Does Thomas Friedman understand economics? Read this column–
Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”
We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese …
We can’t do this anymore.
I am as cynical, and pessimistic, and misanthropic, and (if someone really really bugs me) obnoxious as they get; but I am not fatalistic – I don’t believe humanity is doomed. Friedman’s view however is precisely that – fatalistic (he says he’s an optimist, but he isn’t, not as far as this article goes). And that view either stems from his ignorance of economics, or his willingness to be part of – as Rothbard calls it – the Welfare-Warfare State. If the past is any indication, it is the second.
The “crisis” – some would call it a well-deserved hangover – stems from three deep-rooted civilizational problems – refusal to respect individual and property rights, refusal to understand the consequences of the “tragedy of the commons”, and a “God Complex” that the State suffers from when it comes to the market.
Individual and property rights are moral axioms; you could try to derive them from some metaphysical truth – it is important to guard against nitpickers – but not otherwise. What this means essentially is – individual before collective, always; and the junking of all forms of utilitarian calculus – social utility, public good, common good, public interest etc etc. A civilization that refuses to respect these rights, or indulges in Orwellian Newspeak when it comes to them, or is inconsistent when it comes to their practice is doomed to a state of perpetual crisis. You will then have pressure group warfare, lobbyists cutting each others throats, groups conspiring to rob, maim, kill other groups that they hate, egalitarian policies that enforce “equality of opportunity” and “equality of outcome”, will succeed in neither, but will create more and more animosity, and so on. All this will happen in the name of “democracy” and that is a fitting epithet because democracy refers to majoritarianism – Law is not what is Just, but what the Majority says is its Will. Respect for individual and property rights means the elimination of all laws that gives the State the power to dispose of any individual in any manner of its choosing – so “eminent domain”, all discriminatory laws – “affirmative” or otherwise, taxation laws, “moral” laws, “paternal”/ “nanny” laws, laws to protect “national security” etc etc will have to go. If this cannot be done, then “rights” are nothing more than “legal fiction”.
Some people understand all this, but their heart bleeds for those who are suffering from “unequal” distribution of wealth, lack of “equal opportunity”, or for some other egalitarian cause. Others believe that the absence of a State means complete anarchy – people cannot be trusted if left to their own devices, but the State can because it is not staffed by regular people, but by Gods – bureaucrats, and hence the State has to set the “rules of the game” from above. Still others exist who believe that freedom can lead to moral corruption; or that people are not “really free”, and that the omniscient, omnipotent State apparatus must step in to “guide” people. Such people cannot be argued or debated with – their axioms are different; they have to be made politically irrelevant if rights have to reign. Its a case of Either-Or, and there is no point in pretending otherwise.
That was the moral position on liberty. Now some practicalities.
I have mentioned the “tragedy of the commons” many times, but what does it mean? This question is all the more important because – I don’t know if Friedman is aware of this – Hardin’s chilling philosophical essay that popularized the phrase deals with the same unsustainable lifestyle argument which Friedman makes (refuting Hardin’s conclusion on population is more interesting that doing so with Friedman, but not this time).
The “tragedy” lies in a simple empirical observation that communists/ socialists will continue to be blind to – a man will take better care of his property than of property that is “not his”. Its not just about public pastures, but everything. I am sure people won’t piss in their cars even if there is no law against it, but won’t mind doing it on the roads even if laws exist (more so in India). The same goes for every piece of so-called “public property.” From roads, to airwaves, to rivers, to wildlife, to forests – the “tragedy” explains everything. It explains how property rights, however informal they may be, protect forests against deforestation, and in fact promote regeneration. It explains how ownership of forests and wildlife keeps poachers at bay, and actually increases the wildlife population (also read this and this – If wildlife pays, it stays). Further, Rothbard has written innumerable books and articles on how roads can be privatized, pollution controlled, ownership of airwaves granted etc – visit the Mises Institute website and search for them, or do the same on my blog (if you can’t find anything, leave a comment on this post). I haven’t found too many articles on property rights on rivers, oceans and seas – that would prevent water pollution, and the problems associated with excessive whaling and fishing. But I am sure that’s the way to go. The Rothbard article – “Who owns water?” is a step in that direction. While the finer points need to be figured out, there is no doubt about the existence of the “tragedy of the commons” – property rights allows people to invest in assets secure in the knowledge that they will reap the fruits of the efforts they put in.
The “God Complex” of the State is a pernicious problem. Markets cannot be controlled, especially by bureaucrats, who are selected from the same mass of people that go by the name “public.” The paper-pusher-cum-scribbler in a dusty office does not have any special insight as to the functioning of the market. That’s why every “market failure” is in fact a “State failure.” As always, the root of the problem lies in the egalitarian “Welfare State” whose main intention is to promote the welfare of those who vote the current crop of politicians to power – at the cost of those who didn’t.
The State will see that the market isn’t giving out loans to those who don’t have the ability to repay them. So, to “fix this injustice” it will legislate and offer incentives to people to loan out money to such borrowers. It will tamper with everything from interest rates to money supply to distort the market’s signaling mechanism. And when the signaling mechanism gets distorted, you end up with a pile up. Who’s to blame? Naturally the “capitalist pigs.” The politicians who were trying to do good, and the bureaucrat who ensured that the “good” happened are entirely blameless.
Airline companies enter the business to see which company can crash the most planes; they will employ bullock cart drivers to fly their planes; they will fit the noisiest, cheapest and most unreliable engines on their aircraft. No? The fact is – they enter to make profits, and a company that allows its planes to crash more than a couple of times a year will see its customers disappear. If you don’t agree, ask yourself which airline you will trust – one that lost twenty planes this year, or two? The honest answer will be two. In that case, why do bodies like the FAA or DGCA exist? The same can be said about “every” State regulatory agency. They “think” they help the market, but they end up creating barriers to competition and actually grant their seal of approval to any company that is still in business regardless of its QoS – if the company were up to mischief, surely the “agency” would have taken care of it. That is the thinking it helps perpetuate. No wonder people always get screwed during financial crises – they thought the super-bureaucrats employed by the “agencies” were actually watching their backs.
Friedman thinks that Mother Nature is saying “no more.” If she is, sell her to the market. She won’t complain any more. Further, he thinks the market is saying “no more.” He heard it wrong; the market was speaking in french. It actually said – laissez-nous faire – leave us alone. The market was telling the 800 pound imbecile – the State – to get off its back. There is no problem with the “growth model.” Laissez-faire capitalism will continue to deliver the goods as long as the State keeps its hands to itself. The China problem – the “more and more” happened because the market is shackled. Demolish the State, or at least make it withdraw completely from the market – from banking, from money, from regulation – and China will self destruct thanks to its currency manipulation. Otherwise, Friedman’s predictions will come true. Going green isn’t going to change anything; going laissez-faire will.