here we are.

  52. Square,

    Sorry but you have a strange idea of value. A factory is essentially worthless without a consumer to buy from it. It’s also not something easily transfered from one job to another.

    This is as opposed to a service style economy like ours where value is in the indivduals knowledge and skills. Many Americans need little more than a laptop to make a living. In our situtaion we can rapidly move from one opprotunity to the next. Much of the expertise used to build, maintain, and coordinate those factories is over here.

    Unless the factory can miraculously find all of its potential consumers, market to them, and then get its product to them by itself it’s going to need a service economy to do it.

    You can build cars in your factory all day but if no one knows about them, and you can’t get them to consumer then it’s unlikley you’ll be creating much value.

    Don’t underestimate the importance of the middle man.

  53. By libertarians I am going to guess that Weisberg means corporatatians and other associated Veblenesque caricatures. Is so, he’s right, of course.

  54. Guys, enough. No one’s putting nails into anyone’s coffin.

    You’re discussing economics. There’s a never ending back and forth debate about where to place blame. No one can win.

    The reality is, both sides have important points about the collapse. Libertarians will rely on thier experts, and opponents will rely on theirs.

    Come to the middle Libertarians…

    Come.

  55. Pain puts it pretty well. I’ll just add:

    I’m simply saying that those people who own the factories are closer to being producers whenever demand for products appear than those people who don’t own the factories. This almost seems like a syllogism to me, but… here we are.

    Right, but factories need someone to sell to, profitably, or they are essentially junk. This should be a truism, but as you say, here we are.

    In any case it’s a moot point as the U.S. still has plenty of factories and will for the foreseeable future; we do actually produce a lot of stuff here. Also, much of our economy is based on service, which doesn’t require factories but does produce value (hence our wealth).

  56. When TallDave threadjacks a post right from the start again would people just please please ignore him.

  57. “the need to retool a plasma screen factory into a brick factory”

    Genius!!!!

    http://en.wikipedia.org/wiki/Cleanroom

    http://en.wikipedia.org/wiki/Cement_kiln

    I’m actually retooling my oven into a laser welding system this weekend

  58. You libertardians make me laugh. Under Reagan’s watch financial regulations of the markets were gutted. Clinton went along with it as well, as Greenspan, the ‘maestro’ and his ilk were thought to be untouchable. This whole collapse was the result of over 25 years of deregulation. Why can’t you admit that?

  59. Famous Mortimer,
    You have a terrible habit of posting without saying anything. Not that other people here aren’t occasionally (often) guilty of the same thing, but you do it all the time.

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