The More Things Change . . .

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I will confess that I found this past presidential campaign sheer hell. I detested both Clinton and Trump, and voted for neither. I hoped that both would lose, and my only consolation was that they both did lose: Trump was defeated decisively in the popular vote, while Clinton was defeated decisively in the Electoral College contest. My view was and is that Trump will transform the Republican Party into a populist one, pushing nativism, protectionism, corporatism, and isolationism. It saddened me to see writers I had previously admired — such as Larry Kudlow and Steve Moore — who have long argued against the populist siren call to the Republican Party, succumb to it at last, in the form of Trump — The Boss. They, along with a large group of other soi-disant free market commentators, have been seduced by populism. This group I call “the Herd.”

Now, when those of us who are classical liberals — i.e., believers in the free movement of products, of physical capital, and of human capital — expressed alarm at Trump’s explicitly expressed nativism, animus toward Mexicans and Chinese, sexism of the crudest sort, and obvious protectionist aversion to free trade, the Kudlow-Moore Herd mooed, “Oh, he’s just saying that to get the workers’ votes. Don’t worry — he isn’t serious — it’s just bait for the bubbas.” The Herd never asked why the rest of us would ever be attracted by the pitch “Vote for The Boss — he would never do what he says he will!”

Well, even before assuming office, The Boss has started making major decisions as if he were already in charge. It’s as if he couldn’t wait. And it seems he was serious in his campaign.

One highly touted decision The Boss made recently was to coerce Carrier, a division of United Technologies that makes HVAC units, to keep roughly half the workers who were slated to lose jobs when the plant was moved to Mexico. Under pressure, Carrier agreed to keep about 800 of the jobs here. (The Boss’ propaganda ministry said it was 1,150 jobs, but it turns out that included 350 support jobs that were slated to stay anyway.) Gregory Hayes, United Technologies’ CEO, gave in to The Boss, and The Boss and his myrmidons hailed this as a triumph. Indiana, veep-elect Mike Pence’s state, sweetened the deal by giving the company $7 million in tax incentives (read: taxpayer subsidies), but clearly Hayes was most concerned with the continuing bad publicity driven by The Boss and his Herd, and the threat of a 35% tariff on Carrier gas furnaces made in Mexico.

The Herd never asked why the rest of us would ever be attracted by the pitch “Vote for The Boss — he would never do what he says he will!”

The reactions to The Boss’ gambit have been fascinating, to put it mildly. Richly ironic was Sarah Palin’s denunciation of the deal as “crony capitalism.” She wrote ruefully, “When government steps in arbitrarily with individual subsidies, favoring one business over others, it sets inconsistent, unfair, illogical precedent. . . . Republicans oppose this, remember? Instead, we support competition on a level playing field, remember? Because we know special interest crony capitalism is one big fail.” This is rich, considering Palin was one of the Republican Party elite who came out in support of Trump. And she may come to rue her small speck of intellectual honesty, since she has been rumored to be under consideration for government positions and The Boss has shown he tends to appoint his supporters to administrative posts.

Moving now from the ironic to the surreal, the arch-free-market opponent Bernie Sanders also criticized the deal. Yes, socialist Sanders was angry that The Boss didn’t “save” all the jobs by immediately imposing a massive import tax on the products of any company that dares to offshore its operations. Sanders thinks that “United Technologies took Trump hostage and won,” by getting tax breaks in exchange for only half the jobs. In fact, Sanders holds that The Boss has endangered the jobs of countless American workers, because “he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be reevaluating their stance [now].”

Surreal indeed! The loopy old Stalinist tool can’t imagine any other reason why businesses would legitimately want to move operations abroad than to get tax breaks. Certainly not to escape our punitive corporate income taxes, currently the highest in the industrialized world, and about triple the rate of Ireland. Certainly not because of our dysfunctional common law system, the only one without the “loser-pay” (or “British”) rule that limits frivolous lawsuits. Certainly not to escape Obamacare, a law that saddles companies with the obligation to provide costly health insurance to their full-time employees whenever they have more than 49 of them. And certainly not because of the metastasizing cancer of regulation, which under Obama has simply exploded. Here the senile socialist Sanders complains that United Technologies made a profit last year of $7.6 billion, and its top execs received $50 million each. (Imagine that! Top execs being paid less than one tenth of one percent of the billions in profits they helped produce! Outrageously generous!)

The loopy old Stalinist tool can’t imagine any other reason why businesses would legitimately want to move operations abroad than to get tax breaks.

In a revealing interview with CNBC’s Jim Cramer, United Technologies’ CEO Hayes explained his thinking. Nobody listening to the interview could doubt that Hayes is a decent and patriotic man, but also a man committed to running his company profitably and for the long term. He signaled that he caved to The Boss’ demands because he feared government retaliation against the other three United Technologies divisions — Pratt Whitney engines, Otis Elevator, and the aerospace division — no less than against Carrier. As he put it, “I was born at night, but not last night. I also know that about 10% of our revenue comes from the US government.”

Hayes outlined the reasons why his company had moved Carrier’s — but no other divisions’ — operations down to Mexico. While the skills of the employees at the other divisions are extraordinarily high, the skills at the assembly line for HVAC units are much lower. Moreover, Hayes noted, not only are labor costs lower in Mexico (80% lower) but the company’s existing Mexican plants, the absentee rate was only 1% and the turnover rate only 2%. These figures are much lower than those for the American plant.

Here Hayes touched upon two points I have to work to explain to my business ethics students — who, despite their choice of major, often incline to the Clinton-Sanders-Obama view of capitalism. First, besides intellectual virtues, employers have to consider moral virtues as well. And employees are often not “perfect substitutes” here: some are more inclined to show up for work reliably and work enthusiastically and conscientiously, because for them work is a moral prerequisite for being a virtuous person. Unfortunately, this attitude is more prevalent abroad than in heavily unionized American factories. (I attribute this to the unionization, not the Americanization, of the workers.) Second, what makes employees more valuable is their productivity, not their relatively low salaries. The top paid quarterback in the NFL is a lucky fellow named Luck, who earns $26.4 million a year from the Colts organization. Suppose I called the Colts management and offered my services for a mere 1% of that cost. Would the Colts jump at the chance to “snap up” an old, out-of-shape, overweight, nearsighted, clumsy, uncoordinated philosopher who has never played football in his ludicrous life? Hardly. But if the Colts management could find a man with the skill set of Mr. Luck for significantly less, then they might consider it.

What makes employees more valuable is their productivity, not their relatively low salaries.

Hayes explored this latter point when he noted that United Technologies sent 45,000 employees through their “employee scholar” program, with 38,000 receiving degrees. United Technologies spent $1.2 billion over the last two decades on increasing the skills — the intellectual virtue — of its workforce. And Cramer — an intellectually honest progressive liberal, which is as rare as a sympathetic fascist — pointed out for his CNBC audience (to wit, progressives who make money off capitalism even as they despise it) that United Technologies had early moved a plant from Nogales, Mexico to Florence, South Carolina — at a cost of $60 million in the first year. Notice that neither The Boss’ propaganda machine nor the Herd of establishment Republican apologists even mentioned the onshoring of the bigger Otis plant at great expense, nor the huge amount of money the company has put into improving the skills of tens of thousands of American workers. They mentioned only the 800 inefficient assembly-line jobs.

Hayes noted that United Technologies will now invest $16 million in the existing Carrier plant, to automate it as much as possible, to make it “cost competitive.” So the jobs “saved” by The Boss are not destined to last long. Yeah, the Mexicans won’t “steal them,” but the robots will. In short, don’t blame Juan — blame R2D2!

Hayes made one other point that one wishes The Boss could grasp: “The genie of globalization is not going back into the bottle. . . . Free trade is still essential to the growth of this country. This country was founded on two principles: immigration and free trade.” Boss, let me introduce you to Thomas Jefferson!

But the Herd was mightily pleased with what The Boss did to United Technologies. Larry Kudlow and Neil Cavuto, who should know better than to tout protectionism and cronyism, approved on air, with Cavuto adding the deft ad misericordiam touch that these jobs were saved just in time for Christmas — which rather makes The Boss the Savior.

The jobs “saved” by Trump are not destined to last long. The Mexicans won’t “steal them,” but the robots will.

One of the founding members of the Herd — Glenn Reynolds — chimed in his support for The Boss’ crony capitalism. Reynolds wrote an amazing — really, psychedelic — piece favorably comparing The Boss and his tweets with FDR and his radio “fireside chats.” Like, far out, man, America is in the Great Depression redivivus, and the Boss is here to save us!

Of course, as Reynolds himself concedes, FDR probably extended the Depression by seven years, but he certainly made economically illiterate Americans feel like he cared. And I guess it’s better to feel the pain you cause in others than to be oblivious to it, although I am more inclined to say you shouldn’t cause the freaking pain to begin with.

But Reynolds’ point is that The Boss, in “saving” these pathetically few jobs, showed more “compassion” than Obama, because when Obama was asked about saving jobs at this Carrier plant, the Prez said that the answer was improved job (re)training. That caused Reynolds to wax sanctimonious, saying that when a factory closes (from outsourcing, free trade, automation, or just plain producing a product the public doesn’t want), the people laid off and the local economy suffer. And the existing job retraining programs — including the Trade Adjustment Assistance program (TAA) — don’t work well. Here Reynolds quotes a study done by the Heritage Foundation that says the TAA doesn’t work — though considering the infamous hit-report the Heritage Foundation did some years back on the cost of immigrants to the nation, which cemented the organization’s turn from conservativism to populism, I no longer put any credence in its reports.

Now, readers of this journal over the last eight years will, I believe, not accuse me of being a blind Obama supporter — far from it. But in this case, Obama is correct and Reynolds, the Heritage Gang, and the rest of the Herd is wrong. We all learned from Joseph Schumpeter that economic progress is driven by “gales of creative destruction,” when old, less efficient ways of doing business are eliminated by newer, more efficient ones. Cathode ray tube TVs died rapidly when flat screens came out; VHS tapes died rapidly when DVDs became available. And human-piloted cars, trucks, and buses may soon be replaced by autopiloted ones. And we all know what Schumpeter pointed out, that this process is often a hardship on some workers as they undergo retraining for more productive jobs. No doubt, if truck, delivery van, and bus drivers, as well as cab and Uber drivers are all put out of work by self-driving cars, some people will find it hard to find other, more productive jobs over a relatively short period of time. But most will find other, more productive work, easily.

FDR probably extended the Depression by seven years, but he certainly made economically illiterate Americans feel like he cared.

For those workers who can’t make the shift easily, the answer is precisely to retrain them. What other options are there? To let them languish on food stamps? Or (as the lumpenprotectionists, Luddites, and nativists would urge) simply outlaw progress? Let’s face it: progress is a bitch!

Let’s consider this for a moment. No doubt many truck and cab drivers will oppose self-piloting vehicles. But we as a country lose roughly 38,000 people a year in auto accidents, more than we lost in the Korean War. Does Mr. Reynolds — so much more compassionate than we unpatriotic, cosmopolitan, hard-hearted, elitist, and egoistic globalists — really want to see those deaths occur forever, lest some cabbie in Queens can’t find work?

As to why the TAA and the other few dozen other government retraining programs don’t work well, they don’t work well for the same reason public schools don’t work well: when the government runs a monopoly, it fails just all other monopolies do. The answer (in both cases) is to separate the government funding from the service by voucherizing it.

Specifically, we should kill all the retraining programs, along with (say) the Department of Energy, and use all that money for vouchers for long-term unemployed so that they can go to a public or private community colleges to get retrained (or get the high-school diploma they should have gotten when they were young). I would allow trade unions and private industries to use these vouchers to expand their apprenticeship and training programs they already have, and to open full-fledged trade schools as well. For example, the United Electrical, Radio and Machine Workers of America could run a chain of trade schools where people could come to learn the trades, paying the union with vouchers and perhaps by agreeing to be dues-payers for some period of time (say, ten years). Oh, and end the Obama Administration’s war on for-profit colleges, a war that killed so many hundreds of decent trade schools for no reason other than a desire to please the teacher’s unions. (The fall of the ITT college chain alone eliminated 130 campuses.)

There are several reasons why The Boss’ “victory for American jobs” is in fact disastrously bad.

First, it forces Carrier to keep paying high wages to its employees, thus ensuring that it will be unable to compete with foreign-produced products in the long term. This is the kind of “good deal” the US autoworkers received: ludicrously sweet contracts that drove two of the major American automakers into bankruptcy.

Government retraining programs don’t work well for the same reason public schools don’t: when the government runs a monopoly, it fails just all other monopolies do.

Second, it punishes American consumers, who will be forced not just to pay continuing high prices for Carrier’s products but also to pay higher taxes to provide the subsidies. The Boss’ “big-hearted” concern for the workers obviously did not extend to the consumers or taxpayers.

Third, as Bastiat would note, while the populace — with the Herd leading the cheers — hails the Boss for the 800 jobs saved, it will not see the many of thousands of jobs that will be lost. Any company, foreign or domestic, that is thinking of building new plants here knows that if any of those facilities turn out to be unprofitable — say, because the workers form a union as unreasonable as the UAW — and the company moves to close the plant, The Boss will punish it with whatever sort of sanctions he can dream up. As the French have discovered, the harder you make it to fire workers, the more reluctant companies will be to hire them in the first place, so you wind up with chronic high unemployment.

This is where the Herd may be miscalculating. Kudlow, Moore, Laffer, Cavuto, Reynolds, et.al. assume that with lower corporate taxes and fewer regulations, the economy will boom and job growth explode as companies repatriate foreign profits and open new plants here. But in the face of The Boss’ demagogic, autocratic governance, the companies may instead use the money to buy back stock in their own outfits or invest the money abroad. The good effects of The Boss’ more classically liberal policies may be trumped by the bad effects of his populist ones.

The harder you make it to fire workers, the more reluctant companies will be to hire them in the first place, so you wind up with chronic high unemployment.

In fact, the Herd’s admiring lowing in response to his bullying of Carrier may be confirming to The Boss that his protectionism is working. He moved on rapidly to attack another company — Rexnord Corporation — for daring to move a plant to Mexico and “viciously fire” 300 existing employees. So far the company hasn’t caved, leading The Boss to renew his threat to hit Mexican imports with a 35% tariff. Ford, which he threatened earlier, still appears to be moving forward with plans to build small cars in Mexico. So The Boss may well be forced to carry through with his threat.

This is all reminiscent of Obama’s first year, in which he started trade wars with Mexico and Canada, while engaging in crony capitalism with environmentalist companies. As the cynical but insightful French put it, the more things change, the more they stay the same.




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The Decline and Fall of the American Empire

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It is with a great deal of sadness that I report that recently Bangladesh, a small nation in southeast Asia which is the country of origin of my father and his side of the family, collapsed from a 40-year-old democracy into a dictatorship. How this happened is interesting, both in absolute terms and also relative to politics in America.

You see, Bangladesh did not collapse by means of military coup or dictatorial takeover. Instead, it became a dictatorship by means of a democratic election. For the past 40 years, ever since Bangladesh won its War of Independence against Pakistan, every time the government called for an election, the heads of the two major Bangladeshi political parties, which are (1) the Awami League and (2) the Bangladesh National Party (BNP), handed over the election process to a “caretaker government,” a neutral group of aged respected lawmakers and leaders, who administered a fair and neutral election. Corruption and bribery have always been widespread in Bangladesh, but, in spite of this, the national elections were always kept clean and honest by the caretaker government.

But in the last election, the Awami League, which had been in power for several years and was widely hated and destined to lose at the polls, simply called an election, refused to let the caretaker government in, and held rigged, phony elections. The BNP boycotted the elections and called for general strikes and opposition rallies, but ultimately the BNP’s efforts were for nothing, as the Awami League put down the opposition movement by means of the police, and maintained control.

Sheik Hasina, the leader of the Awami League, is now the de facto dictator of Bangladesh. Interestingly, Hasina is a woman, and she is one of the world’s first and few female dictators. As a case study in the psychology of a tyrant, it is worth noting that Bangladeshi people generally believe that Hasina was enraged when Bangladesh’s microcredit banking pioneer Muhammad Yunus won the Nobel Prize, which she felt should have gone to her instead, for brokering a minor peace treaty with the northern tribes. This may have inflamed her anger and her ambitions. The Awami dictatorship is real, despite the fact that Awami propaganda says that the League was democratically elected and that Bangladesh remains a democracy. Something similar exists in Russia with Putin, who is essentially a democratically-elected dictator. A number of other countries also put forward a face of democracy to seek support from the West, while actually being run by a ruling class.

History may classify every president from Wilson forward as an “emperor,” and it is mere semantics to ask whether the term is correct.

The decline and fall of the Bangladeshi democracy reads like a dire prophecy of what is going to happen in America if libertarians do not start winning big at the polls, and soon, in many different elections across states and nationally too. I will return to that idea later in this article, but here, having discussed Bangladesh, I would also like to mention Rome. In Gibbon’s Decline and Fall of the Roman Empire, it is shown that Rome deteriorated slowly, insidiously, with the very greatness and majesty of the Empire ultimately leading to the bloated corruption that consumed Rome and became Rome’s undoing. The book argues that Rome outsourced its military to the barbarians, and eventually those same barbarians turned on Rome and destroyed it. It is worth noting that, at the time when history regards Rome as having transformed itself from a Republic into an Empire, in the era of Julius Caesar and Augustus, the Romans themselves had no such idea. As shown by the writings of that era, the early Roman Empire was regarded as the continuation of the Roman Republic, and the early emperors were considered leaders of the Republic, not dictators.

What does all this mean for us here in the United States? I want to make two points. First, I think that if America ever descends into dictatorship, it will probably happen through the Bangladesh method of rigged elections followed by a strict police control of the opposition, instead of an armed revolt or military coup. The Republicans essentially rigged the vote in Florida for Bush in 2000 (or, at the very least, they refused to do a recount to establish what the accurate result of the vote really was), and once the Supreme Court gave the stamp of approval, they got away with it. If the same thing happened but on a bigger scale, if the Democrats rigged the votes in Michigan and Illinois and Missouri and won the White House, or if the Republicans rigged the votes in New Jersey and Wisconsin, and such things started to happen frequently, then what could be done about it? Nothing. And so, slowly and as by means of a spreading illness, American democracy could collapse into a sham democracy, a dictatorship.

If democracy in the US collapses, then the libertarians and the Tea Party may rebel (unless it is the GOP that becomes the ruling party), but the American military and police forces could probably put down any armed rebellion. The only thing that prevents this from happening is that elections in the US tend to be run at the local level by ordinary patriotic Americans who are too naive to understand the dangerous power that they possess as the stewards of our democracy.

Second: people see this era as the time of the Great Recession. But history may look back upon our time as that of the decline and fall of the American Empire. In the post-World War II era, and especially in the post-Cold War era and the War on Terror era, the United States of America has been the one and only true world power. We flex our military muscle around the globe, with wars in Iraq and Afghanistan, and military bases in Europe and Japan, and drone strike assassinations in Pakistan and Yemen. This by itself is enough to justify calling us an empire. History may classify every president from Wilson forward as an “emperor,” and it is mere semantics to ask whether the term is correct. Certainly, if we are an empire, then our leader is an emperor, and Bush acted like one, and Obama sure acts like one too.

If we are an empire, it may also be appropriate to say that the Great Recession is our decline, and will end with our fall. If the Great Recession never ends, then America is destined for widespread poverty, which could end in discontent, riots, and crime that will provoke a government crackdown and the rise of a police state. Many economists project that the recession won’t end until 2020, for another six long years. Millions of people remain unemployed, and if the jobs aren’t there to support them, and these people need food to eat, then chaos is coming.

People like to think that the Great Recession will end and good times are just around the corner. I certainly hope they are. Nothing would make me happier. But the structural defects in the US economy act to prevent growth and maintain stagnation, and only liberty could fix this. So unless libertarians start getting elected all over the place, America may be doomed. The structural defects are the various details of the manner in which the statist government’s taxes and regulations are stopping a growth-fueled economic recovery. Welfare motivates people not to work, and millions of poor people invest their thought in figuring out how to milk the welfare system, instead of figuring out how to become productive assets to the economy. These people vote for statists and against libertarians. This is not to say that we should let the poor die, but it does explain a lot about why the system is broken and can’t be fixed.

The minimum wage prevents employers from hiring Americans for low-skilled, low-paying manufacturing jobs, and these jobs are sent to China or Mexico. Meanwhile, regulations make doing business very difficult in the United States, and taxes make it expensive to live and work here. So higher-skilled, middle class jobs get outsourced to India. Just as with outsourcing the army to barbarians by the Roman Empire — something that destroyed Rome when the barbarians turned against the Empire — outsourcing of jobs may be the final source of the economic decline of the American Empire. The fact that government policy motivates employers to send American jobs overseas, with millions of jobs sent out already and more to come, explains a lot about why the American economy suffers while China’s economy and India’s economy grow.

I once heard someone say that America “outsources its labor standards,” meaning that our workers are paid and treated much better than the workers in third-world countries who produce much of what we consume. That is true, and it leads naturally to the outsourcing of our entire low-skill low-wage manufacturing industry, which, if those jobs had been kept in the USA, could have provided a foundation of growth with which to revive the sluggish economy.

President Obama, in the 2014 State of the Union speech, advocated raising the minimum wage. The general public met this proposal with indifference or support, not with the shock and outrage it deserved.

The minimum wage for American workers stands at over $7 an hour, plus legally mandated employer-provided health insurance, membership benefits from labor unions, Social Security for retiring workers, Medicare and Medicaid for poor workers, a social safety net of food stamps and SSI disability and unemployment benefits, and the tax-funded services given ”free” to workers but really paid for by the taxpayers — such benefits as public transportation and public education. The real cost to society of paying an American manufacturing worker may be $35 an hour. Factory workers in China are getting paid under $2 an hour, with negligible benefits, to make our computers, and our smartphones, and our tablets, and our other electronic devices, and our washing machines, and our televisions, and our children’s toys, and our flashlights, and our furniture, and our clothes.

It is basic economics, which most Americans seem not to understand, that a business must include the cost of making a product, including the salary and benefits paid to workers, in the retail price at which the product is sold, otherwise the product will be sold at a loss. Unless we want to pay $300 for a simple low-quality white cotton shirt, or $10,000 for a new cellphone, these things must be made in China, and businesses could not profitably employ Americans to make them. Do you wonder why the US economy has not recovered yet?

The liberals want us to solve the problem by imposing our artificially high labor standards on foreign workers. The AFL-CIO, for instance, has been active recently in organizing labor unions in Bangladesh. The libertarian solution, in contrast, is to deregulate working conditions here in the US so that we can bring manufacturing jobs back here. And boy, do we ever need those jobs! If the outsourcing trend is not stopped, then soon we won’t have enough jobs left in the USA for our income to support our first-world lifestyle. As libertarians, we know that lunches aren’t free, and we must pay for our standard of living by working for it. But President Obama, in the 2014 State of the Union speech, actually advocated raising the minimum wage. The general public met this proposal with indifference or support, not with the shock and outrage it deserved. It is political suicide to suggest that we should abolish the minimum wage and end welfare for workers and let the free market set wages and working conditions. But this political suicide may result in economic suicide and national suicide and real suicides, when people can’t find jobs and they and their families are literally starving, with no escape in sight.

Every libertarian knows that freedom leads to prosperity and government control leads to poverty, as well as to dictatorship. We all know that when the baby boom people clamor to protect their Social Security, when politically connected businesses cry for bailouts, when Wall Street asks the Federal Reserve to spend more money, when the lower middle class seeks to tax the rich for money to spend on mushy, wasteful programs that claim to help the poor while merely destroying the nation’s wealth, what we see is the destruction of free market capitalism — the system that safeguarded our freedom. We know that we are seeing the march down the road to serfdom. But the American people refuse to learn that lesson, and we libertarians don’t appear to be winning either the war of ideas, or of political campaigns. Pessimism, which I have always opposed, now seems more and more justified. Apparently it is a question of when, not if, we will witness the decline and fall of the American Empire; and our sole consolation must be that later historians will find our behavior as fascinating as Edward Gibbon found the Romans’.

Please, hope that I am wrong, but do what you can to make this an inaccurate prophecy.




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And We All Frack On

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Several recent stories show that the amazing technology of fracking continues to transform the energy world.

First is the news out of Russia that it has begun drilling a well that aims to tap the huge Bazhenov shale formation. The Bazhenov field, in Siberia, may be the biggest shale formation in the world.

Until now, Russia hasn’t bothered with fracking, even though it has the world’s largest reserves of shale oil (and the ninth largest of shale gas), because it has immense reserves of conventional fossil fuels. But lately its conventional production has begun to stagnate.

So Russia is allowing Royal Dutch Shell and Exxon Mobil to partner with its state-owned Gazprom Neft to start the process of developing fracking operations. How quickly it can mimic the American success in this area is hard to tell — certainly, other countries with large shale reserves (such as China, Poland, and the UK) have yet to get any production going, because the technology is tricky. What Russia has going for it is that — unlike the US — Russia has a leader who actually wants to enhance fossil fuel production, rather than destroy it.

Even more fascinating is the report out of Brussels that the European Commission now wants to cut back on the “climate protection” schemes it has pushed in the past and — wait for it — embrace fracking!

Yes, apparently the Commission’s plan is to step back from its aggressively Green agenda, called “20-20-20,” set back in 2007. The plan then was to achieve a 20% drop in greenhouse gas emissions, raise the EU’s output of renewable energy to 20% of all energy consumed, and achieve a 20% increase in the EU’s energy efficiency — all by 2020. The plan now is to switch to pursuing these green energy goals only on a voluntary basis.

As regards fracking, the Commission now intends to establish only minimal rules, instead of the very strict ones it was considering.

The interesting question is whether Germany’s head Angela Merkel will continue to push for an increase in the use of renewables. She has set the goal for generation of renewable energy in Germany at 60% by 2036. Considering that after Fukushima, Merkel ordered that the German nuclear power industry be closed by 2022, and that half the plants are already shuttered, achieving the renewable goals will drive the cost of German power through the roof.

But she is running into flak from German industry. An article late last year noted that the rising energy prices in Germany and dropping prices elsewhere were beginning to put pressure on German manufacturers to start offshoring much of their operations.

I mean, this is just fascinating: when America is finally free from our current Green president, and we once again encourage domestic oil and gas production, we may find that we get back some of the heavy industry we lost to the Germans decades ago. Hell, maybe their automakers will completely relocate here.

Of course if they do, they will need new names. Instead of Bayerische Motoren Werke, might I suggest Tennessee Motor Works? And Mercedes Benz — well, “Mercedes” is so dated. We might try “Miley” (after our famous twerker-girl pop star). Perhaps “Miley Bends” would work . . .

A recent Wall Street Journal piece noted that many EU companies are moving production to the US, because of our relatively inexpensive energy — and, one might add, because at least in the half of all American states that have right-to-work laws, our labor rules are more realistic.

Finally there is a story about a start-up company called Siluria, which may possibly have solved the technological hurdles in the way of turning abundant natural gas into cheap gasoline — gasoline at about half the price of the current product distilled from petroleum.

Siluria is trying to do what so far has been impossible. While gas-to-liquids plants do exist (plants that convert natural gas to liquid fuels, including gasoline), they are very costly. It takes a lot of energy to do the conversion. For years, companies have searched for a catalyst that would make the conversion more cost-efficient, but so far, no catalyst has succeeded. Siluria has a new approach: it has built an automated system for making and trying out new catalysts. The system has already sifted through 50,000 possibilities, and the company feels that the performance of the catalyst currently in use at its experimental conversion plant justifies opening two larger-scale plants to prove to investors that it has a commercially viable approach.

A number of other companies are trying to find a commercially attractive way to convert natural gas to liquid fuels — none of which, please note, receiving the lavish funding accorded Obama cronies’ multitudinous green energy companies (most of which have failed).

In fact, the whole fracking revolution was entirely the creation of a handful of brilliant entrepreneurs in the private economy, operating in the face of the administration, not with its help. Over the decades, the role of the federal government in confronting our energy dependence on the Mideast has been one of trying to pick winning technologies, and failing every time. Not just failing, but failing at a cost to taxpayers of billions of dollars, all the while impeding private enterprise.

It is time just to end the idiotic Federal Energy Department, and let the free market solve the problem.




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Crony Car Capitalism Capper

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Obama’s reelection hardly negates the fact that his regime is one of the most corrupt in American history. This fact is by now obvious to all but the most partisan Obamistas. Crony green energy deals, crony college deals, crony car industry deals — the list is long.

But among the most egregious was the rigged bankruptcy of GM and Chrysler, in which the legitimate secured creditors were cheated out of what they were due under settled law in favor of the UAW — which had conveniently contributed tens of millions of dollars to Obama’s coffers. The UAW was to begin with the biggest reason that American auto companies became basket cases, and it received massive amounts of stock in both companies. It was then allowed to liquidate its stock before the taxpayers were allowed to liquidate theirs. The taxpayers ate billions of bucks in losses.

All this dirty business was done to protect grossly inefficient, overpaid, greedy auto union workers, most of whose jobs would likely have been saved (albeit at lower compensation) in a regular bankruptcy.

Finally we learned what has to be the ultimate joke. In the corrupt crony bankruptcy, Chrysler — after being bailed out with billions of taxpayer dollars — was essentially given away free to an Italian car company, Fiat. Fiat used the opportunity to expand its presence in America. And the most recent news is that Fiat will likely move some of the Jeep operations to China, and the rest of the Jeep and Chrysler operations to Italy.

As the report explains, “To counter the severe slump in European sales, [Fiat] is considering building Chrysler models in Italy, including Jeeps, for export to North America. The Italian government is evaluating tax rebates on export goods to help Fiat.”

So the Italian taxpayers will pay the highly unionized Italian auto workers to make cars at a cheap subsidized price — to put American auto workers out of work, and ensure that the American taxpayers get the ultimate hosing.

The stench from this corrupt deal grows in intensity every day, with each new permutation of the putrid process.

Is it too much to hope that the House of Representatives will mount a serious investigation into the whole crony crowd responsible for this abortion? I mean (to name names) Obama, “auto czar” Steve Rattner, the management team of GM and Chrysler, including Sergio Marchionne (CEO of Fiat), and especially all the leaders of the UAW?

Alas, it probably is too much to hope. The crime of the century will likely be swept under the carpet of history.




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Governments Finally Outsourcing

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A report out on a small Michigan city points the way for other school districts to deal with their looming fiscal problems.

The city is Highland Park, which faces a major problem with its school district, consisting of three schools and 1,000 students. The system ranks near the bottom in the state academically, and it is facing a fiscal fiasco.

In fact, only a wretched 22% of the system’s third-grade students passed the state’s reading exams, and a pathetic 10% of them passed the math exams, last year. Only 10% of its high school students tested proficient on reading, and 0% — yes, precisely none of them — tested proficient in math.

This, in a district that last year spent over $16,500 per student, which is 80% more than the average per student expenditure for the state (which last year was about $9,200 per pupil)!

Moreover, despite the fact that its student population has plummeted by two-thirds in the past five years, the district’s deficit has exploded — reaching over $11 million last year.

So the Highland Park school district has taken a bold step: it is borrowing a tool commonly employed in private industry, outsourcing — the process by which one company hires a second company to handle some part of its operations. For example, a major retailer (such as Walmart or Costco) will often hire industrial janitorial firms to handle the cleaning of their stores, rather than hiring janitors within their own companies.

Outsourcing has a number of benefits, most importantly improving efficiency and increasing accountability. It improves efficiency because the company that outsources operations will be able to hire a company that specializes in that aspect of business. It improves accountability, because if the company outsourcing doesn’t see an improvement in that aspect of its business, it can terminate the service and hire another contracting firm to do the job. This puts pressure on the contracted company to do the job properly and within the price negotiated.

Highland Park is outsourcing its entire school system to the charter school company Leona Group.

The Leona Group runs 54 schools in five states. While almost half the students in them don’t score at standard levels, that is on average better than the public schools they replace. And in Michigan, 19 of 22 schools that Leona runs do meet state standards. Moreover, Leona’s contract is for five years, so if it doesn’t dramatically improve student outcomes, it can easily be replaced. That is the missing factor in district-run schools: accountability.

Charter schools have some major advantages over district-run schools. While the charters are overseen and funded by the district, they have substantial freedom when it comes to setting union contracts, curricula development, and teacher standards. And precisely because they are not controlled by teachers unions, they are usually much less costly to the taxpayer.

Indeed, Leona Group will charge the district only $7,100 per student, plus an annual management fee of $780,000 — dramatically less than what the district is currently paying.

Public school outsourcing is a growing trend. Highland Park is the second district in Michigan to outsource its schools to charter schools. Several districts in Georgia have also done the same thing. Of course New Orleans has already converted most of its schools to charters (which has already produced a dramatic increase in graduation rates) and even allows its students to use the newly issued state educational vouchers.

Other districts are now eyeing this novel idea — novel, that is, only in the world of government; it has been a staple of private industry management forever. In Michigan alone there are 48 districts in fiscal peril (with a collective $429 million in annual deficits).

Naturally, the teachers unions are fighting outsourcing fang and claw, but given the looming financial disaster, the pressure for extensive education outsourcing is increasing rapidly.

Outsourcing district-run schools to charter school companies is a tool that many districts can and should consider, especially as more and more of our cities declare bankruptcy.




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