Regulation

How to rid Ghana of corruption

Abuse of power, Regulation No Responses »

Jul 112009

A good way for President Obama to exhort Africans to rid themselves of corruption would be to lead by example. He could start by being more open with Congressional investigators about the firing of watchdog Gerald Walpin.

The first African-American president came to the continent of his father to exhort Africans on Saturday to rid themselves of corruption, embrace democracy and move from the grand, often violent, struggles of liberation and tribalism to the quieter, more potent movement of stability and economic growth.

URL here.

How to reward failure

Free markets, Regulation No Responses »

May 282009

Last week we learned that Shell stockholders voted down an executive compensation plan. (WSJ: “Shell investors revolt over executive pay plan.”) They did not want to reward the managers of their company for failure.

It was just a non-binding resolution, though. As at many business corporations, the Shell company executives have managed to keep their paychecks insulated from the workings of the free market by not allowing the owners to control them.

I don’t know just how that state of affairs came about, but I would wager that the executives of this and other business corporations had allies in government who helped pull it off. Governments of the modern welfare-police state tend to fear, hate, and loathe markets and will go to great lengths to keep them from working. It’s natural for them to collaborate with business managers to suppress their operation. (You can read all about it in Milton Friedman.)

But the point is, if the owners had their way, they would not reward the managers of their company for failure.

Compare that with what happens when federal regulators fail. The usual remedy is to reward them with bigger budgets, bigger empires, and more power. That’s how we got the monstrosity known as the Department of Homeland Security. Not a single person in government suffered any consequences for being unlucky enough not to use the available information to prevent 9/11. Instead, the system rewarded itself.

That’s also what was happening in the closing months of the Bush administration when Bernanke and Paulson kept pushing for more centralized power over the economy as a reward for their mismanagement. They didn’t get their way, but they tried. Now the Obama administration is trying the same thing, and will have a better chance of getting it. (WSJ: “Single-Regulator Plan for Banks Now Close“)

White House and Treasury officials have met with numerous groups to discuss their plans to rework supervision of financial markets, and they have occasionally offered clues as to what their plans may look like. Mr. Geithner has said he thinks there needs to be consolidation and simplification in the oversight of banks, but he has declined to be more specific.

“Declined to be more specific.” Yeah, there’s probably a reason for his reticence.

Not so many months ago these same people were asking for unprecedent sums of money even though it soon became apparent they didn’t have any idea what they were going to do with it. Now they’re asking for unprecedent powers and a major reworking of the org charts in their favor, and they have no idea what they’re going to do with that, either. But they do know that they want more centralization and more power. That’s the government reward for incompetence.

It’s sort of like what the Shell executives want, only on a much more massive scale, beyond anything that even Dilbert ever imagined could happen.

Khrushchev’s decentralizing tendencies

Regulation No Responses »

May 062009

I’ve been neglecting my blogs the last few days. Largely I’m using such time as I can to read Sergei Nikitich Khrushchev’s book, Nikita Khrushchev – and the creation of a superpower. It’s a real page turner. I’ve read it while lying back in the Lazy Boy, in bed, while soaking in the tub, and while shaving. I even wake up in the middle of the night to read more of it. I put it aside just now only because I want to comment on some aspects before I read the rest of it and get more information that will change my mind.

First I should point out that several years ago, when I read some excerpts in American Heritage, I wondered just how much Sergei Nikitich could really have known about his father’s political actions. I had the impression that Communists believed in subordinating family life to the party. After all, these were the people who made a martyr hero out of Pavlik Morozov, a young man who coldly (perhaps that’s a play on his name) denounced his father to the authorities and then was killed for it by his family. And even if it weren’t for that, would a Soviet dictator really have had much time for his family?

It turns out that Nikita Khrushchev had a surprising amount of time for his family, and especially for his son. He was almost always home in the evening, and part of his daily routine was to go for a walk with his son. Even after Sergei was married, this practice continued. There were things that Nikita didn’t want to talk about, but he was a voluble person. There were a lot of important issues that the two did discuss. Sergei Nikitich was not privy to what happened in his father’s Kremlin office, but was sometimes present when his father was talking business with others on the phone at home or in person. Sergei Nikitch also had important contacts in the missile industry, where he worked. And he has made use of archival information that has since become available in our country and in Russia. So it’s a big book.

Aside from the surprises (to me) about his family life, I’ve been surprised to learn that on economic and organizational matters Khrushchev seems to have been somewhat to the right of Barak Obama, at least in temperament. Instead of the constant drive to centralize functions that we are getting under Obama (and also got to some degree under Bush and Clinton) Khrushchev sometimes tried to decentralize. Missile research is an example. He had to overcome a lot of resistance to do so.

For example, he supported missile designer Sergei Pavlovich Korolyov, but didn’t want him to have a monopoly. Khruschev wanted to set up separate, autonomous groups, each with its own research institutes, design bureaus, and bases. Korolyov’s idea was to instead make a hierarchical organization with separate branches. Sergei describes his father’s reaction to this (on pages 217-218):

Father admired Sergei Pavlovich’s drive and powers of concentration, but didn’t agree with him in everything. He objected to the idea of branches. He thought that the newly created organizations should be fully independent, both financially and in their research.

“I know you. You’ll give them some minor jobs and they’ll wind up spending their lives as assistants. We want to create competitors for you, so they’ll keep you awake,” joked Father.

I wish we had people in our own presidential leadership who had insights like that, e.g. in dealing with the auto industry. But I suppose it’s worth keeping in mind that Nikita Khruschev was desposed in 1964 by people who had a temperament more like Obama’s.

Friday WSJ blurbs

Regulation No Responses »

Apr 122009

Reflections on blurbs on the front page of Friday’s WSJ:

Obama urged families to take advantage of low mortgage rates by refinancing.

Gee, if this president gig doesn’t work out, Obama could get himself a career in the real estate business. Or he could work as a used car salesman. (I think it was at a 1968 Republican election rally at my college’s gymnasium that a young man amused some of us by going out on the gym floor with a big photo of Nixon, demanding to know if we would buy a used car from that man. Little did we know that we would eventually have a president who actually would make a car sales pitch from his office.)

The government said it hasn’t made progress in lowering the rate of food poisoning in the last four years.

But in the actual article, there was nothing to tell us what that rate is, and nothing to inform us as to whether or not it’s reasonable to expect it to go lower.

The CIA banned interrogations by contractors, Panetta said, part of the dismantling of Bush-era agency policy.

It isn’t much in comparison to all the bad things being done by the current administration, but here the Obama administration has done something right. Policing, tax collecting, and war-making are government functions that should never be privatized. Education, on the other hand…

Anti-Food Safety

Regulation No Responses »

Apr 022009

I just now decided that I’m 100 percent opposed to Food Safety. Safe, healthy food I like. I even think there is a role for government in food safety. Having such a thing as a Food Safety Institute at the W.K. Kellogg Company in Battle Creek could be a good thing, too. But not when the organization that’s directing it is “an international, non-profit organization that works to develop uniform laws, regulations, and guidelines in the food safety industry.”

It’s that part about uniform laws and regulations that gets me. Uniform laws and regulations are a time-honored method to make the rich richer and the poor poorer. Uniform bank regulations across state lines are what enabled a few big banks to gobble up the smaller ones and become too big to fail, leading to financial meltdown and the destruction of our political system.

Uniform laws and regulations are going to kill local food markets and producers in favor of big ones who will be able to maneuver the political and technical intricacies of compliance. The giant conglomerates tend to be annoyed by the fact that Minnesota has different regulations than Kansas. But local regulations mean there are local openings for local food-competitors in Minnesota and Kansas that the big guys would like to eliminate. Under uniform regulations, on the other hand, those who can achieve economies of scale will be the winners who take all.

Maybe Round One of new regulations isn’t going to outlaw the Amish roadside baked-goods sellers that I occasionally patronize on my bike rides in Indiana and Ohio. But eventually they will. It’s a process that has already started.

I suppose the big guys will want to act quickly on this, before too many people catch on to what’s happening to us. And there is a growing awareness. Note the article by Caleb Stegal titled “I Did Taste” at Front Porch Republic:

A few weeks ago I attended a meeting of Kansas secessionists. The participants were rowdy, complaining of economic gigantism squashing them flat and bureaucratic thugs hounding their every move. They were all sick and tired of worker-ant existence in the hive-mind of American groupthink and they wanted out. Despite the quintessentially political nature of the gathering, politics proper never came up. Conservative and liberal meant nothing in that room, and party affiliation even less.

Kansas patriots fomenting disunion? No, though there are a few of those kicking around these parts. These were local farmers organizing a farmer’s market.

It’s people like this that uniform laws and regulations will squash like a bug. And it’s not a bug that would theaten your food safety.

BTW, here’s the best one-liner from the Caleb Stegal article: “Food rots. If it doesn’t rot, it’s not food.”

Comprehensive

Regulation, Sustainability No Responses »

Mar 182009

Today I came to realize that in the world of politics, the word “comprehensive” is a near-synonym for totalitarian.

In Tuesday’s WSJ there was a letter in response to an article explaining how cap-and-trade is a corrupt, expensive system. The letter-writer said we should instead think about the benefits of having a “comprehensive” energy and climate system. And then there are the people who say we need to make all of our existing health systems fail so we can have a “comprehensive” system of national health insurance. (They don’t say so quite that explicitly, but this came up in connection with Obama’s recent statements about cutting benefits for combat veterans.)

I’ve now officially decided that I am very anti-comprehensive anything. I am a raging incrementalist, as the late Representative Barber Conable used to call himself.

The comprehensivists always have an excuse for failure. We didn’t spend enough money, fast enough, they will say. A little reform will never do. Yes, everything they’ve done so far has caused misery. That’s why we need to have more — lots more. We must have a comprehensive, all-or-nothing reform system. (Think of those people who say communism hasn’t failed because it hasn’t been tried. Yes, the more of it you have, the more miserable people get — until you get to 100 percent, and then nirvana! See the graph above.)

It’s different with us free-marketers. For our side, a little more is always better. When Stalin and Khruschev backed off of their grand, comprehensive plans and allowed a little bit of market freedom, things got better, not worse. We don’t need comprehensive.

The comprehensivists are like Linus Pauling and his Vitamin C. “Yes,” I would say, “I took Vitamin C and I still got a cold.” “But you didn’t take enough!” they say. So next time I would tell them, “I took a gazillion milligrams, and I still got a cold!” “But you need to take more — lots more!” they say. It’s never enough.

That’s the way it will be with health care or cap-and-trade. It will fail, and we’ll find out that the reason will be because it wasn’t comprehensive enough. “Of course things got worse,” they will tell us. “We need a comprehensive, all-or-nothing, totalitarian system!” (Holistic might be another term they’ll use.)

They will refuse to enact market-based reforms that will merely improve the environment and health-care.

Regulation and stimulus

Regulation, Stimulus spending No Responses »

Feb 212009

An article at wowowow.com summarizes Obama’s first 30 days:

…so far the reaction to the new administration’s programs has been decidedly negative. Investors, among others, have panned the plans; the stock market is off nearly 10% from the day before the inauguration, or more than 800 points on the Dow Jones Industrial Average.

That made me wonder what happened to the stock market in FDR’s first hundred days. I didn’t find the kind of chart I was looking for, but I did find this summary in Washington Business Journal:

On March 4, 1933, Franklin Roosevelt inherited a Dow that had lost 82 percent of its value in the previous four years. That was the day Roosevelt famously declared that “all we have to fear, is fear itself.” Once Wall Street reopened after the bank holiday immediately imposed on Inauguration Day, the Dow Jones rose 15 percent in the first day of trading March 15, 1933, and rallied 75 percent in the first 100 days of Roosevelt’s presidency.

So is the market telling us that we already tried these Keynesian theories once, and unlike last time we now know what to expect? That’s probably not it, exactly, because in a way they have been tried more than once.

But I did find an interesting tangent at realclearmarkets.com, in an article by George Bittlingmayer and Thomas W. Hazlett titled, “The market is shorting Obama’s ‘stimulus’.”

Many claim that World War II brought us out of the Great Depression, but the lesson to be learned is still being debated. Federal budget deficits soared (reaching 26.5 % of GDP in 1942 as calculated by Harvard economist Robert Barro), providing Keynesians an argument for spending as stimulus. But WWII also brought a profound shift in the New Deal’s regulatory policies. Attorney General Thurman Arnold’s vigorous campaign to break-up “the bottlenecks of business” in major industries like steel, chemicals and electrical equipment was shuttered, and America’s largest corporations enjoyed a respite from threats of dismemberment (Arnold was kicked upstairs to a judgeship). As Thomas K. McCraw writes in his superlative Schumpeter biography, “Under the life-and-death pressure of war mobilization… the Roosevelt Administration, which had been hostile toward alleged monopolies, now decided that big business must lead in the job that had to be done.”

What’s interesting about this is that phrase about a “shift in the New Deal’s regulatory policies” with the onset of World War II. I had recently come across references, I don’t remember where, that suggested the national government had great difficulty making itself unregulate the economy after WWII was over. So if WWII-era regulation was itself a respite from New Deal regulation, then I need to learn more about 1930s’ regulation.

Despite having been brought up from childhood on a steady diet of anti-New Deal sentiment, I either wasn’t told about this aspect of the New Deal when I was young, or I wasn’t paying adequate attention.

$317,000 vs $500,000

Health care reform, Regulation, Stimulus spending No Responses »

Feb 092009

The following is what I posted on a forum at lancasteronline.com, in response to an item still making the rounds about the elimination of Michelle Obama’s $317,000/year job at the University of Chicago Hospitals. A comment about it in the Chicago Daily Observer is here. National Review has apparently questioned how important the job was if there was no need to fill the position when she left. (I say apparently, because I don’t have access to the issue in which this point was allegedly raised.) In response to critics, I said:

Besides, the 317,000 is well under the 500,000 that her husband thinks should be the maximum for senior executives at banks that received federal funds. And I’ll bet if you look at her time logs, you’d see she worked at least 63 percent as hard as a banking executive. And she probably did a lot to save on health care costs, too.

I admit it, those comments were intended as bait. But all I caught was a possibly racist Obama-hater who seemed to think I was one of the Obama faithful.

I’m used to people not noticing my sarcasm. Sometimes I even like it that way.

I wish, though, that people would wonder how Barak Obama can possibly know that $500,000 is the proper maximum compensation level for a senior banking executive. There are any number of people on his side who without batting an eye will tell you why Michelle Obama was probably worth $317,000/year. Some of those people responded in the same forum in which I did. Couldn’t those same people apply their apologetic skills to the salaries of bank executives?

I also wish people would question why it is that we have to pay $317,000 a year so someone can develop programs to encourage people to use local health clinics rather than hospital emergency rooms. If people aren’t motivated to make those choices on their own — if we need “programs” to convince people to do that — something is terribly wrong with our health care system, and that something is only going to get worse if we get the kind of universal health care being promoted by the Obama crowd.

Back to my bait, though. I think we need some kind of contest — to see who can come up with the lamest, most pitiful rationalization to excuse Obama behavior — and have that rationalization picked up and used by Obama’s supporters.

This would not be an easy task, because these people come up with some very lame rationalizations on their own. Those who are old enough got a lot of practice during the Clinton years.

Now you might ask if it isn’t just going to poison our political discourse if we go around saying things we don’t mean. I say no, that well has already been poisoned beyond repair. When you have people who can switch faster than the speed of light from defending certain behaviors to hating Bush for the same things, and then without slowing down switch back to defending them when Obama is elected, there is no point using anything but ridicule on them.

How to be a hero

Regulation No Responses »

Jan 192009

What to do if you have a serious messiah complex, but the people don’t want to be saved, at least not by you?

For example, suppose you’re a lifeguard at the beach and you have a serious need to be a hero. There might be a kid who needs a rescue, but that’s not going to be enough. Like I said, you have a serious messiah complex.

You can find the biggest kid on the beach and order him to go rescue the kid in trouble, or else. Then go out and hold them both underwater a while. Then let go. If they still don’t want your help, push them under for a while longer.

Eventually they’ll accept your help, and then you’ll have an flock of adoring and grateful followers.

What if you don’t like getting wet? In that case you could become Treasury Secretary or Federal Reserve Chairman, and do basically the same thing to our country’s banks.

Welcome to the world of re-regulation. I expect we’ll be seeing a lot of heroes in the next few years.

Donations to a non-profit for his benefit

Regulation No Responses »

Dec 112008

Who cares which people were Senate Candidates No. 1 through 5? What I want to know is the name of the non-profit that would have benefited Governor Blagojevich.

Everyone already knows that politicians are bought and sold. What might be new is the ways by which non-profit organizations can be profitable to politicians.

The affidavit states that Senate Candidate 1 was likely to be supported by Obama for the seat, and that the Illinois governor was mulling a variety of ways to capitalize on such an appointment. Blagojevich allegedly wanted a corporate board appointment for his wife or millions in donations to a non-profit organization for his benefit, or even an appointment as secretary of health and human services, in exchange for appointing Senate Candidate 1. (Obama nominated former Senate Majority Leader Tom Daschle for the Cabinet post Blagojevich wanted on Thursday.)

—Fox News article [Emphasis mine]

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