Know-nuttin’ economics

MEXICO’S PRESIDENT-ELECT, a leftist who’s best known by his initials AMLO, takes office in December, but he’s been talking a lot since winning the presidency by a landslide in July.

Leftists are known for their big talk. Just within the last week, he’s promised “free” healthcare like the Canucks and much of Europe have, he says. We have our own Latino Bernie Sanders.

AMLO also has promised to greatly reduce or eliminate federal inspections; for instance, checking to see if gas stations are stiffing  the customers. It’s better to just “trust the people” to do the right thing, i.e. gas station owners.

Instead of making presidential decisions, which was what he was elected to do, he talks a lot about “letting the people decide,” i.e. plebiscites on all manner of issues, a very costly method of decision-making, of course.

It’s also an easy out if things go sour. Wasn’t my doing. The people decided!

He’s also vowed to clamp down on a federal consumer protection agency known as PROFECO. It’s hard to grasp his thought processes on that one.

He’s real big on “trusting the people.” He’s promising to raise the minimum wage too, of course. A couple of our relatives here on the mountaintop run a humble hotel, and they were big AMLO supporters. However, their enthusiasm has waned on learning they may have to pay their few employees higher salaries.

Oh, dear.

Is a high minimum wage a good thing? Everyone likes a fatter paycheck.

In the United States, the Democrat Party pushes a higher minimum wage, and the Republicans usually oppose it, making them look like the black hats. But who are really the black hats? Who is right, Democrats or Republicans?

For an excellent, easy-to-read take on raising the minimum wage, its unforeseen consequences, and lots of other economic issues, I highly recommend Economics in One Lesson by Henry Hazlitt.

One of Hazlitt’s primary points is that when government mandates something, downstream effects should be investigated, not just the immediate result. This isn’t done as often as it should be, certainly not with minimum-wage hikes.

Now let’s turn to the video, which was made in the seething leftist hotbed of Seattle. How are “liberal” business owners reacting to the idea of a $15 minimum wage? Not too well, it seems, and that pastes a grin on my face.

The Social Justice Warriors in front of them walked around to their rears, morphed into Poetic Justice and bit ’em in their arses!

Cool rain and the dismal science

IT’S BEEN RAINING a lot recently, and that’s cooled things down nicely. Even though it’s raining, I still head downtown most afternoons to sit at a sidewalk table with a nice café americano negro and my trusty Kindle.

It’s a good way to live.

My current book, and I’m just about finished with it, is Henry Hazlitt’s Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics. It came recommended by young Ben Shapiro, a brilliant, conservative guy in spite of his not being a fan of President Trump.

Ain’t nobody perfect in this troubled world.

They don’t call economics the dismal science for no reason. Trying to get a good grip on the subject is a dismal undertaking, especially for someone like me who grapples with simple arithmetic.  But Hazlitt makes it pretty easy.

The book was first published in the late 1940s and updated in the late 1970s, but it’s quite relevant today because some things don’t change.

Hazlitt simplified things for me, and I’m going to make it even simpler for you:

A free market, unfettered by government meddling, works best 98 percent of the time. That’s the core message. But there’s more.

If government meddles in the free market, it should do this: 1. Look not at the immediate, desired effect of a policy, but at its long-term effects. 2. Look not just at the people a policy is designed to benefit, but at everyone it affects.

It’s quite common that a policy will help one group of people while doing harm to other, larger groups of people. And it’s common for a policy to right a perceived wrong today while creating greater wrongs over the long haul.

Hazlitt points out that most laymen do not take this into consideration when favoring something, and even professional economists can fail to take into account the long-term effects.

Speaking of professional economists, I cannot resist mentioning Paul Krugman’s prediction the stock market would tank if Trump became president. Of course, it did quite the opposite. One must chuckle.

On to the Irony Department, Starbucks, about as vocally leftist an outfit as you’ll find, is closing 150 stores in the United States due to minimum-wage increases and government regulations, putting scads of SJW employees out of work.

Nailed by their beloved socialism.

Minimum-wage increases is one of the things Hazlitt touches on at length as being an example of short-term vision. Government steps in to help “poor people,” but fails to realize the broader effects of a high minimum wage.

The higher salaries is money that comes from somewhere else. It is not pulled out of thin air. Starbucks sees that now. One must chuckle even more.

Hazlitt’s book is just 220 pages. I recommend it to you.

Obviously, it was not raining in the above video, which was taken a year ago, but it was raining in the video below, which was taken four years ago. Rain looks the same from one year to the next.

 

Socialism for dummies

(Thomas Sowell, the Black Knight of Intellect, returns today in the form of a guest column. Give him a big hand!)

* * * *

SowellSocialism sounds great. It has always sounded great. And it probably will always continue to sound great. It is only when you go beyond rhetoric and start looking at hard facts, that socialism turns out to be a big disappointment, if not a disaster.

While throngs of young people are cheering loudly for avowed socialist Bernie Sanders, socialism has turned oil-rich Venezuela into a place where there are shortages of everything from toilet paper to beer, where electricity keeps shutting down, and there are long lines of people hoping to get food, people complaining that they cannot feed their families.

With national income going down, and prices going up under triple-digit inflation in Venezuela, these complaints are by no means frivolous.

But it is doubtful if the young people cheering for Bernie Sanders have even heard of such things, whether in Venezuela or other countries that have turned their economies over to politicians and bureaucrats to run.

The anti-capitalist policies in Venezuela have worked so well that the number of companies in Venezuela is now a fraction of what it once was. That should certainly reduce capitalist “exploitation,” shouldn’t it?

But people who attribute income equality to capitalists exploiting workers, as Karl Marx claimed, never seem to get around to testing that belief against facts — such as the fact that none of the Marxist regimes around the world has ever had as high a living standard for working people as there is in many capitalist countries.

Facts are seldom allowed to contaminate the beautiful vision of the left. What matters to the true believers are the ringing slogans, endlessly repeated.

* * * *

The great promise of socialism is something for nothing. It is one of the signs of today’s dumbed-down education that so many college students seem to think their education should — and will — be paid by raising taxes on “the rich.”

* * * *

When Senator Sanders cries, “The system is rigged!” no one asks, “Just what specifically does that mean?” or “What facts do you have to back that up?”

In 2015 the 400 richest people in the world had net losses of $19 billion. If they had rigged the system, surely they would have rigged it better than that.

But the very idea of subjecting their pet notions to the test of hard facts will probably not even occur to those who are cheering for socialism and other ideas of the political left.

How many of the people who are demanding an increase in the minimum wage have even bothered to check what actually happens when higher minimum wages are imposed?

More often they just assume what is assumed by like-minded peers — sometimes known as “everybody,” with their assumptions being “what everybody knows.”

Back in 1948 when inflation had rendered meaningless the minimum wage established a decade earlier, the unemployment rate among 16- to 17-year-old black males was under 10 percent.

But after the minimum wage was raised repeatedly to keep up with inflation, the unemployment rate for black males that age was never under 30 percent for more than 20 consecutive years, from 1971 to 1994.

In many of those years, the unemployment rate for black youngsters that age exceeded 40 percent and, for a couple of years, it exceeded 50 percent.

The damage is even greater than these statistics might suggest. Most low-wage jobs are entry-level jobs that young people move up out of, after acquiring work experience and a track record that makes them eligible for better jobs. But you can’t move up the ladder if you don’t get on the ladder.

The great promise of socialism is something for nothing. It is one of the signs of today’s dumbed-down education that so many college students seem to think their education should — and will — be paid by raising taxes on “the rich.”

Here again, just a little check of the facts would reveal that higher tax rates on upper-income earners do not automatically translate into more tax revenue for the government. Often high tax rates have led to less revenue than lower tax rates.

In a globalized economy, high tax rates may just lead investors to invest in other countries with lower tax rates. That means that jobs created by those investments will be overseas.

None of this is rocket science. But you do have to stop and think — and that is what too many of our schools and colleges are failing to teach their students to do.

* * * *

(BONUS 1: A brother Black Knight of Intellect, Armstrong Williams, also addresses this issue in a piece titled Bernie’s Utopian Nightmare.)

(BONUS 2: Nicolás Maduro, president of the collapsing socialist nation of Venezuela, endorses Bernie Sanders, calls nutty Ole Bern a “revolutionary friend.”)

(BONUS 3: Ole Bern hems and haws when asked about the imploding socialist mess in Venezuela.)

(The Hacienda couple will be out of touch for a few days due to a vacation jaunt to Colima. ¡Hasta luego!)

Grub for thought

THERE’S MUCH talk about raising the minimum wage. I don’t think there should be a minimum wage at all. I don’t think government should be telling private businesses how much they should pay employees.

Good government sticks to things like the military, the police, building highways, mild regulation when absolutely necessary, welfare safety nets for the truly needy, keeping the food chain clean, etc.

Minimum wage sounds like a great idea on the face of it. Get behind that face, and you run into deeper issues that most people don’t grasp. Government should usually butt out of private enterprise.