My goal – by teaching basic, foundational, principles of microeconomics – is to inoculate students against the bulk of the common economic myths that they’ll encounter throughout their lives – myths such as that the great abundance of goods and services available to us denizens of modernity is the result of a process that can be easily mimicked or understood in detail by smart people or planners– that the market value of goods or services can be raised by price floors (such as a legislated minimum wage) or lowered by price ceilings (such as rent control) – that benefits can be created without costs – that government is an institution capable of rising above the realities that ensure that private institutions never perform ‘perfectly’– that intentions are results – that destruction of property is a source of prosperity – that exchange across political boundaries differs in economically meaningful ways from exchange that takes place within political boundaries – that the only consequences that occur or that matter are those that are easily anticipated and seen.
The destabilizing effect of QE threatens global growth at a moment when none of the major economies is firing on all cylinders. By encouraging overinvestment in developing countries, it may have created new deflationary pressures. China built massive steel-making capacity that will now drive down the global price and lead to protectionist pressure in the U.S. This dislocation and wasted investment should make policy makers reconsider their faith in the power of monetary policy to stimulate growth, and put the emphasis back on pro-market reforms.
There has often been a tension between the Fed’s roles as regulator of the U.S. domestic economy and custodian of the world’s reserve currency. The QE era shows what happens when it ignores the latter responsibility. Bond-buying allowed the U.S. to pump up asset values, even as it has failed to stimulate the real economy.
U.S. presidential candidates have been quick to jump on China’s recent small devaluation as proof of currency manipulation aimed at stealing American jobs. The irony is that the Federal Reserve has been guilty of the biggest currency whipsaw the world has ever seen. And it has beggared its neighbors in the process.
Socialism has two relevant features: Central planning of the economy by political powers and the public provision of ordinary goods (as opposed to public goods such as national defense and judicial systems). This is distinct from welfare-state policies such as those found in the United States, Canada, and Europe. Sweden has a large and expensive welfare state, but it has a robustly capitalistic trade-driven economy that in many ways is more free-market than our own, with lower corporate taxes and fewer trade barriers. The difference between welfare programs and socialism is the difference between food stamps and the state-run groceries that were the bane of the common people’s existence in the old Soviet Union and in modern Venezuela. The former is imperfect, the latter catastrophic.
The price of free stuff ends up being terribly high. While Venezuela has endured food riots for years, the capital recently has been the scene of protests related to medical care. Venezuela has free universal health care — and a constitutional guarantee of access to it. That means exactly nothing in a country without enough doctors, medicine, or facilities. Chemotherapy is available in only three cities, with patients often traveling hours from the hinterlands to receive treatment. But the treatment has stopped. Juvenile cancer patients taken by their parents to the children’s hospital in the capital are being turned away because the treatments they need are no longer available. The scene is heartbreaking, but that’s the political mode of thinking: Declare a scarce good a “right” and the problem must be solved, regardless of whether that scarce good is any more plentiful than it was before.
Read more at: http://www.nationalreview.com/article/423011/venezuela-nicolas-maduro-socialism-economics
Debbie Wasserman Schultz was inept or unable to distinguish Socialism from the Democrats in a question from Chris Matthews. Perhaps she should read Kevin Williams.
“What I have argued in this book, and what the British experience convinces me even more to be true, is that the unforeseen but inevitable consequences of socialist planning create a state of affairs in which, if the policy is to be pursued, totalitarian forces will get the upper hand. I explicitly stress that “socialism can be put into practice only by methods of which most socialists disapprove” and even add that in this “the old socialist parties were inhibited by their democratic ideals” and that “they did not possess the ruthlessness required for the performance of their chosen task.”
Excerpt From: F. A. Hayek. “The Road to Serfdom.” University of Chicago Press, 2010-04-06. iBooks.
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