Milton Friedman Fridays - On The Environment &c.

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Oil: It's Not Black & White (UPDATED)

As a general rule, I look to the efficiency and amorality of the market to solve economic issues. I guess that makes me libertarian. However, my libertarian-ness has limits. I won't get into those here.

From that general rule, I find myself hesitant of any plan that seeks to manipulate the market to attain some desired, utopian end. One example of this would be "an end to oil dependency." You see, I used to just accept, like everyone else, that dependence on oil for our energy use was an unmitigated bad--the blackest of black.

(nor should this be interpreted as a call for laissez faire, whatever)

My opinion is shifting. Like any other traded good, and especially one so vital to the operation of a country, I think oil forces the United States to make compromises and care about parts of the world which would otherwise receive no attention. And I don't buy the "blood for oil" arguments of the most ardent anti-Bush people. Sorry, folks, President Bush doesn't/didn't just take his marching orders from Exxon & Haliburton.

And I'm worried about the unintended consequences of "going green" or even of imposing some sort of pigovian tax. Sure, I'm sympathetic to a plan that trades cuts in income taxes for a carbon tax, but I'm worried that under such a scenario, the poor will pay--and not just the poor of this country. I'm reminded of the failure of the massive ethanol subsidy which contributed to worldwide food shortages and famine.

I bring all of this up because of an article in the Wall Street Journal which argues, essentially, that oil dependency and the moderation in foreign policy it forces is good. It's a persuasive essay written by someone, Roger Howard, who has done his homework.

While there are, of course, circumstances in which oil can exacerbate tensions and be a source of conflict, it can also act as a peacemaker and source of stability. So to identify America's "foreign oil dependency" as a source of vulnerability and weakness is just too neat and easy.

It's at least worth considering because, like so many other things, the question of oil is not black & white.

12 December 12:50am BST: RD at Pendulum Politics responds.


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Vote McCain: An Appeal To Fiscal Libertarians & Conservatives

I know you're out there, those of you who consider yourselves fiscal conservatives or libertarians, but who have somehow talked yourselves into voting for Barack Obama.

Many of you have persuaded yourselves that by electing a young black man as President, the nation will somehow have healed itself of the open wound of slavery and segregation.

This fantastical dream--for that's what it is--will come at an extremely high price, if, indeed, it ever does come.

Daniel Henninger puts its cost--America's transformation into a Western European-style socialist democracy--in very plain terms.

[...]

I don't agree with the argument that an Obama-Pelosi-Reid government is a one-off, that good old nonideological American pragmatism will temper their ambitions. Not true. With this election, the U.S. is at a philosophical tipping point.

The goal of Sen. Obama and the modern, "progressive" Democratic Party is to move the U.S. in the direction of Western Europe, the so-called German model and its "social market economy." Under this notion, business is highly regulated, as it would be in the next Congress under Democratic House committee chairmen Markey, Frank and Waxman. Business is allowed to create "wealth" so long as its utility is not primarily to create new jobs or economic growth but to support a deep welfare system.

[...]

This would be a historic shift, one post-Vietnam Democrats have been trying to achieve since their failed fight with Ronald Reagan's "Cowboy Capitalism."

Of course Cowboy Capitalism built the country. More than any previous nation in history, the United States made its way forward on a 200-year wave of upwardly mobile, profit-seeking merchants, tradesmen, craftsmen and workers. They blew out of New England and New York, rolled across the wildernesses of the Central States, pushed across a tough Western frontier and banged into San Francisco and Los Angeles, leaving in their path city after city of vast wealth.

The U.S. emerged a superpower, and the tool of that ascent was simple -- the pursuit of economic growth. Now China, India and Brazil, embracing high-growth Cowboy Capitalism, are doing what we did, only their cities are bigger.

Now comes Barack Obama, standing at the head of a progressive Democratic Party, his right hand rising to say, "Mothers, don't let your babies grow up to be for-profit cowboys. It's time to spread the wealth around."

What this implies, undeniably, is that the United States would move away from running with the high GDP, high-growth nations rising today as economic and political powers and move over to retire with the low-growth economies we displaced -- old Europe.

As noted in a 2006 World Bank report, spending in Europe on social-protection programs averages 19% of GDP (85% of it on social insurance programs), compared to 9% of GDP in the U.S. The Obama proposals send the U.S. inexorably and permanently toward European levels of social protection. This isn't an "agenda." It's a final temptation.

In partial detail:

Obama's federalized medical insurance system starts the transition away from private medical care and toward Obama's endlessly promised "universal health care." This has always been the sine qua non of planting a true, managed-market economy in the U.S.

Obama's refundable tax credits are direct cash transfers from the federal government. This would place some 48% of Americans, nearly half, out of the income tax system. More than a tax proposal, this is a deep philosophical shift, an American version of being "on the dole."

His stated intent to renegotiate free-trade agreements such as Nafta is a philosophical shift. It abandons the tradition of a hyper-competitive America dating back to the Industrial Revolution, toward a protected, domestic workforce, as in Western Europe. The Democratic proposal to eliminate private union votes -- "card check" -- ensures the spread of a static, Euro-style workforce.

Eliminating the ceiling on payroll taxes changes Social Security from an insurance to a welfare program. Obama's tax credits requires performing government-identified activities, the essence of a "directed economy."

All this would transform the animating American idea -- away from creation and toward protection.

Many voters -- progressive Democrats, the asset-safe rich, academics and college students -- regard this as where America should go. They explicitly want America's great natural energies transferred away from unwieldy economic competition and toward social construction. They want the U.S. to reduce its "footprint" in the world. Monies saved by stepping down from superpower status can be reprogrammed into "investments" (a favorite Obama word) in a vast Euro-style hammock of social protection programs.

(emphasis added)

If you are going to vote for Obama, you'd better be damned sure you understand what that vote means beyond "hope" & "change." It will be a transformational change for America, a transformation--described above by Henninger--for which few Obama voters realize they are voting.

It is not sustainable. Something, folks, has gotta give. I'll give you a clue--two clues, actually:

- cuts in defense spending AND
- higher taxes

In the case of Western Europe, they have been enjoying the public good provided by our defense and security for the last 50 years.

Because they didn't have to fund a military, they could afford to build vast welfare states. Even then, with no defense expenditures and with their aging populations, they are beginning to find themselves unable to fund all the promised entitlements. In the coming years, they will either have to pursue high growth, free market policies, or see their welfare state collapse in on itself.

We cannot make the same decision of butter over guns, because there isn't another one of U.S. to maintain the peace and security on which democracy in this world hinges. Someone has to be responsible and be the world's police and it will take a high growth country to do it, not another western european socialist democracy.

Let me repeat: We cannot turn ourselves into Western Europe because we cannot, as they have done, take a break from history and rely on some unseen ally to protect us. And we ought not follow Western Europe into an unsustainable welfare-state scenario.


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Libertarians And The American Political Landscape

I expressed the following thought to my brother the other day:

I think modern liberalism is so intellectually bankrupt that more and more, the only debate that rages in my head is between conservatism and libertarianism or between conservatism and extreme conservatism.

Such is the diminished state of liberalism, I do not believe it has anything to offer or any solutions to modern problems. I think it has become so narrowly defined and owned by the identity politics of the various wings of the Democratic party, that it isn't even really a philosophy anymore. Or if it is, it is morally relativistic and/or utilitarian--both of which I reject on philosophical grounds.

(for more on the intellectual bankruptedness of liberalism, see One Cosmos)

It's why I find things like the following article at Cato so interesting:

In the November issue of Liberty magazine I write about one factor that I think reduces the political impact of libertarian-leaning voters: the fact that they’re all over the map about which party or faction represents the lesser of the evils:

One reason why libertarians underperform politically is that they are politically split, not just between radicals and incrementalists, as can happen in any political movement, but also among various political movements — while being too small to influence any of them very much.

It seems to me that libertarians come in several political groupings:

(1) Those who care primarily about free markets and thus support conservative Republicans. Given the candidates on offer, that means helping to move the GOP to the right on social issues (and war and civil liberties) as well as on economic issues. This group would include the Club for Growth, Republican “Leave Us Alone” activist Grover Norquist, many donors to free-market thinktanks, and probably most libertarian-leaning politically active people.

(2) Those who want to make the GOP more socially tolerant and thus support moderate Republicans, which effectively means Republicans who aren’t very free-market. This would include Log Cabin Republicans, pro-choice Republicans, and lots of Wall Street and Silicon Valley businesspeople.

(3) Those who think the GOP is irredeemably bad on social issues and civil liberties and thus support Democrats. This would again include some Silicon Valley businessmen who are pro-entrepreneurship and fiscally conservative but just can’t support a party that is opposed to abortion rights and gay rights. A dramatic example is Tim Gill, the founder of Quark, who calls himself a libertarian but has contributed millions of dollars to Democrats because of Republican opposition to gay rights. There are also broadly libertarian people involved in the ACLU, the drug-reform movement, and other civil libertarian causes.

(4) Those who support the Libertarian Party. They don’t get many votes, but they include a large percentage of libertarian activists.

If only some candidate or movement could bring them all together.

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