Open Borders: Trade, Migration, Entrepreneurship, And Prosperity

By Ken Schoolland For good reason people ask how nations can become more prosperous. Usually the start is “Why is there poverty?” But the real question should be “Why is there wealth?” Poverty is the natural condition of all peoples of the world throughout history. Only in the past couple hundred years have we seen an astounding rise in the amount of wealth per person in some countries while others still languish in ancient poverty. The Fraser Institute of Canada approaches this question with the Economic Freedom of the World Index (EFW), analyzing conditions that give people incentives. In other words, what conditions allow people to benefit most from the creativity and work that produces wealth? They look annually at (1) tax rates, (2) legal protections for contracts and property, (3) inflation that undermines sound money, (4) openness of trade, and (5) regulatory restrictions. Hong Kong, Singapore, and New Zealand typically rank at the top, while Myanmar, Venezuela, and Zimbabwe are often at the bottom. North Korea would probably be dead last if any data could be gathered. Nations in the top quadrants produce much more wealth per capita, higher growth rates, higher literacy, and lower rates of infant mortality than nations at the bottom. Growth matters. Brazil, with all of its resources, increased wealth per capita fourfold from 1950 to 2000. Hong Kong, with a lot of people in a small space and no natural resources, increased wealth per capita 36-fold in the same period of time. Hong Kong is now one of the wealthiest places in the world per capita, richer than Great Britain, its former colonial ruler. China is coming up the EFW ranking to 107 out of 144 countries, but it still ranks below Sri Lanka at 100 in 2010. So how could China have had such …

An Honest Look at Government Accounting

“Accounting is a tool to find the right person for the right job,” said Hiroshi Yoshida at the World Conference on Market Liberalization in Bali in 2015, hosted by Liberty International. “If the performance is good,” said professor Hiroshi Yoshida, “we continue trade. If the performance is bad, you stop the trade.” According to professor Hiroshi, accounting is an important tool to evaluate the performance of an individual. However, government does not do honest accounting, said Hiroshi Yoshida. “The Japanese government has a very big liability,” said Hiroshi, “It is [bigger] than Greece . . . who pays for it?” “Our children will pay,” added Hiroshi. Watch the full video below:

Democratic Socialism – they’re baaaaaaack

I got into an online discussion the other day, slammed someone down hard, felt first smug, then kind of bad. Well I guess I started it. Vis-à-vis Bernie Sanders presidential campaign I said, “Socialists hate corporations so much they want to turn the whole country into one big corporation.” Someone replied that though some socialists favor central planning, not all do. Then he said, “Look it up, I know research is hard.” So I let him have it. “I lived in several countries in Eastern Europe 1991-2004. I was elected Honorary Member of the Yugoslav Movement for the Protection of Human Rights in 1997. I’ve smuggled cash to support families of imprisoned dissidents in Belarus. I know what jackboots and rubber truncheons applied to tender places feels like. I don’t know how much more research I can stand.” I was expecting a huffing and puffing reply, and prepared to uplift the virtual finger, when to my surprise he apologized for the snark and said he sincerely appreciated the good I’d done. “We American socialists” want nice stuff for everybody without all the nasty stuff that’s been associated with some socialist regimes abroad he said. OK, point taken. I’ve been preaching and trying real hard to practice civility in public discourse. Because I think we’re getting dangerously uncivil. As in nearing the point of “the heck with it just shoot ‘em” uncivil. “Please forgive me if I seem impatient,” I replied. “But do you imagine I’ve never heard this before? Do you think nobody in the old Soviet Union ever said, ‘Why can’t we have socialism but free speech and be nice to people too?’ Socialism doesn’t work and can’t be made to work. The best socialism is like a big corporation, the worst is hell on earth.” I’ve had this …

Ken Schoolland in Mongolia

Ken Schoolland recently appeared on Mongolian National Broadcasting to speak about economics, and why the Austrian school is so important. Host: Please tell us about the, since we talk about the Austrian school of economics, and the certain direction of economic teaching.  What kind of major branch of economics teachings exist, and what makes the Austrian school so specific? Ken: Well, I usually display four categories.  The Marxian is that the government should own all the resources and make all the decisions for society.  What is to be produced, how, and so on. The Keynesian school of thought is focused in on government intervention in the economy through fiscal policy, spending taxation, debt, and regulatory controls over every aspect directing the economy as officials in government see fit.   A 3rd school of thought is the monetarist school that argues that monetary policy through banking regulation, interest rates, money supply, is the way to control and manipulate the economy utilizing the banking system.   And the Austrian school argues that they’re all the cause of the problem, not the solution.  It’s sort of like a disease masquerading as it’s own cure.  The government creates problems and then creates more agencies and officials to try and solve these problems it created in the first place. The Austrians are the ones who believe that it is better to trust individuals with their own decision making, not only to own yourself, but to own the product of your wealth.  The government shouldn’t intervene by trying to manipulate your behavior with taxation incentives and punishments.  Because government officials aren’t any smarter than the rest of us — as a matter of fact, they’re much less smart.  It’s just that when they spend other people’s money, they spend it rather grandly on their friends and …

How Many Lies Does “The Good Lie” Tell?

In today’s Western society, with the overwhelming majority of us products of at least twelve years of mandatory government schooling, free market advocates are vastly outnumbered by defenders of the status quo. After all, what use does the state have for critical thinkers who are able to think things out for themselves and come to their own conclusions? A population full of such people could come to all sorts of outlandish ideas such as that the use of force and coercion is always reprehensible, even when committed by “officials”. We can’t have that! Instead, state-run schools cultivate the sort of hive mind of which we see many expressions in popular culture, perhaps most notably in Hollywood. The basic plot of many a popular movie or TV show has the good guys brandishing uniforms and badges while the bad guys are shady criminals out to destroy the peaceful lives we so happily live thanks to government. Other Hollywood productions, however, include more subtle references to the advancements supposedly made possible by – if not exclusively attributable to – state intervention. One recent example of the latter is the 2014 movie by the title “The Good Lie“. The film follows a group of orphaned Sudanese refugees lucky enough to escape their war-torn homeland to resettle in the United States. After finding a new home in Kansas City, Missouri, the three brothers Mamere, Jeremiah, and Paul have to start at the bottom of the societal totem pole. While Jeremiah and Paul start working a low-wage job at a local grocery store, the more ambitous Mamere decides to hit the books and study to become a doctor. Naturally the men experience quite the culture shock trying to adapt to life in the U.S. both in the personal and professional sphere. One scene has the …

What Cues Can South America Take From Europe?

Over the past few years Greece has probably made the news more than ever before. Whether it be protesters in the streets, election results, or the announcement of some new government policy, whatever happens in Greece seems to be written about in all corners of the world. Just recently the fierce rhetoric of a relatively obscure populist left-wing party made international headlines and fueled new speculations about the future of one of the world’s major currencies, if not the world economy and financial markets. The eventual ascent of that same party, Syriza, to Parliament has all eyes both on the Old Continent and across the world focused on its plan of action. Mind you, we are talking here about a country whose GDP represents less than 0.4% of the world economy. In the meantime, incessant government intervention into the economy has caused major upheaval in several countries in South America. Venezuela is currently experiencing the worst depression in decades, Argentina’s economy is in shambles once again on the heels of its most recent default, and since the World Cup bubble popped Brazil has equally dipped into recession. These countries dwarf Greece in terms of population as well as contribution to world GDP, and some of their resources make them important players in global commodity markets. Yet aside from some news outlets reporting on Venezuelans having to stand in line for hours for even the most rudimentary items or the mysterious death of a federal prosecutor in Argentina, major media are hardly paying attention. The latter, far from being the result of a massive media cover-up, reflects a general sentiment in South America. Here in Chile, for instance, nobody in their right mind would dream up some theory about the aforementioned woes causing a spillover effect that might bring the entire …

Lessons Unlearned From Brazil’s Recession

As she was sworn in for her second term last week Dilma Rousseff publicly stated government spending would have to be cut. Yes, you read that right; the leader of the Workers’ Party just said her own administration is spending too much taxpayer money. It might be a day late and a few billion dollars short, but could it be Brazil’s president just had her Eureka moment? Years of spending billions of dollars on stadiums and infrastructure for a 4-week event has left the Brazilian government with little to brag about. While the world has moved on to other things the World Cup’s relics lie mostly unoccupied in a land of poverty, police corruption and gang violence. After the artificial boom created by said event the bubble has definitively burst. Yet to hear one of South America’s most adamant cheerleaders of government intervention admit to it is remarkable to say the least. Government figures show Brazil’s economy had already fallen into a recession before the World Cup even got underway. This year the central bank expects the economy to grow by a dismal 0.38 percent while inflation hovers north of 6.5 percent, well above the 4.5 percent target rate. Industrial production is forecast to expand by no more than 0.7 percent, with the country’s current account deficit widening to $78 billion. Predictable though the downturn may be, its sheer magnitude is forcing the Dilma administration to consider some rather uncharacteristic measures. Or is it? The budgets of a few dozen ministries and some secretariats may be cut by one-third, reportedly amounting to some $700 million in savings, the new Finance Minister Joaquim Levy was quick to add expenses listed in the constitution will be unaffected – a constitution about as thick as Ayn Rand’s novel Atlas Shrugged, by the way. …

Keynesianism in Chile

Last week Chilean president Michelle Bachelet announced an “especially anti-cyclical” government budget for 2015. Utilizing the usual rhetoric of creating jobs and stimulating the economy, the first budget in her second term is set to increase by a whopping 9.8 percent. The new budget’s “historical increase in public investment” – mind you, these are the words of a Socialist Party president – will be directed mostly toward social reforms. The increase in spending is supposedly covered by a landmark tax reform passed last month raising corporate taxes and closing tax exemptions. These funds, confiscated from those who could make actual investments to meet market needs, will be used to ramp up spending on health care by 85 percent and education by 10.2 percent. In addition, Bachelet pledged to pump more money into developing certain remote regions and consolidate social welfare schemes, stating her administration’s goal to have 1,700 of the poorest families on the dole by next year. The latter, of course, is typical of the redistributionist ideology; the fundamental difference between giving a man a fish to feed him once and teaching him how to fish so that he may become more self-reliant. As always the irony of striving first and foremost to make the poor and destitute more dependent on others for their sustenance seems to be lost on most people. Growing up, children are expected to become better able to take care of themselves and take on more responsibility as they get older – I personally recall a story or two about my older sister looking after me when we were kids. Yet when government takes this inherent human instinct and turns it on its head, nobody bats an eye. In her press conference president Bachelet claimed the stimulus will create 139,000 jobs. What she left out, …

What’s Really Growing in Argentina?

Traveling through Argentina recently I was taken aback by the abject depression that seems to have taken the country and the people in its grip. Even after spending barely two days in the country I left with a negative taste in my mouth. More than the many buildings, modes of transport, streets and sidewalks in severe states of disrepair the overall feel of the place really stood out in my mind. And it is not that I was expecting to see a prosperous, bustling country either. For some time now it has been clear that the Argentine economy is rapidly disintegrating. The people are struggling to cope with an estimated inflation rate of over 50 percent, a rate the Kirchner administration has been stubbornly underreporting to the point to where international authorities have openly questioned the numbers. Other persistent problems include seemingly permanent fiscal deficits, international reserves drying up, and the ongoing devaluation of the peso. Government spending as a percentage of GDP now hovers around 50 percent, contributing to last month’s second sovereign debt default in a mere 13 years. Meanwhile the previous one is still haunting the state budget. In late 2001 the Argentinian government declared the world’s largest sovereign default, triggering the worst economic recession in history. Unemployment spiked to 20 percent causing widespread riots and looting, not to mention political instability– five different presidents held office in a mere two weeks. Eventually the debt was restructured and most bondholders agreed to a debt swap even if the new bonds were worth only 35 cents on the dollar. A small minority holding some 9 percent of Argentine debt did not take the deal. Consequently these hedge fund “holdouts”, in Argentina less affectionately referred to as “vultures”, have been involved in a legal battle with the government that …

Trade Talks, the Jones Act, and the International Cost of Protectionism

[alert style=”grey”] This article was originally published on the Grassroot Institute website, you can view the original article here. [/alert] For years now, the US has been involved in two important trade talks: the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). Both seek to provide new market access, expand existing markets, and provide regulatory transparency and consistency among European and Asia-Pacific markets. Many different industries and policies are being discussed in the TPP and TTIP negotiations. One policy that is often mentioned in such trade talks is the Jones Act, more formally known as the Merchant Marine Act of 1920. While the TPP and TTIP are unlikely to reform the Jones Act due to a strong pro-Jones Act lobby, the these trade talks remind one of the great domestic and international cost of the Jones Act and protectionism in general. The Jones Act is a protectionist policy that restricts foreign competition from domestic coastal shipping and, in doing so, keeps prices artificially high, especially in America’s non-contiguous states and territories. For goods shipped between US ports, the Jones Act requires that ships be 1) built in the US, 2) crewed largely by American citizens 3) owned largely by Americans, and 4) be registered US vessels. With up to 90% of goods transported by sea,1 protectionism in the shipping industry can have massive, widespread costs. For America alone, the Jones Act costs “at least $2.8 billion [$4.37 billion in 2014 inflation-adjusted dollars] annually and its removal would lower domestic shipping prices by 26%,”according to a 1995 report from the U.S. International Trade Commission.2 More recent research by Justin Lewis of Tulane University has shown that “a full repeal of the Jones Act would yield economic benefits of up to $682 million per year” with domestic coastal shipping “approximately 61% …