Speaking at Wichita State University on Monday, former ABC News journalist John Stossel told a large crowd that free markets and limited government, not more government, are the best way to increase our wealth and prosperity.
Speaking about his beliefs early in his career as a journalist, Stossel said, “By and large it’s [capitalism] cruel and unfair. We need government and lawyers to protect us from capitalists.”
Eventually, he said, he began to realize the harm in excessive government regulation. Bureaucrats who propose licensing auto repair shops don’t do much to protect consumers. Instead, the cost of regulation and licensing makes auto repair a little more expensive — leading, perhaps to shops in poor neighborhoods going underground to escape regulation.
So could trial lawyers do a better job of protecting the consumer? They have the ability to make bad guys pay. But Stossel said the best deterrent is the free market and competition. “Word gets out,” he said, and if you cheat your customers, they won’t come back. There’s also fraud laws.
Stossel said that it’s easy for reporters to cover the victim who wins a large reward in a lawsuit. The unintended consequences, however, are harder to see. But they’re everywhere. He cited the reduction in the number of vaccine companies due to lawsuits, asking are we safer with five vaccine companies researching vaccines rather than 20? No, he said, we are less safe.
Competition through free markets, he said, protects us all by itself without government intervention. There are exceptions — Bernie Madoff, for example — but the fact that these exceptions receive so much media attention is evidence of how well markets work.
The way to get rich in America, Stossel said, is to serve consumers well, citing the example of Bill Gates.
Stossel said that critics of free markets say that they don’t work for complicated things such as schools and health care. Don’t we need wise elites in Topeka and Washington to make decisions for us, he asked?
The answer is no. Not everyone needs to be an expert. It’s sufficient for there to be a few “car buffs” — using the example of selecting an automobile — for free markets to work.
We need some government, he said, to provide rule of law, to protect our property and person. But government needs to be limited. He showed graphs that illustrated the rapid growth of government spending since the presidency of Lyndon Johnson.
“I’d say they were spending like drunken sailors, but that insults drunken sailors, who spend their own money.”
He cited his own experience with his beach house, where government provides low-cost flood insurance. His beach house — right on the ocean, built on sand — was damaged. But the government insurance replaced it.
The problem, he said, is that this insurance was not priced properly. Government ignored the price signals sent by the private market, which set high prices for this insurance, based on the risk they judged the properties faced. The below-market prices set by government have lead to a program that is billions in the read.
Stossel said that in every newsroom he’s been in, and at all the elite universities he’s visited, people hate business. It’s intuitive, he said, to think of business as a zero-sum game. “If somebody makes a profit off me, I must be losing something.”
But business is voluntary. Government is force. Business doesn’t happen unless both parties think they win, leading to the “double thank you” moment at the time of the transaction.
Business is not like a pie, where if someone takes a big slice, there’s less for others. Business, he said, creates more pies. Entrepreneurship makes us all richer, but that’s not intuitive, he said.
He also talked about his experience reporting on the risks we face in the world. He found that news media focused its reporting on sensational events such as airplane crashes that are actually quite rare. Flying takes an average of one day off each person’s life, statistically speaking.
But driving takes an average of 182 days off of life. And because of the “hysterical coverage” of plane crashes, people are scared into driving instead of flying. Stossel termed this “statistical murder.”
(Later, in response to a question, Stossel said that this type of reporting was difficult to get on the air. Two producers quit, saying this reporting was not journalism, but “conservative dogma.”)
The most important danger to life, however, is poverty, taking over 3,000 days (about nine years) off a person’s life. “Wealthier is healthier,” he said. Regulation that prevents capital from flowing to its best use makes us poorer, he said, and fewer people get hired. Perhaps the headline should be “New OSHA rule saves four, kills ten,” he said.
Our lack of perspective has made America fear innovation, Stossel said. He referred to Europe’s precautionary principle, which really means “don’t do anything for the first time.” He illustrated a mythical new product — a new fuel, domestically produced, but explosive, invisible, and poisonous, and would kill 200 people each year. And, he wants to pump it into your home. Would we allow that today? This product, of course, is natural gas.
The innovation that we now fear has made our lives richer. Free people pursuing their own self-interest make America richer, and that saves lives.
Questions in written form from the audience included one asking Stossel who in Washington he considers to be a leader in free market philosophy. He mentioned Ron Paul as a politician, and the Cato Institute as a leader in explaining the benefits of free markets.
About the myths and lies of health care reform: Stossel said that President Obama is right, the current system is unsustainable, as it “promises everybody everything free.” The proposed reforms are likely to make the current situation worse. He mentioned that the rate of increase in spending on recreation is the same as the increase in spending on health care. No one complains about spending on recreation, though, because they’re spending their own money. It’s when government spends our money that problems arise. Also, other countries freeload off the innovation that happens in America, and they don’t bear that cost.
At ABC News, Stossel said they rejected his stories about health care in favor of Michael Jackson stories. He believes this will improve at his new home at Fox Business Network.
One of his favorite stories was “Stupid in America,” which took a look at public schools. American students do fine in fourth grade, Stossel said, but as time goes on, our students lag behind students in other countries. “The longer they are in our public school system, the worse they do.” The problem, he said, is that our public school system is a government monopoly. An important factor in the success of schools in other countries is that the money is attached to the student, not the school, as it is in America.
In an interview session before his talk, I asked Stossel about the events of the past year: Is this evidence of the failure of free markets and capitalism? Referring to the rise in the Dow Jones average from 800 to over 9000 since 1982, he said that’s pretty good. “Perfect is not one of the choices,” and there will be booms and busts, he said. Plus, this bust was mostly a government bust, with Fannie Mae and Freddie Mac contributing.
I asked about regulation, and Stossel said that regulation increased greatly during the Bush administration. Republicans say they want to cut spending and rules, but they don’t do it, he said.
About health care in Canada, Stossel said that Canadians like their system and think ours is horrible. But media reporting has exaggerated the defects of the American system, and most of the people surveyed in Canada aren’t sick. Also, Canada reduces their cost by freeloading off American innovation.
At Fox Business Network, Stossel said he will have a show once a week “talking about the economic liberty that made American prosperous.” He also said that “I’m angry that smug people are claiming that central planning from government will make our lives better, despite the evidence in our face that it’s failed again and again.” He plans to confront these people.
I asked if we in America are starting to look more to a European style of security, rather than relying on freedom. Stossel said yes, quoting Thomas Jefferson as “It is the natural progress of things for government to gain, and liberty to yield.” But it is a false sense of security to rely on government. Real security and what has made America prosperous is the innovation that comes from capitalism.
Addional coverage from Kansas Watchdog is at John Stossel’s 20/20 Vision of Journalism and Free Markets.