It’s intern season in the nation’s capital, where hundreds of young adults decamp to D.C. for the summer to learn the legislative process. Who knew they’d also get an object lesson in Capitol Hill hypocrisy?
The recently-introduced Raise the Wage Act of 2017 would increase the federal minimum wage by 107 percent, to $15 an hour from $7.25. A new Employment Policies Institute analysis shows that 95 percent of the House and Senate sponsors and co-sponsors hire interns for $0 an hour.
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History Channel tells stunning secret story of War on Drugs – from the beginning it was a political war on people
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From a very important article in The Intercept by Jon Schwartz “The History Channel Is Finally Telling the Stunning Secret Story of the War on Drugs” (emphasis added):
The History Channel is showing a new four-part series called America’s War on Drugs. Not only is it an important contribution to recent American history, it’s also the first time U.S. television has ever told the core truth about one of the most important issues of the past 50 years.
That core truth is: The War on Drugs has always been a pointless sham. For decades the federal government has engaged in a shifting series of alliances of convenience with some of the world’s largest drug cartels. So while the U.S. incarceration rate has quintupled since President Richard Nixon first declared the war on drugs in 1971 (see chart above), top narcotics dealers have simultaneously enjoyed protection at the highest levels of power in America.
On the one hand, this shouldn’t be surprising. The voluminous documentation of this fact in dozens of books has long been available to anyone with curiosity and a library card. Yet somehow, despite the fact the U.S. has no formal system of censorship, this monumental scandal has never before been presented in a comprehensive way in the medium where most Americans get their information: TV.
That’s why America’s War on Drugs is a genuine milestone. We’ve recently seen how ideas that once seemed absolutely preposterous and taboo — for instance, that the Catholic Church was consciously safeguarding priests who sexually abused children, or that Bill Cosby may not have been the best choice for America’s Dad — can after years of silence finally break through into popular consciousness and exact real consequences. The series could be a watershed in doing the same for the reality behind one of the most cynical and cruel policies in U.S. history.
That this series exists at all shows that we’re at a tipping point with this brazen, catastrophic lie. We have to push hard enough to knock it over.
You can watch a 4-minute overview of the series above and you can watch full episodes of the series online here:
Episode 1 — Acid, Spies, & Secret Experiments
Episode 2 — Cocaine, Cartels, & Crack Downs
Episode 3 — Gangs, Prisons, & Meth Queens (requires sign-in with your cable TV provider)
Episode 4 — Heroin, Terrorists, & Kings of Pain (requires sign-in with your cable TV provider)
Bottom Line: As I’ve written before, I’m confident that in a future, more enlightened, advanced, open-minded and tolerant America, we’ll look back on America’s immoral, senseless, expensive and failed War on Drugs Otherwise Peaceful Americans Who Chose to Ingest or Smoke Plants, Weeds and Recreational Substances Proscribed by Arbitrary Government Regulations with the shame, contempt, and embarrassment that it so rightfully deserves for such cruel, intolerant, and inhumane treatment of our fellow citizens (and our children and family dogs). Kudos to The History Channel for making such an important contribution to bringing us much closer to that future reckoning with such an embarrassing and shameful chapter of America’s history that matches (if not exceeds) America’s previous failed, costly and shameful War on Alcohol Otherwise Peaceful Americans Who Chose to Ingest Recreational Beverages Proscribed by Arbitrary Government Regulations during the 1930s.
The first of three simple principles of trade policy: A tax on imports is equivalent to a tax on exports
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From Dartmouth College economist Douglas A. Irwin’s 1996 pamphlet Three Simple Principles of Trade Policy (emphasis added):
The first proposition is that a tax [tariff] on imports is equivalent to a tax on exports. Any restraint on imports also acts, in effect, as a restraint on exports. The converse of this proposition is also true: when a government undertakes policies to expand the volume of exports, it cannot help but to expand the volume of imports as well.
The fundamental reason for this truth is that exports and imports are flip sides of the same coin. Exports are necessary to generate the earnings to pay for imports, or exports are the goods a country must give up in order to acquire imports. Exports and imports are inherently interdependent, and any policy that reduces one will also reduce the other.
Exports and imports are unmistakably correlated: they rise and fall in lockstep, such that one cannot distinguish between them (see chart above for graphical confirmation of that phenomenon over more than 200 years in the U.S.). Revisionists about U.S. economic policies during the postwar period have complained that it was marked by a one-sided opening of the U.S. market; foreign trade barriers and unfair practices, they charge, were tolerated far too long. Yet the openness of the U.S. market does not manifest itself in a differential in the levels of exports or imports.
If a government undertakes policies that systematically reduce the volume of imports [e.g., through protectionist trade policies], it also systematically reduces the volume of exports. The reasons may be indirect and less than obvious, but they are still present and have to be reckoned with.
MP: In other words, protectionist trade policies that restrict, limit or ban imports in an attempt to expand domestic production and employment by increasing exports are guaranteed to fail and backfire.
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Ayaan Hirsi Ali and Asra Q. Nomani write in the New York Times today about their experience testifying last week before the Senate Committee on Homeland Security and Governmental Affairs last week on “Ideology and Terror: Understanding the Tools, Tactics, and Techniques of Violent Extremism,” and being completely ignored and treated with cold indifference by the female Democratic senators on that committee:
The Democrats on the panel, including Senator Kamala Harris and three other Democratic female senators — North Dakota’s Heidi Heitkamp, New Hampshire’s Maggie Hassan and Missouri’s Claire McCaskill — did not ask either of us a single question. Just as we are invisible to the mullahs at the mosque, we were invisible to the Democratic women in the Senate.
How to explain this experience? Perhaps Senators Heitkamp, Harris, Hassan and McCaskill are simply uninterested in sexism and misogyny. But obviously, given their outspoken support of critical women’s issues, such as the kidnapping of girls in Nigeria and campus sexual assault, that’s far from the case.
No, what happened was emblematic of a deeply troubling trend among progressives when it comes to confronting the brutal reality of Islamist extremism and what it means for women in many Muslim communities here at home and around the world. When it comes to the pay gap, abortion access and workplace discrimination, progressives have much to say. But we’re still waiting for a march against honor killings, child marriages, polygamy, sex slavery or female genital mutilation.
Bonus: Venn diagram above displays graphically the inconsistency of the feminists, gender activists and progressives who seem unconcerned about Islamist extremism and its war on women.
Update: Ayaan Hirsi Ali and Asra Q. Nomani respond in today’s New York Times to readers who posted more than 1,000 comments about their op-ed. Here’s part of a response from Ayaan:
First, what is needed is critical self-reflection on the morals and agenda to which people on the left say they are committed. Look squarely at the real consequences of that agenda, both good and bad. Second, apply the idea of equality to all individuals regardless of their identity.Human rights are universal. And human rights are held by individuals, not by groups. The left today has a growing tendency to prioritize group rights over individual rights, partly driven by “intersectionality.” This is often what gets them in a moral bind. The rights of individual human beings should always come before those of the tribe or the collective.
If one finds white male sexism intolerable, then one should by definition find all male sexism just as intolerable. Excusing men of color, Muslims, immigrants or men living in non-Western societies for bad behavior toward women is an expression of the bigotry of low expectations.
On the intricate network of fallacies about trade that mutually support each other and lead to delusional thinking
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In his classic 1946 book Economics in One Lesson Henry Hazlitt suggested that a major barrier to clear economic thinking is an “intricate network of fallacies” about various economic topics “that mutually support each other.” There’s probably no issue that provides a better example of how a “network of fallacies” results in misguided, erroneous and delusional thinking than the issue of international trade. I identify and discuss three fallacies below about international trade that mutually support each other and together prevent many from thinking clearly, intelligently, and logically about trade.
Trade Fallacy 1: That what is economically prudent and sensible at the household level is somehow imprudent and not sensible at the national level. Adam Smith talked about this fallacy in the Wealth of Nations in 1776:
It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbors, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for. What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.
In a CD post about that quotation from Adam Smith, I added:
At the household level, it should be obvious and self-evident that the economic prosperity is enhanced by trade, choice, selection, competition, and low prices. It should also be obvious that economic prosperity would be retarded for households by restrictions on trade that reduce choice, selection, competition and raise prices. How do people so easily understand prudence, economic efficiency and trade at the household level, but then become inflicted with economic amnesia and a “network of fallacies” when we move from the household level to the national level?
Supporting tariffs and protectionist trade policies often result from Trade Fallacy 1.
Trade Fallacy 2. Related to the first fallacy, this second trade fallacy is that the obvious and verifiable benefits of intranational, domestic trade among US states are somehow different from the equally obvious and verifiable benefits of international trade among countries. Stated differently, it’s the fallacy that there’s “something economically unique about international trade” (see below), or that the process of trading goods across imaginary lines called state borders is somehow unique or different from goods traded across imaginary lines called national borders.
Don Boudreaux explained Trade Fallacy 2 very well on Cafe Hayek like this (emphasis added):
There is nothing special or unique about job and profit losses (and gains) “caused” by changes in the pattern of international trade; these losses (and gains) differ in no relevant way from such losses (and gains) “caused” by changes in the pattern of economic activity that involve no international component.
The importance of this point should be self-evident, although I realize that it isn’t. People are easily mislead by the existence of political borders into imagining the existence of economic relevance that simply isn’t there. Any such supposed economic relevance is a delusion [and fallacy].
Rent-seekers in each domestic market, of course, have powerful incentives to embrace and to fortify these delusions [fallacies], for the greater the number of people who are so deluded, the greater are the prospects for rent-seekers to win and to maintain government-granted special privileges – such as tariffs – to protect them from having to compete in markets as vigorously as they would have to compete without such privileges. But the economics of the matter are crystal-clear: any such imagined economic relevance of political borders is a popular delusion [fallacy]. And one important role of the economist is to do all that he or she can to cure people of suffering this delusion [fallacy]. Any successes that economists have in this endeavor help to protect society from rent-seekers who shamelessly exploit the popular delusion [fallacy] that there’s something economically unique about international trade.
So whatever quantum of compassion or indifference someone wishes to bestow upon a worker who loses his or her job because consumers choose to reduce their rate of purchasing whatever it is he or she produces is a quantum of compassion or indifference that should be bestowed upon any worker who loses his or her job because consumers choose to reduce their rate of purchasing whatever it is he or she produces – whether these consumer choices involve buying more imports or not.
Trade Fallacy 3 is the fallacy that jobs losses and business closures from advances in technology are somehow unique or different from job losses and business closures from international trade. In reality, international trade is just a “form of technology” that lowers the cost of certain goods and services available to Americans, in the same way that technological advances lower the cost of certain goods available to Americans. Therefore, it’s fallacy to think that lower prices for clothing that result from international trade are economically unique or different from lower prices for clothing due to technological advances for producing clothing domestically. Stated differently, it would be a fallacy to think there is something economically unique about the Schumpeterian forces of creative destruction that destroy jobs and businesses due to international trade versus the destruction of jobs and businesses that result from technological advances, entrepreneurship, and innovation.
Once again, Don Boudreaux does a great job explaining Trade Fallacy 3 on Cafe Hayek (second emphasis added):
To repeat an especially important insight: “International trade is nothing but a form of technology.” That is, trade – both intranational and international – itself is an innovation. Finding specialists with whom we can profitably trade requires transportation and communication – both of which today are, as it happens, greatly facilitated by advanced machinery. Yet other, less obvious innovations are involved – for example, the supermarket. The organizational form of the supermarket lowers consumers’ costs of learning about and acquiring groceries. (Superstores, such as Walmart, lower those costs even further.) In international trade, the seemingly simple box that we know today as the shipping container is a labor-saving innovation that dramatically reduced the costs of ordinary men and women from around the globe to trade with each other. Ditto the giant, magnificent modern cargo ship.
Our ability to trade is enhanced by technological innovations. Thus, innovations help us to save labor both directly (as with an incredible bread machine on my kitchen counter) and indirectly (as with the shipping container that better enables me to acquire goods assembled by workers who live thousands of miles distant from me).
The bottom-line is that trying to measure what proportion of some number of job losses is due to innovation and what proportion of those job losses is due to trade is rather pointless: from one valid perspective, all of the job losses are due to innovation; from another valid perspective, all of the job losses are due to trade. But from any perspective, the very fact that particular jobs are lost means that labor is saved.
Bottom Line: There may be others, but the three trade fallacies outlined above are part of the “intricate network of fallacies about trade that mutually support each other” and prevent clear and logical thinking about trade. If you start by falsely thinking that what is economically prudent at the household level is somehow folly at the national level, then you will be easily persuaded that international trade is somehow different from domestic trade, and readily but falsely assume that job losses from trade are somehow different from job losses that result from technology. Once that network of fallacies about trade has been accepted by trade protectionists and nationalists, it becomes an almost superhuman task to break the stranglehold of that delusional and fallacious thinking. “An octopus would sooner release its prey,” to quote Isabel Paterson. The work of economic educators is never done….
Bonus: Venn diagram above illustrates graphically one of the inconsistencies in the “thinking” of the “scarcityists” that is part of the “network of fallacies.”
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Here are some key parts of my op-ed in today’s Washington Examiner:
On June 5, 1920, during President Woodrow Wilson’s administration, Congress passed the Jones Act, ushering in a form of protectionism for the United States shipping industry and seafaring unions that would eventually drive up energy prices and conflict with the goal of achieving energy independence. Now, 97 years later, the need for the Jones Act is sensibly being questioned and challenged as never before.
Specifically, the Jones Act requires that vessels carrying goods shipped in U.S. waters between U.S. ports must be built, registered, owned, and crewed by U.S. citizens and fly the U.S. flag. Since it costs more to build and operate U.S. ships than it does in other countries, the statute has imposed significantly higher shipping costs on the U.S. economy as compared with more competitive international rates. For example, it costs about three times more to ship oil from the Gulf Coast to New England states than to ship the same amount of oil to Europe.
There are the traditional concerns arising from the Jones Act: higher shipping costs, bottlenecks of oil stored at U.S. ports waiting for tankers, higher oil and gas prices, increased reliance on imported oil, and the potential for slower response to hurricanes and oil spills. The century-old statute is raising anxieties that it’s become a regulatory hurdle making it more difficult to use our country’s rising oil and natural gas production from the shale revolution to reshape the balance of global and economic power.
But two new factors are now fueling the debate.
One is a shortage of Jones Act-eligible tankers available to ship oil from Gulf Coast ports to coastal refineries in Philadelphia and other cities. In 2000, there were 193 Jones Act tankers, but by 2014 only 90 remained. Since there are only a limited number of Jones Act tankers and almost all are under long-term contracts, tanker capacity is stretched tight. This has led to a backup of oil in Gulf Coast ports, which is hampering oil production all along the supply chain but especially the production of unconventional tight oil in North Dakota’s Bakken region and in the Eagle Ford Shale area of South Texas.
There are currently no Jones Act tankers capable of carrying liquefied natural gas. This makes it prohibitively expensive to transport LNG to all domestic ports but especially ports in the noncontiguous regions of Hawaii, Alaska and Puerto Rico. To transport LNG from a West Coast port to Hawaii would require building a much more expensive ship. The upshot is that Hawaii and Puerto Rico have been unable to benefit from abundant and cheap natural gas from the U.S.
If foreign vessels were able to ship U.S.-produced oil from Gulf Coast ports to East Coast refineries, it would save U.S. consumers $1 billion annually. There’s no longer any economic reason to keep the anti-competitive and outdated Jones Act. Congress should repeal the century-old legislative relic of the past.
Who’d a-thunk it? Congressional Democrats support $15 an hour minimum wage, but pay their own interns $0 an hour?
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From the “Do as I say, not as I do” file…..
In his op-ed in The Hill today, Michael Saltsman exposes “Capitol Hill’s hypocrisy on intern pay”:
There’s nothing wrong with offering unpaid opportunities for young constituents to gain experience and learn new skills. But it’s hypocritical for Congressional Democrats to emphasize the benefits of a job that pays $0 an hour, while at the same time raising barriers to employment for millions of others who are trying to enter the job market. America’s young workers deserve better from their representatives.
The full list of cosponsors and the compensation details of their internship programs are available here.
Economic lesson for Team Trump: As US firms expand, invest and hire overseas, they expand, invest and hire in US
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The table above (click to enlarge) is based on financial data included in the World Investment Report 2016, a report produced annually by the United Nations Conference on Trade and Development (UNCTAD) and just released with data for 2016. Table 24 of the UNCTAD report lists the world’s top 100 non-financial “Multinational Enterprises,” ranked by foreign assets in 2016, and the table above features the 22 multi-national corporations (MNCs) in that group that are headquartered in the US. Displayed above are: a) foreign assets, b) foreign sales, and c) foreign employees, both alone and most importantly as shares of the global totals for those three items for the 22 US-based companies. Those items with shares above 50% are displayed above in bold.
This post is an updated version using 2016 UNCTAD data of a CD blog post published last year using 2015 data that was inspired by Daniel Griswold’s post “Trump’s Carrier “success” signals a retreat of U.S. business in global markets.” An excerpt of Dan’s post appears below featuring slightly different, but related, data on international sales that reinforce the lessons from the data above. A recent Wall Street Journal op-ed by Dartmouth’s Tuck School of Business Dean Matthew Slaughter (“The ‘Exporting Jobs’ Canard“) is also relevant to the data in the table above, and you’ll find an excerpt from his op-ed below.
Here are some key points from the table above:,
1. Many of the largest US-based MNCs have close to (or more than) two-thirds of their total sales outside the US, e.g. Mondelez (76%), Schlumberger (76%), Coca-Cola (76%), Intel (78%), Apple (65%), Proctor and Gamble (59%), HP (61%). Other large American MNCs generate more than 50% of their sales overseas, e.g. GE (57%), Exxon Mobil (56%), IBM (53%), Microsoft (52%), Pfizer (50.1%) and Alphabet (54%).
2. Almost all of these MNCs have close to half, or more than half, of their workforces outside the US, and some employ nearly 75% of their workers overseas, e.g., Johnson and Johnson (74%) and Amazon (73%) — that’s almost 3 foreign workers for every US employee. Mondelez employs more than six foreign workers for every American worker (87% of its workforce is foreign).
3. Many of the US MNCs above have close to half, or more than half of their corporate assets (property, plant, and equipment) located outside the US, and some like Chevron, Apple, Coca-Cola, Schlumberger, Intel, and Mondelez have two-thirds or more of their assets overseas.
4. Of the top 25 (50) largest MNCs in the world ranked by foreign assets, only 4 (10) are located in the US, and of the top 100 MNCs, 78 are located outside the US and these foreign-based rivals are engaged in intense competition with US-based companies for global sales and market share.
MP: To remain competitive and profitable in an extremely competitive global marketplace, US firms have to operate as efficiently as possible, and produce their products at the lowest possible cost to survive. The long-term viability and sustainability of US MNCs forces them to minimize production costs for their customers in global markets, and sometimes that requires them to shift production overseas, possibly to take advantage of lower labor costs, lower taxes, or more favorable regulations. It’s also frequently the case that expanding production and manufacturing operations overseas takes place to better serve retail markets outside the US and the 95% of non-American global consumers.
For example, Intel and Coca-Cola generated more than $3 in foreign sales last year for every dollar in domestic sales, and Apple generated nearly $2 in foreign sales for every dollar of sales in the US. It therefore makes perfect economic sense for those US-based MNCs to manufacture and assemble their products overseas, since such a large majority of their sales take place in foreign markets, and not the US market. Forcing Intel, Coca-Cola or Apple to shift production of their products to the US where labor costs and corporate taxes are higher, and where production is moved away further from the retail markets where those products will ultimately be sold, could disrupt those companies’ carefully orchestrated, and maximally-efficient global supply chains. If Team Trump is successful at penalizing for political purposes US companies like Intel and Apple that make global production decisions based on what minimizes production costs and best serves their retail markets, it could put many of those companies at a competitive disadvantage by forcing them to incur higher operational costs.
As promised, here’s a key excerpt from Daniel Griswold’s post (emphasis mine):
Most of what American companies sell abroad these days are not exports from the United States but goods supplied through their foreign-owned affiliates. This is how multinational companies compete for customers. In 2013, according to the most recent records from the U.S. Commerce Department, U.S. majority-owned affiliates abroad supplied $4.32 trillion in goods compared to $1.59 trillion in exports. That means that U.S. producers generate almost three times as much revenue from the sale of goods through their affiliates abroad as they do by exporting from the United States.
And what those U.S.-owned affiliates produce abroad is overwhelmingly sold abroad. Of the $4.32 trillion in goods that the affiliates supplied, $339 billion, or less than 8%, was sold as imports to the United States; more than 92% was sold in the host country or in third countries. In China, 96% of the goods supplied by U.S. majority-owned affiliates was sold in China or other countries outside the United States. In Mexico, 68% of the goods they supplied was sold in Mexico or third countries.
If a Trump administration succeeds in bribing and/or intimidating U.S. companies to cut back on their direct investment abroad, the result will be an increasing surrender of market share to their foreign rivals. Fewer goods produced and sold through their foreign affiliates will mean fewer American brand name products sold in global markets. That withdrawal will quickly translate into fewer Americans — managers, accountants, engineers, and production workers — employed in parent-company operations here in the United States.
And here’s an excerpt from Matthew Slaughter’s op-ed (my emphasis):
President Trump has voiced a widely shared—but incorrect—belief that the global economy is a zero-sum game. “One by one,” Mr. Trump said in his inaugural address, “the factories shuttered and left our shores, with not even a thought about the millions and millions of American workers that were left behind.” In his first White House meeting a few days later, Mr. Trump warned a roomful of CEOs that companies sending factories overseas would face a new border tax.
Mr. Trump assumes that when U.S. multinationals expand abroad, it necessarily reduces the number of people they employ in the U.S. But this assumption is wrong, and tariffs would hurt American workers, not help them.
Academic research has repeatedly found that when U.S. multinationals hire more people at their overseas affiliates, it does not come at the expense of American jobs. How can this be? Large firms need workers of many different skills and occupations, and the jobs done by employees abroad are often complements to, not substitutes for, those done by workers at home. Manufacturing abroad, for example, can allow workers in the U.S. to focus on higher value-added tasks such as research and development, marketing, and general management. Additionally, expanding overseas to serve foreign customers or save costs often helps the overall company grow, resulting in more U.S. hiring.
Between 2004 and 2014, total employment at foreign affiliates of U.S. multinationals rose by 4.8 million, from nine million to 13.8 million. Yet the number of jobs at U.S. parent companies rose nearly as much, by 4.2 million, from 22.4 million to 26.6 million. Over the same period, the value-added and capital investment grew faster among U.S. parent companies than in their foreign affiliates. In fact, on these two measures the American parent companies outperformed the overall U.S. private sector. This suggests that having overseas affiliates gives companies a competitive advantage that allows them to invest more at home. More than ever, jobs in America are connected to the world.
President Trump is right that America needs millions more good-paying jobs. But he does not seem to realize they can be created by U.S.-based multinationals that know how to invest capital, operate globally and create knowledge. Limit the ability of U.S. multinational companies to flourish abroad and you limit their ability to create high-paying jobs in America.
Bottom Line: It’s important to remember that large US-based MNCs like the ones in the table above (but also hundreds of other US multinational firms) operate globally — they produce and sell their products globally, they hire workers globally, they invest in capital assets globally, and they compete with global rivals in an intensely competitive global marketplace. Those firms are already exposed to constant risks, challenges, and gales of Schumpeterian creative destruction, and have to focus relentlessly on operational efficiencies and low production costs to survive, and they have to make decisions at the global level to compete with their foreign rivals and maintain or grow market share. Saddling American firms with unnecessary political burdens, uncertainties, and risks from a protectionist, nationalist administration that forces firms like those in the table above to think domestically instead of globally isn’t a formula to make America great. It’s a formula that’s guaranteed to make American companies weaker and the country poorer, and in the process eliminate, not create more jobs, for US workers.
The US War on Drugs started 46 years ago today. Some commentary from Milton Friedman on that failed and shameful war
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Today is the 46th anniversary of America’s War on
Drugs Otherwise Peaceful Americans Who Voluntarily Choose To Ingest or Sell Intoxicants Currently Proscribed by the Government, Which Will Put Users or Sellers in Cages if Caught, see today’s previous post on CD here. To bring awareness to this immoral, failed, costly, and shameful war on the American people, here’s some commentary below from Nobel economist Milton Friedman.
In 1991 Nobel economist Milton Friedman (pictured above giving a talk at AEI, exact year unknown) was interviewed by Emmy Award-winning drug reporter Randy Paige on “America’s Drug Forum,” a national public affairs talk show that appeared on public television stations. In the interview, Milton Friedman discussed in detail his views on America’s War on Drugs, legalization of drugs, the role of government in a free society, and his pessimistic view of America’s future if we continue moving in the direction of socialism. Videos of the entire 30-minute interview appears below in three parts, and here is the transcript of the interview.
Here are some of my favorite parts of the interview (emphasis added):
1. Paige: Let us deal first with the issue of legalization of drugs. How do you see America changing for the better under that system?
Friedman: I see America with half the number of prisons, half the number of prisoners, ten thousand fewer homicides a year, inner cities in which there’s a chance for these poor people to live without being afraid for their lives, citizens who might be respectable who are now addicts not being subject to becoming criminals in order to get their drug, being able to get drugs for which they’re sure of the quality. You know, the same thing happened under prohibition of alcohol as is happening now.
Under prohibition of alcohol, deaths from alcohol poisoning, from poisoning by things that were mixed in with the bootleg alcohol, went up sharply. Similarly, under drug prohibition, deaths from overdose, from adulterations, from adulterated substances have gone up.
2. Paige: For us to understand the real root of those beliefs, how about if we just talk a minute about free market economic perspective, and how you see the proper role of government in its dealings with the individual.
Friedman: The proper role of government is exactly what John Stuart Mill Said in the middle of the 19th century in “On Liberty.” The proper role of government is to prevent other people from harming an individual. Government, he said, never has any right to interfere with an individual for that individual’s own good.
The case for prohibiting drugs is exactly as strong and as weak as the case for prohibiting people from overeating. We all know that overeating causes more deaths than drugs do. If it’s in principle OK for the government to say you must not consume drugs because they’ll do you harm, why isn’t it all right to say you must not eat too much because you’ll do harm? Why isn’t it all right to say you must not try to go in for skydiving because you’re likely to die? Why isn’t it all right to say, “Oh, skiing, that’s no good, that’s a very dangerous sport, you’ll hurt yourself”? Where do you draw the line?
3. Paige: Is it not true that the entire discussion here, the entire drug problem is an economic problem to…
Friedman: No, it’s not an economic problem at all, it’s a moral problem.
Paige: In what way?
Friedman: I’m an economist, but the economics problem is strictly tertiary. It’s a moral problem. It’s a problem of the harm which the government is doing.
I have estimated statistically that the prohibition of drugs produces, on the average, ten thousand homicides a year. It’s a moral problem that the government is going around killing ten thousand people. It’s a moral problem that the government is making into criminals people, who may be doing something you and I don’t approve of, but who are doing something that hurts nobody else. Most of the arrests for drugs are for possession by casual users.
Now here’s somebody who wants to smoke a marijuana cigarette. If he’s caught, he goes to jail. Now is that moral? Is that proper? I think it’s absolutely disgraceful that our government, supposed to be our government, should be in the position of converting people who are not harming others into criminals, of destroying their lives, putting them in jail. That’s the issue to me. The economic issue comes in only for explaining why it has those effects. But the economic reasons are not the reasons.
Of course, we’re wasting money on it. Ten, twenty, thirty billion dollars a year, but that’s trivial. We’re wasting that much money in many other ways, such as buying crops that ought never to be produced.
4. Paige: There are many who would look at the economics–how the economics of the drug business is affecting America’s major inner cities, for example.
Friedman: Of course it is, and it is because it’s prohibited. See, if you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That’s literally true.
Paige: Is it doing a good job of it?
Friedman: Excellent. What do I mean by that? In an ordinary free market–let’s take potatoes, beef, anything you want–there are thousands of importers and exporters. Anybody can go into the business. But it’s very hard for a small person to go into the drug importing business because our interdiction efforts essentially make it enormously costly. So, the only people who can survive in that business are these large Medellin cartel kind of people who have enough money so they can have fleets of airplanes, so they can have sophisticated methods, and so on.
In addition to which, by keeping goods out and by arresting, let’s say, local marijuana growers, the government keeps the price of these products high. What more could a monopolist want? He’s got a government who makes it very hard for all his competitors and who keeps the price of his products high. It’s absolutely heaven.
Legalization is a way to stop–in our forum as citizens– a government from using our power to engage in the immoral behavior of killing people, taking lives away from people in the U.S., in Colombia and elsewhere, which we have no business doing.
5. Paige: So, you see the role of government right now as being just as deadly as if Uncle Sam were to take a gun to somebody’s head.
Friedman: That’s what he’s doing, of course. Right now Uncle Sam is not only taking a gun to somebody’s head, he’s taking his property without due process of law. The drug enforcers are expropriating property, in many cases of innocent people on whom they don’t have a real warrant. That’s a terrible way to run what’s supposed to be a free country.
6. Paige: What scares you the most about the notion of drugs being legal?
Friedman: Nothing scares me about the notion of drugs being legal.
Friedman: What scares me is the notion of continuing on the path we’re on now, which will destroy our free society, making it an uncivilized place. There’s only one way you can really enforce the drug laws currently. The only way to do that is to adopt the policies of Saudi Arabia, Singapore, which some other countries adopt, in which a drug addict is subject to capital punishment or, at the very least, having his hand chopped off. If we were willing to have penalties like that–but would that be a society you’d want to live in?
7. Paige: Last question. You have grandchildren.
Friedman: Absolutely. I have a two-year-old granddaughter named Becca.
Paige: When you look at Becca, what do you see for her and for her future?
Friedman: That depends entirely upon what you and your fellow citizens do to our country. If you and your fellow citizens continue on moving more and more in the direction of socialism, not only inspired through your drug prohibition, but through your socialization of schools, the socialization of medicine, the regulation of industry, I see for my granddaughter the equivalent of Soviet communism three years ago.
Part I (below). Milton Friedman interview on “America’s Drug Forum” (1991)
Part 2 (below). Milton Friedman interview on “America’s Drug Forum” (1991)
Part 3 (below). Milton Friedman interview on “America’s Drug Forum” (1991)