Voice For Liberty

Tag: Capitalism

  • Kansas and Wichita quick takes: Sunday April 10, 2011

    Local elections, qualifications of Wichita’s elected officials. On today’s edition of the KAKE Television public affairs program This Week in Kansas, Wichita State University’s Ken Ciboski, Chapman Rackaway of Fort Hays State University and myself join host Tim Brown to discuss local elections in Kansas. Mention was made of a recent article I wrote that was critical of the educational attainment of some Wichita City Council members. See Education gap on Wichita City Council.

    Steineger, Kansas senator, to address Pachyderms. This Friday (April 15) Kansas Senator Chris Steineger will speak to the members and guests of the Wichita Pachyderm Club on the topic “Using Business Principles to Restructure State and Local Government For Long-Term Efficiency.” Steineger, of Kansas City, has served in the Kansas Senate since 1997 and in December switched his affiliation from the Democratic to Republican party. Steineger has voted with Republicans on fiscal issues for many years. Explaining why he switched parties, he wrote “I am a fiscal hawk who believes Americans have been borrowing, spending, and living beyond their means for too long.” Steineger has spoken at events organized by Americans for Prosperity.

    Washington Monument strategy. At about 11:00 pm Friday night, President Barack Obama spoke on television in front of a window where the Washington Monument could be seen in the background. He said that thanks to the just-struck agreement to continue funding the operations of the federal government, the monument would be open to visitors the next day. This is explicit use of the Washington Monument strategy, in which the response to any proposed cut or slowdown in the growth of government is illustrated in the most painful or visible way. As the Wikipedia entry states: “The most visible and most appreciated service that is provided by that entity is the first to be put on the chopping block.” … The president also said “I would not have made these cuts in better circumstances.”

    Soros conference online. This weekend’s conference of the Institute for New Economic thinking has quite a few papers and videos online at the conference’s website. Surprise: Keynes and his economic theories are revered. Attendees are treated to papers and presentations like this: “It is the interdependence between the rule of law and the production and distribution of goods and services that gives capitalism its unity. The autonomy of the economy is thus an illusion, as is its ability to self-regulate. And we are in the current mess because the scales have tipped slightly too far in favour of this illusion. This shift in the balance represents an inversion of values. Efficiency, it was believed, would be better served if the workings of governments were regulated more tightly (especially in Europe, although the theory originates in America) and if the markets were deregulated to a greater extent. The ingenuity of the financial markets initially, then their blind sightedness, did the rest.” … What?

    Economics in one lesson this Monday. On Monday (April 11), four videos based on Henry Hazlitt’s class work Economics in One Lesson will be shown in Wichita. The four topics included in Monday’s presentation will be The Lesson, The Broken Window, Public Works Means Taxes, and Credit Diverts Production. The event is Monday (April 11) at 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. The event’s sponsor is Americans for Prosperity, Kansas. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

    Wichita City Council this week. On Tuesday, the Wichita City Council considers only consent agenda items. Then, tributes — including video — to outgoing Council Members Paul Gray, Sue Schlapp, and Roger Smith and installation of new members. A new vice mayor will also be selected. … I don’t know if the city will be hosting a luncheon afterward. Two years ago a celebratory luncheon titled “Wichita City Council Changing of the Guard” cost over $1,000.

  • Soros events, catering to liberal causes, largely escape notice

    This week George Soros is hosting two conferences that seek to influence and change the international financial system and the news media. In contrast to a conference recently hosted by Charles and David Koch, the Soros events have received little advance attention, and it seems likely that there will be little reporting afterward.

    A search of Google news shows just a handful of stories mentioning these events. The Boston Globe has short mention of the event taking place in New Hampshire, presumably only because it is in the neighborhood. But Dan Gainor of Media Research Center, a conservative watchdog group, has the details on these two events and who is attending.

    The New Hampshire event, previewed by Gainor in the Wall Street Journal piece Unreported Soros Event Aims to Remake Entire Global Economy, is intended to “‘establish new international rules’ and ‘reform the currency system.’ It’s all according to a plan laid out in a Nov. 4, 2009, Soros op-ed calling for ‘a grand bargain that rearranges the entire financial order.’” The goals of the conference are lofty — and scary. Soros has written that “The main enemy of the open society, I believe, is no longer the communist but the capitalist threat.” As described by Gainor, this conference appears to exist to counter the threat Soros sees: “That’s what this conference is all about — changing the global economy and the United States to make them ‘acceptable’ to George Soros.”

    At the same time in Boston, Gainor reports (Two Soros Events Aim to Remake Financial Order and Media — So Where’s the Reporting?) that about 350 will gather for a conference on media reform. “Everywhere you they go in Boston, they’ll be making more left turns than NASCAR. It’s an event filled with lefties dissatisfied that the news media aren’t even more liberal, and their goal will be to make that happen.”

    Proposals for government funding of news media and a return to the fairness doctrine will be big topics, says Gainor.

    Contrast with Koch event

    The virtually non-existant news coverage of these two Soros events stands in stark contrast to the frenzy whipped up by media in anticipation of the recent Koch-sponsored conference in January. This is despite the fact that several journalists are speaking at the New Hampshire event, and the Boston event is all about news media.

    The Koch event was also protested, and the protests widely covered in the news. It appears there are no plans by anyone to protest the Soros events.

    Perhaps David Boaz offers insight when he wrote: “One difference between libertarianism and socialism is that a socialist society can’t tolerate groups of people practicing freedom, while a libertarian society can comfortably allow people to choose voluntary socialism.”

    The message of capitalism, free markets, and economic freedom is powerful. When people realize its benefits and its ability to foster civil society and prosperity for everyone, the special interests that live off government intervention are threatened. As Boaz notes, if people choose to reject freedom and live under some other form of order, libertarians have no problem with that.

    But Boaz qualifies this. Such a choice must be voluntary. That’s not what Soros and his supporters have in mind. Their intent is to expand the role of government, and since government operates by force and coercion, this expansion is not voluntary. The more Soros has his way, the more the freedom and liberty of Americans is at risk.

    We ought to take note of these conferences. But with a virtual news blackout, most people won’t be aware of them and the plans being made.

  • Weekly Standard: The left’s obsession with the Koch brothers

    Matthew Continetti of the Weekly Standard has written a profile of Charles and David Koch and Koch Industries, focusing on politics and the attacks by the political Left.

    A key passage in the story explains what those who believe in economic freedom have known all along: If Charles and David Koch really wanted to make a lot of money for themselves, they would act like most corporations: seek fortune through government intervention, not through competition in free markets:

    The second charge was that the Kochs’ talk about free markets was merely cover for economic self-interest. But if that were true, why doesn’t every major corporation full-throatedly support limited government? Are we really to believe that Koch Industries is the only self-interested corporation in America? The reality, of course, is that an easier way to advance corporate self-interest is the one taken by most giant companies: securing monopolies, bailouts, tariffs, subsidies — the opposite of free enterprise. “It’d be much safer economically to sit on the sidelines or curry favor with the Obama administration,” said Richard Fink.

    It was impossible for the liberal activists to acknowledge that libertarians might actually operate from conviction. Charles and David believed in low taxes, less spending, and limited regulation not because those policies helped them but because they helped everybody. “If I wanted to enhance my riches,” said David, “why do I give away almost all my money?”

    We’ve just seen the results of how an “aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting” can succeed, as we’ve learned that General Electric has been successful in avoiding income tax liability. GE, whose chief executive is said to be close to President Obama, also invests in industries like wind power that receive government subsidy, without regard for the underlying economic benefit of these investments.

    But Charles and David Koch believe that economic freedom and free markets are the best way to generate prosperity for everyone, and the Weekly Standard article shows they have worked for decades to promote this message.

    What may really gall liberals is that while believing that a powerful and expansive government is good for the country, they have created a complicated machine that a politically-favored company like GE can exploit for huge profits, all without creating anything that consumers value. Charles Koch calls for an end to this, as he recently wrote in the Wall Street Journal: “Government spending on business only aggravates the problem. Too many businesses have successfully lobbied for special favors and treatment by seeking mandates for their products, subsidies (in the form of cash payments from the government), and regulations or tariffs to keep more efficient competitors at bay. Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.”

    The political Left just can’t believe that anyone would write that and really mean it.

    The Paranoid Style in Liberal Politics

    The left’s obsession with the Koch brothers
    By Matthew Continetti

    … For decades David and Charles have run Koch Industries, an energy and manufacturing conglomerate that employs around 50,000 people in the United States and another 20,000 in 59 other countries. Depending on the year, Koch Industries is either the first- or second-largest privately held company in America — it alternates in the top spot with Cargill, the agricultural giant — with about $100 billion in revenues. David and Charles are worth around $22 billion each. Combine their wealth and you have the third-largest fortune in America after Bill Gates and Warren Buffett. Like most billionaires, the brothers spend a lot of time giving their money away: to medical and scientific research, to educational programs, to cultural institutions, and to public policy research and activism.

    That last part has caught the attention of the left’s scouring eye. For unlike many billionaires, the Koch brothers espouse classical liberal economics: They advocate lower taxes, less government spending, fewer regulations, and limited government. “Society as a whole benefits from greater economic freedom,” Charles wrote in a recent Wall Street Journal op-ed. Judging by the results of the 2010 elections, there are millions of Americans who agree with him.

    Over the years the Kochs have flown beneath the radar, not seeking publicity and receiving little. But then the crash of 2008 arrived, and the bailouts, and the election of Barack Obama, and pretty soon the whole country was engaged in one loud, colossal, rollicking, emotional argument over the size, scope, and solvency of the federal government. Without warning, folks were springing up, dressing in colonial garb, talking about the Constitution, calling for a Tea Party. Some of them even joined a group called Americans for Prosperity — which the Kochs helped found and partly fund.

    Continue reading at the Weekly Standard.

  • Kansas and Wichita quick takes: Thursday March 23, 2011

    Owens still blocks judicial selection reform. Kansas Reporter writes that one man, Senator Tim Owens, an attorney and Republican from Overland Park, is still blocking judicial selection reform. But a move by the House gives Senate President Stephen Morris a chance to let Senators vote to concur with the reform measure passed by the House. Or, Morris could refer the measure to Owens’ Judiciary committee, where it will die. See New way of picking appeals judges gets second shot.

    Greed is killing Detroit. Greed is often portrayed as a negative quality of the rich. But Investor’s Business Daily tells what happens when union greed — yes, everyone can be greedy — runs wild in a city: “Census data released Tuesday show Detroit’s population has plunged 25% since 2000 to just 713,777 souls — the same as 100 years ago, before the auto industry’s heyday. As recently as the 1970s, Detroit had 1.8 million people. What’s happening is no secret: Detroiters are fleeing an economic disaster, the irreversible decline of the Big Three automakers. … Sure, a lot of the blame goes to a generation of bad management. But the main reason for Detroit’s decline is the greed of the industry’s main union, the UAW, which priced the Big Three out of the market.” … Having killed the goose with the golden egg once, union leadership seeks seek to do it again: “Even as Detroit collapses, new UAW chief Bob King promises to ‘pound’ the transplants into submission and force them to drink his union’s poison, too. Given what we know, every town that is now home to a foreign automaker should be very afraid. If King has his way, they’ll soon suffer Detroit’s fate.”

    Liberal Bias at NPR? Stephen Inskeep, co-host of the National Public Radio program Morning Edition, defends his network against charges of liberal bias. In The Wall Street Journal Inskeep writes that NPR draws an audience with diverse political views, including conservatives: “Millions of conservatives choose NPR, even with powerful conservative alternatives on the radio.” Which, I would say, is all the more reason why the network should stand on its own without government funding. … Inskeep also writes about the recent undercover video by James O’Keefe, who NPR claims, through a spokesperson, to have “inappropriately edited the videos with an intent to discredit” NPR. If true, shame on O’Keefe. The NPR spokesperson concedes that then-NPR chief fundraiser Ron Schiller made some “egregious statements.”

    Electric cars questioned. Margo Thorning writing in The Wall Street Journal, explains that the new crop of all-electric or near-all-electric cars not worthy of government support. She notes the Consumer Report opinion of the Chevrolet Volt: “isn’t particularly efficient as an electric vehicle and it’s not particularly good as a gas vehicle either in terms of fuel economy.” … Batteries remain a problem: “A battery for a small vehicle like the Nissan Leaf can cost about $20,000 and still only put out a range of 80 miles on a good day (range is affected by hot and cold weather) before requiring a recharge that takes eight to 10 hours. Even then, those batteries may only last six to eight years, leaving consumers with a vehicle that has little resale value. Home installation of a recharging unit costs between $900 and $2,100.” … Thorning notes that half of the electricity that powers America is generated by coal, so all-electric cars are still not free of greenhouse gas emissions. Also, “a substantial increase in the numbers of them on the road will require upgrading the nation’s electricity infrastructure.” … While electric cars are not ready to save the earth, the U.S. government insists on intervention: “Despite these significant flaws, the government is determined to jump-start sales for plug-ins by putting taxpayers on the hook. The $7,500 federal tax credit per PEV is nothing more than a federal subsidy that will add to the deficit. There are also federal tax credits for installing charging stations in homes and businesses and for building battery factories and upgrading the electric grid. The administration’s goal — one million PEVs on the road by 2015 — could cost taxpayers $7.5 billion.” And saddle Americans with expensive automobiles that do little to address the problem they’re designed to solve. Reading the Journal article requires a subscription, but it is also available at The American Council for Capital Formation, where Thorning is Senior Vice President and Chief Economist.

    Government as business. Yesterday’s reading from Robert P. Murphy’s book Lessons for the Young Economist explained the value of the profit-and-loss system in guiding resources to where they are most valued. For those who wan to “run government like a business” I offer today’s excerpt from the same book, which explains how lack of the ability to calculate profit means this can’t happen: [Regarding a capital investment made by Disney as compared to government:] The crucial difference is that the owners of Disneyland are operating in the voluntary market economy and so are subject to the profit and loss test. If they spend $100 million not on personal consumption (such as fancy houses and fast cars) but in an effort to make Disneyland more enjoyable to their customers, they get objective feedback. Their accountants can tell them soon enough whether they are getting more visitors (and hence more revenue) after the installation of a new ride or other investment projects. Remember it is the profit and loss test, relying on market prices, that guides entrepreneurs into careful stewardship of society’s scarce resources. In contrast, the government cannot rely on objective feedback from market prices, because the government operates (at least partially) outside of the market. Interventionism is admittedly a mixture of capitalism and socialism, and it therefore (partially) suffers from the defects of socialism. To the extent that the government buys its resources from private owner — rather than simply passing mandates requiring workers to spend time building bridges for no pay, or confiscating concrete and steel for the government’s purposes — the government’s budget provides a limit to how many resources it siphons out of the private sector. (Under pure socialism, all resources in the entire economy are subject to the political rulers’ directions.) However, because the government is not a business, it doesn’t raise its funds voluntarily from the “consumers” of its services. Therefore, even though the political authorities in an interventionist economy understand the relative importance of the resources they are using up in their program — because of the market prices attached to each unit they must purchase — they still don’t have any objective measure of how much their citizens benefit from these expenditures. Without such feedback, even if the authorities only want to help their people as much as possible, they are “flying blind” or at best, flying with only one eye.

  • Kansas and Wichita quick takes: Wednesday March 23, 2011

    Health information campaign. What happened to an all-star group that was to promote President Obama’s health care plan? Politico reports: “Democrats are under siege as they mark the first anniversary of health care reform Wednesday — and they won’t get much help from the star-studded, $125 million support group they were once promised. Wal-Mart Watch founder Andrew Grossman unveiled the Health Information Campaign with great fanfare last June. … But nine months later, the Health Information Campaign has all but disappeared.”

    Eisenhower book author to speak in Wichita. At this Friday’s meeting (March 25) of the Wichita Pachyderm Club, David A. Nichols, Ph.D. will speak on his new book Eisenhower 1956: The President’s Year of Crisis — Suez and the Brink of War . Nichols is formerly of Southwestern College in Winfield. Copies of the new book will be available for purchase at the meeting. The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers include Derrick Sontag of Americans for Prosperity on April 1, Deputy Public Defender Jama Mitchell on April 8, Kansas Senator Chris Steineger on April 15, Friends University Associate Professor of Political Science Russell Arben Fox on April 22, and Wichita State University Political Scientist Ken Ciboski on April 29.

    Kansas agencies mum on travel spending. From Kansas Policy Institute: “State agencies, boards and universities in Kansas claimed they did not have to disclose details on $21.4 million in spending on various forms of travel and entertainment in FY 2010, according to a Kansas Policy Institute (KPI) analysis of the state’s checkbook.” According to KPI president Dave Trabert: “$39 million is a lot to spend on travel in any year, and especially so when some agencies say they are being forced to cut services. Maybe the Kansas Bureau of Investigation needs some discretion when conducting investigations, but the breadth and volume of these confidentiality claims are incomprehensible.” While the Kansas Open Records Act (KORA) has many categories of information that are exempt from disclosure, agencies have discretion as to which information to disclose. None of the exemptions mention travel. Says Trabert: “State checkbook records don’t indicate which exemption from disclosure is invoked on travel spending, but disclosing the names of hotels, airlines and restaurants that received taxpayer money would not be an unwarranted invasion of anyone’s personal privacy. It is, however, an unwarranted invasion of taxpayers’ right to not know how their money is being spent and state law should be changed to eliminate gaping loopholes in KORA.” … I’m really curious to learn more about this finding: “KPI’s review of state travel records also found many examples of the vendor being listed as the agency or university itself rather than the actual vendor that provided the service.” … KPI’s press release is at State Agencies Claim Confidentiality on Travel Spending.

    Kansas wind energy jobs. Again we find that the promise of green energy projects being an economic development driver is overplayed. In “Goal of many more ‘green’ jobs is elusive” (February 14, 2011 Kansas City Star) we find the same skepticism that most now see justified regarding ethanol is applicable to wind power: “‘We need to temper our expectations on wind energy,’ said David Swenson, an Iowa State University economist known for deflating the ethanol industry’s job claims. Now, he says, the same ‘environment of hype’ is developing around wind power.” It’s been good for China, though: “… more than 80 percent of $1 billion in federal stimulus grants for wind projects went to foreign countries. One of the projects, a $1.5 billion wind farm in Texas, expected to collect $450 million in stimulus money — but use wind turbines made in China.” The counting of a job as “green” is highly suspect, as the article notes: “Kansas officials have trumpeted that the state already has 20,000 green jobs — and hopes for 10,000 more, many from manufacturing and assembly work for generating wind power. But so far, most of the jobs in that count by the state Department of Labor have been around for years, including carpenters installing energy-efficient windows and plumbers putting in toilets that don’t use much water. Even maids, if they use green products, are classified as green-collar workers.” … Wichita Mayor Carl Brewer promotes manufacturing of wind power machinery as good for Wichita’s economic development, and Kansas Governor Sam Brownback supports renewable energy standards for Kansas.

    The role of profits and losses. From Robert P. Murphy, Lessons for the Young Economist: Many naïve observers of the market economy dismiss concern with the “bottom line” as a purely arbitrary social convention. To these critics, it seems senseless that a factory producing, say, medicine or shoes for toddlers stops at the point when the owner decides that profit has been maximized. It would certainly be physically possible to produce more bottles of aspirin or more shoes in size 3T, yet the boss doesn’t allow it, because to do so would “lose money.” On the other hand, many apparently superfluous gadgets and unnecessary luxury items are produced every day in a market economy, because they are profitable. Observers who are outraged by this system may adopt the slogan: “Production for people, not profit!” … Such critics do not appreciate the indispensable service that the profit and-loss test provides to members of a market economy. Whatever the social system in place, the regrettable fact is that the material world is one of scarcity — there are not enough resources to produce all the goods and services that people desire. Because of scarcity, every economic decision involves tradeoffs. When scarce resources are devoted to producing more bottles of aspirin, for example, there are necessarily fewer resources available to produce everything else. It’s not enough to ask, “Would the world be a better place if there were more medicine?” The relevant question is, “Would the world be a better place if there were more medicine and less of the other goods and services that would have to be sacrificed to produce more medicine?” … Loosely speaking, the profit and loss system communicates the desires of consumers to the resource owners and entrepreneurs when they are deciding how many resources to send into each potential line of production. … In a market based on the institution of private property, profits occur when an entrepreneur takes resources of a certain market value and transforms them into finished goods (or services) of a higher market value. This is the important sense in which profitable entrepreneurs are providing a definite service to others in the economy.

  • Charles G. Koch: Why Koch Industries is speaking out

    In today’s Wall Street Journal, Charles G. Koch, who is chairman of the board and CEO of Koch Industries, writes that economic freedom — not government spending and intervention — leads to prosperity and economic well-being for all, even for our poorest citizens.

    Koch describes an “economic crisis” of increased spending and debt, at both the federal and state levels. The spending cuts currently being considered by Congress, he says, are “relatively minor,” with few proposals for necessary cuts to military and entitlement programs. He describes Wisconsin Governor Scott Walker as someone who takes seriously the challenge of controlling government spending.

    Mismanagement of our finances by both Democrats and Republicans, along with their and President Obama’s refusal to tackle the problem of existing debt and the unfunded liabilities of Social Security, Medicare and Medicaid, means we are looking at “looming bankruptcy,” Koch writes.

    On the relationship between government and business, Koch writes that too many business firms have practiced “crony capitalism”: lobbying for special favors, subsidies, and regulations to keep competitors — who may be more efficient — out of the way.

    While it’s more difficult than practicing cronyism, competing in open markets assures that firms that efficiently provide goods and services that consumers demand are the companies that thrive, Koch writes. It is these efficient firms that raise our standard of living. When politically-favored firms are propped up and bailed out, our economy is weakened: “Subsidizing inefficient jobs is costly, wastes resources, and weakens our economy.”

    He concludes: “I am confident that businesses like ours will hire more people and invest in more equipment when our country’s financial future looks more promising. Laying the groundwork for smaller, smarter government, especially at the federal level, is going to be tough. But it is essential for getting us back on the path to long-term prosperity.”

    Why Koch Industries Is Speaking Out

    Crony capitalism and bloated government prevent entrepreneurs from producing the products and services that make people’s lives better.

    By Charles G. Koch

    Years of tremendous overspending by federal, state and local governments have brought us face-to-face with an economic crisis. Federal spending will total at least $3.8 trillion this year — double what it was 10 years ago. And unlike in 2001, when there was a small federal surplus, this year’s projected budget deficit is more than $1.6 trillion.

    Several trillions more in debt have been accumulated by state and local governments. States are looking at a combined total of more than $130 billion in budget shortfalls this year. Next year, they will be in even worse shape as most so-called stimulus payments end.

    For many years, I, my family and our company have contributed to a variety of intellectual and political causes working to solve these problems. Because of our activism, we’ve been vilified by various groups. Despite this criticism, we’re determined to keep contributing and standing up for those politicians, like Wisconsin Gov. Scott Walker, who are taking these challenges seriously.

    Both Democrats and Republicans have done a poor job of managing our finances. They’ve raised debt ceilings, floated bond issues, and delayed tough decisions.

    Continue reading at The Wall Street Journal (subscription not required)

  • Kansas governor releases economic development plan

    Yesterday Kansas Governor Sam Brownback released his plan for economic growth and development in Kansas. Drawing on free market principles and relying less on government intervention, the plan calls for a departure from present practices, especially the heavy-handed methods cities like Wichita use.

    Brownback’s plan would transform Kansas’ approach to economic development. Currently the approach of the state and most of its cities and counties is to go after the “big deal.” This typically lures a large employer to Kansas through the use of various incentives. Or, as we have seen recently with the Hawker Beechcraft deal, incentives may be used to keep a company from leaving Kansas, even if that company is downsizing.

    This last deal is especially troubling for the state’s future. Wichita State University professor H. Edward Flentje recently sounded a note of caution on deals like Hawker Beechcraft: “The result diverts millions in limited taxpayer funds, primarily state income-tax revenues, from state coffers to a company’s benefit, simply to have an existing business stay put.” Flentje wrote that there are more than 500 Kansas businesses now eligible for state assistance just like Hawker.

    It is breaking this cycle of dependency on the “deal” that the governor’s plan calls for. Instead of the state targeting industries or specific companies, Kansas should seek to establish a strategy that is simple, fair, and of high capacity. I believe that for this strategy to work, Kansas cities and counties will need to follow the plan, too.

    Productivity and growth, not just jobs

    Right away the governor’s plan calls for prosperity through productivity: “A sound economic development process enhances prosperity through enhanced business-sector productivity.” This is in contrast to the economic development efforts of most governments, including that of the City of Wichita. There, the focus is on jobs, with capital investment a lesser factor.

    The plan identifies two fundamental roles for government to play. First, the state should create an environment that “motivates as much risk-taking and competition as possible in the context of a ‘level playing field.’” Second, it must do this effectively and efficiently, leaving as many resources in the private sector as possible.

    Key concepts in the plan are risk taking, economic competition, business experimentation, and trial and error. These activities are important, the plan says, because they will lead to increased economic productivity, which is what produces prosperity for Kansans. This is what the economic development policies of Kansas need to promote, says the plan: “The more that Kansas’ economic development environment motivates each entrepreneur and business to engage in the trial and error process, the more the Kansas economy will generate economic opportunity for Kansas families.”

    But the state’s policies don’t promote this environment: “Yet Kansas economic development policy tends to work as if only a small sub-set of entrepreneurs or businesses matter.” Current policies attempt to find the right technologies and companies for the state to invest economic development resources in. The criteria for determining winners are often job count and wage levels. Winners are rewarded at the expense of non-winners.

    Instead of this approach — which is common in most states and cities — the plan recommends a different policy: “Dedicate human and financial resources to promoting maximum experimentation through volume and diversity.” Also: “Establish stable policies that treat all investments and businesses equally, thereby liberating resources from the costly and economically dubious task of targeting.”

    The plan is critical of selective efforts and in favor of broad-based strategy, especially in taxation: “A more uniform business tax policy that treats all businesses equally rather than the current set of rules and laws that give great benefit to a few (through heavily bureaucratic programs) and zero benefit to many.”

    The plan emphasizes promoting as much diversity as possible. The current strategy of attracting large employers is not wise: “In fact, research indicates that economic development strategies based on the recruitment of large employers tends to have negative effects over the long run. One of the best predictors of future economic growth for metropolitan areas is the average employment size of business establishments: larger average sizes are typically associated with slower future growth.”

    Measures of success of economic development efforts include jobs, although the plan cautions that “job creation is a result that derives from profitable business births and expansions.” Other factors are income growth, population density and migration, productivity growth, capital investment, and gross business starts and expansions.

    The plan creates a council of economic advisers and coordinate the actions of seven different agencies that work in the field of economic development. It also calls for funding of certain university research programs.

    The plan is not totally free-market in its approach. It retains PEAK, which lets companies that meet criteria retain their employees’ withholding taxes. But are we certain we can identify which companies are worthy of this subsidy? There will also be a fund that can be used to “close a deal on a prime economic growth opportunity.” Brownback’s “rural opportunity zones” are also included, which offer income tax breaks and student loan paydowns for people moving into counties that have experienced large population decline.

    Cities like Wichita will need to change, adapt

    The governor’s plan calls for economic development strategies very different from what most cities and counties pursue. As an example, at the most recent meeting of the Wichita City Council, the council approved forgivable loan agreements for two companies that are adding jobs. These loans amount to grants of money, providing that the companies meet specified employment goals. The loans were not the only form of subsidy. One company is slated to receive forgiveness from paying property tax for up to ten years, and both received grants and tax credits from the state under existing economic development programs.

    At the meeting, Mayor Carl Brewer offered a defense of the city’s economic development policy (click here for video), saying that if Wichita doesn’t offer targeted incentives, other cities will. “If we don’t stay in the game and do whatever is necessary to be able to protect our jobs, protect our citizens, then we’re going to lose out on this entire thing. Times are changing. 20 years ago individuals weren’t even thinking about providing incentives to various different corporations. And now it appears that every place that we go, we seeing that everyone’s doing it. … That’s a reality of things. The dynamics and the field that we all have to play on is continuing to change.” He urged his critics to look at the larger picture, rather than just the action the council is taking today.

    Council member Janet Miller also defended the city’s policy, saying that companies either qualify for incentives or they don’t, based on established criteria. She cited Wichita State University figures that support the incentives as providing an economic return to the city.

    If cities continue to offer targeted incentives that are at odds with the governor’s plan, what will be the outcome? It doesn’t seem as though the two approaches are compatible. Many of the programs that cities use to offer targeted incentives — industrial revenue bonds (IRB), tax increment financing (TIF), community improvement districts (CID), and others — are creations of the legislature. It and the governor have the power to control their use — if there is political will to do so.

  • Charles and David Koch v. George Soros: Free markets or not

    Perhaps the best commentary on the recent conference sponsored by Charles and David Koch in California comes from Timothy P. Carney of the Washington Examiner. Titled The Kochs vs. Soros: Free markets vs. state coercion, it explains the difference between advocates of free enterprise and those who believe in using the force of government to achieve their goals.

    At the conference, protests were arranged by the left-wing advocacy group Common Cause. That organization recently launched an attack on Charles Koch, David Koch, and two U.S. Supreme Court Justices that has been found to be baseless and nothing more than a publicity stunt.

    After tracing the source of funding for Common Cause, Carney concluded: “In other words, money from billionaire George Soros and anonymous, well-heeled liberals was funding a protest against rich people’s influence on politics.”

    Liberals, of course, contend that their political donates are good because their causes are the correct causes: “Conservative money is bad, and linked to greed, while liberal money is self-evidently philanthropic.”

    While I don’t want to repeat Carney’s entire piece here — there’s a link to it below — here’s the crux of his argument: “… while Soros money and Koch money are superficially equivalent, there’s a crucial distinction. If we take both sides at their word, Soros and other liberal donors spend in order to impose their preferences on others while the Kochs and other free-market donors spend in an effort to be left alone to buy and sell with willing parties. The moral difference is this: Only one side is trying to compel others to conform to its preferences.”

    Carney has written before about the political left’s presumption — that big business is evil and is always seeking to restrain government interference — being incorrect. In his 2006 book The Big Ripoff: How Big Business and Big Government Steal Your Money , Carney explains:

    The standard assumption seems to be that government action protects ordinary people by restraining big business, which, in turn, wants to be left alone. The facts point in an entirely different direction:

    • Enron was a tireless advocate of strict global energy regulations supported by environmentalists. Enron also used its influence in Washington to keep laissez-faire bureaucrats off the federal commissions that regulate the energy industry.
    • Philip Morris has aggressively supported heightened federal regulation over tobacco and tobacco advertising. Meanwhile, the state governments that sued Big Tobacco are now working to protect those same large cigarette companies from competition and lawsuits.
    • A recent tax increase in Virginia passed because of the tireless support of the state’s business leaders, and big business has a long history of supporting tax hikes.
    • General Motors provided critical support for new stricter clean air rules that boosted the company’s bottom line.

    Most important, in these and hundreds of similar cases, the government action that helps big business hurts consumers, taxpayers, less established businesses, and smaller competitors. Following closely what big business does in Washington reveals a very different story from conventional wisdom.

    While critics of Charles Koch, David Koch, and Koch Industries use the “big business” criticism — Koch Industries is a very large company, after all — there is a difference the critics can’t — or don’t want to — grasp, as Carney explains in the Washington Examiner article: “First off — and this was the point of a talk I gave Sunday at the Koch conference — many of the industrialists in the audience could profit more through regulations and subsidies than they could through the free market. Some oil executives, for example, have supported California’s strict refinery regulations because they kept out competitors. Natural gas companies like Enron have backed cap and trade because it hurt oil and coal. As for bankers — the Wall Street bailouts made it clear that big government is their mother’s milk.” (emphasis added)

    Carney’s book The Big Ripoff is blunt and detailed in its criticism of companies that use government to obtain special favor to enrich themselves. Yet, he spoke at the Koch conference, and has spoken at other similar events in the past.

    The Kochs vs. Soros: Free markets vs. state coercion

    By Timothy P. Carney

    Palm Springs, California — At the front gates of the Rancho Las Palmas resort, a few hundred liberals rallied Sunday against “corporate greed” and polluters. They chanted for the arrest of billionaires Charles and David Koch, and their ire was also directed at the other free market-oriented businessmen invited here by the Koch brothers to discuss free markets and electoral strategies.

    Billionaires poisoning our politics was the central theme of the protests. But nothing is quite as it seems in modern politics: The protest’s organizer, the nonprofit Common Cause, is funded by billionaire George Soros.

    Common Cause has received $2 million from Soros’s Open Society Institute in the past eight years, according to grant data provided by Capital Research Center. Two panelists at Common Cause’s rival conference nearby — President Obama’s former green jobs czar, Van Jones, and blogger Lee Fang — work at the Center for American Progress, which was started and funded by Soros but, as a 501(c)4 nonprofit “think tank,” legally conceals the names of its donors.

    In other words, money from billionaire George Soros and anonymous, well-heeled liberals was funding a protest against rich people’s influence on politics.

    When Politico reporter Ken Vogel pointed out that Soros hosts similar “secret” confabs, CAP’s Fang responded on Twitter: “don’t you think there’s a very serious difference between donors who help the poor vs. donors who fund people to kill government, taxes on rich?”

    In less than 140 characters, Fang had epitomized the myopic liberal view of money in politics: Conservative money is bad, and linked to greed, while liberal money is self-evidently philanthropic.

    Continue reading at the Washington Examiner

  • Kansas: business-friendly or capitalism-friendly?

    Plans for the Kansas Republican Party to make Kansas government more friendly to business run the risk of creating false, or crony capitalism instead of an environment of genuine growth opportunity for all business.

    An example is the almost universally-praised deal to keep Hawker Beechcraft in Kansas. This deal follows the template of several other deals Kansas struck over the past few years, and outgoing Governor Mark Parkinson is proud of them. Incoming Governor Sam Brownback approved of the Hawker deal, and probably would have approved of the others.

    Locally, the City of Wichita uses heavy-handed intervention in the economy as its primary economic development tool, with several leaders complaining that we don’t have enough “tools in the toolbox” to intervene in even stronger ways.

    The problem is that these deals, along with many of the economic development initiatives at the state and local level in Kansas, create an environment where the benefits of free market capitalism, as well as the discipline of a market-based profit-and-loss system, no longer apply as strongly as they have. John Stossel explains:

    The word “capitalism” is used in two contradictory ways. Sometimes it’s used to mean the free market, or laissez faire. Other times it’s used to mean today’s government-guided economy. Logically, “capitalism” can’t be both things. Either markets are free or government controls them. We can’t have it both ways.

    The truth is that we don’t have a free market — government regulation and management are pervasive — so it’s misleading to say that “capitalism” caused today’s problems. The free market is innocent.

    But it’s fair to say that crony capitalism created the economic mess.

    But wait, you may say: Isn’t business and free-market capitalism the same thing? Here’s what Milton Friedman had to say: “There’s a widespread belief and common conception that somehow or other business and economics are the same, that those people who are in favor of a free market are also in favor of everything that big business does. And those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There’s a real distinction between being in favor of free markets and being in favor of whatever business does.” (emphasis added.)

    Friedman also knew very well of the discipline of free markets and how business will try to avoid it: “The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.”

    The danger of Kansas government having a friendly relationship with Kansas business leaders is that these relationships will be used to circumvent free markets and promote crony, or false, capitalism in Kansas. It’s something that we need to be on the watch for, as the relationship between business and government is often not healthy. Appearing on an episode of Stossel Denis Calabrese, who served as Chief of Staff for Majority Leader of the U.S. House of Representatives Congressman Richard Armey, spoke about crony capitalism and its dangers:

    “The American public, I guess, thinks that Congress goes and deliberates serious issues all day and works on major philosophical problems. Really a typical day in Congress is people from the private sector coming and pleading their cases for help. It may be help for a specific company like the [window manufacturing company] example, it may be help for an entire industry, it may be help for United States companies vs. overseas companies.”

    He went on to explain that it is wrong — corrupt, he said — for Congress to pick winners and losers in the free enterprise system. Congress wants us to believe that free enterprise will be more successful when government gets involved, but the reverse is true. Then, the failures are used as a basis for criticism of capitalism. “This is an unholy alliance,” he said, and the losers are taxpayers, voters, and stockholders of companies.

    Later in the show Tim Carney said that “A good connection to government is the best asset a company can have, increasingly as government plays a larger role in the economy.”

    Host John Stossel challenged Calabrese, wondering if he was part of the problem — the revolving door between government, lobbyists, and business. Calabrese said that “Every time you see a victim of crony capitalism you’re looking at a potential client of mine, because there’s somebody on the other side of all these abuses. When Congress tries to pick a winner, there are losers, and losers need representation to go tell their story.” He added that he lobbies the American people by telling them the truth, hoping that they apply pressure on Congress to do the right thing.

    He also added that it is nearly impossible to find a single area of the free enterprise system that Congress is not involved in picking winners and losers.

    While the speakers were referring to the U.S. federal government, the same thing happens in statehouses, county courthouses, and city halls across the country — wherever there are politicians and bureaucrats chasing economic development with government as the tool.

    It is difficult to blame businessmen for seeking subsidy and other forms of government largesse. They see their competitors do it. They have a responsibility to shareholders. As Stossel noted in the show, many companies have to hire lobbyists to protect them from harm by the government — defensive lobbying. But as Carney noted, once started, they see how lobbying can be used to their advantage by gaining favors from government.

    The danger that Kansas faces is that under the cover of a conservative governor and legislature, crony capitalism will continue to thrive — even expand — and the people will not notice. The benefits of a dynamic Kansas economy as shown by Dr. Art Hall in his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy may never be achieved unless Kansas government — at all levels — commits to the principles of free market capitalism.