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The Loss of American Competitiveness

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from The Great Degeneration by Niall Ferguson

Experts on economic competitiveness, like Michael Porter of Harvard Business School, define the term to include the ability of government to pass effective laws; the protection of physical and intellectual property rights and lack of corruption; the efficiency of the legal framework, including modest costs and swift adjudication; the ease of setting up a new business; and effective and predictable regulations.  It is startling to find out how poorly the United States now fares when judged by these criteria.  In a 2011 survey, Porter and his colleagues asked HBS alumni about 607 instances of decisions on whether or not to offshore operations.  The United States retained the business in just 96 cases(16%) and lost it in all of the rest. Asked why they favored foreign locations, the respondents listed the areas where they saw the U.S. falling further behind the rest of the world.  The top ten reasons included:

  1.  The effectiveness of the political system
  2. The complexity of the tax code
  3.  Regulation
  4. The efficiency of the legal frameworks
  5. Flexibility in hiring and firing
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Soft Tyranny

From Alexis de Tocqueville’s Democracy in America  (published in 1840):

Thus, after taking each individual by turns in its powerful hands and kneading him as it likes, the sovereign extends its arms over society as a whole; it covers its service with a network of small, complicated, painstaking, uniform rules through which the most original minds and the most vigorous souls cannot clear a way to surpass the crowd; it does not break wills, but it softens them, bends them, and directs them; it rarely forces one to act, but it constantly opposes itself to one’s acting; it does not destroy, it prevents things from being born; it does not tyrannize, it hinders, compromises, enervates, extinguishes, dazes, and finally reduces each nation to being nothing more than a herd of timid and industrious animals of which the government is the shepherd.

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Capitalism Requires Optimism – Thoughts 2016 04 26

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The call for a higher minimum wage is an admission that policies are stifling economic growth. The best way to increase worker pay is to create a demand for their labor.  This means stimulating investment and encouraging risk taking.  Capitalism requires optimism.

Yet the question remains how much of our stagnation is due to poor policy and how much is due to a social and economic shift. Such shifts usually signal the need to drastically reallocate resources. The political challenge is to aid those who are on the painful end of the change without slowing down the needed transition.

Part of the solution to such changes in the past was the mobility of the people to move to where the opportunities were.  Strong safety nets may prolong such needed adjustment by discouraging mobility. Perhaps there should be incentives to relocate when needed.  Instead the programs seem to encourage people to stay in dying towns and industries.

The thought process that criticizes the wealthy and the 1% is the same as ethnic or racial bigotry.  The wealthy are faceless and stereotyped and treated as a monolithic bloc. They are not considered as individuals. If they were they would be seen as the diverse souls that they are. Warren Buffet, Steve Jobs, Elon Musk, and Mark Zuckerberg do not fit the same wealthy stereotype as Donald Trump.

The attraction that so many of the middle and working class have for Donald Trump raises the question of how much inequality is a problem in the eyes of the voters. They rally in record numbers to a candidate who brags how rich he is and engages in gaudy conspicuous consumption.  This stands in stark contrast to Warren Buffet who could buy and sell Trump several times over.

The measurements of inequality are distorted and exaggerated and I contend that it is a much greater problem in the minds of the academics and politicians than it is in the minds of the voters.   The absolute level of poverty and the stagnation of middle class income is a far greater problem.  The middle class does not care how rich Donald Trump or Warren Buffett is: they care that their own prosperity has flat lined or declined.

I just read the Annual Report of Berkshire and will be attending the annual meeting. In reading Warren’s report (very simple report- no glossy covers and no pictures) he remains optimistic and runs his business as of the government is irrelevant.  They should be.

That does not mean we should ignore them, but perhaps we give them too much consideration when we plan our lives.

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Authoritarianism as Science

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a gem from George Will in National Review, The ‘Settled’ Consensus du Jour

excerpts:

Four core tenets of progressivism are: First, history has a destination. Second, progressives uniquely discern it. (Barack Obama frequently declares things to be on or opposed to “the right side of history.”) Third, politics should be democratic but peripheral to governance, which is the responsibility of experts scientifically administering the regulatory state. Fourth, enlightened progressives should enforce limits on speech (witness IRS suppression of conservative advocacy groups) in order to prevent thinking unhelpful to history’s progressive unfolding.

Authoritarianism, always latent in progressivism, is becoming explicit. Progressivism’s determination to regulate thought by regulating speech is apparent in the campaign by 16 states’ attorneys general and those of the District of Columbia and the Virgin Islands, none Republican, to criminalize skepticism about the supposedly “settled” conclusions of climate science.

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Democracy Overrated

Democracy is two wolves and a sheep deciding what is for dinner. Liberty is a well-armed sheep with the same vote.

“Voting is the illusion of influence in exchange for the loss of freedom.” Frank Karsten and Karel Beckman

“The urge to save humanity is almost always a false from for the urge to rule.”  H.L. Mencken

“The more one considers the matter, the clearer it becomes that redistribution is in effect far less a redistribution of free income from the richer to the poorer, than it is a redistribution of power from the individual to the state.” Bertrand de Jouvenal

“The best argument against democracy is a five minute conversation with the average voter.” Winston Churchill

Democracy is supposed to be responsive to what the people want. I am often quite surprised to wake up and read the paper and discover what I wanted.  I had no idea.