November 30, 2009
The Ghost of Lysenko
By Bruce Walker
The imaginary science of man-made global warning can now be entered into the infamous history of politicized science, the results of which have threads in our lives today. Consider the residue of such frauds as Rachel Carson, Alfred Kinsey, and Margaret Mead. Carson's invented findings and unscientific methods led to the banning of DDT, which in turn cost the lives of tens of millions of children in undeveloped nations. Kinsey's tortuously doctored "sex research," as Dr. Judith Riesman has so amply demonstrated, was not only invented to sate his perverted lusts, but created scientific myths about normal and abnormal behavior which haunt us to this day. Mead also simply invented research to fit her idea of what the science of anthropology ought to be in order to justify her own immature and immoral behavior. Carson, Kinsey, and Mead had an agenda before they did any research, and this agenda governed everything else.
Science is supposed to be the impartial blend of data with theory that allows human knowledge to go wherever the evidence leads. Serious science must be firmly grounded in moral absolutes. This sounds untrue to modern ears because we have been indoctrinated with a false history of science. Without faith in an ordered universe according to discoverable principles, science cannot exist. The assumption that life and the universe are rational is religious in nature. There must be a belief in ultimate truth -- a faith, something which religion brings that is not found in a man-centered mindset. If man is all there is, then why can't truth be relative?
Those who hijack science, however, are not interested in truth. They have created a false history of science which asserts absurd lies like "medieval Christians believed the Earth was flat." (Not only is that not true, but the religious influence upon science tended to confirm that the Earth was a sphere, and Christians of the time had the truest calculation of the circumference of the Earth of anyone around.) The men who founded modern science -- Galileo, Copernicus, Kepler, Pascal, Napier, Newton, and others -- were much more religious than their contemporaries. Those who hijack science for personal and political reasons pretend that religion interfered with science, but this is no more than a power-hungry agnostic's narcotic delusion.
This fraud has left many ghosts. "Aryan" science pretended, for a time, to be rooted in real science. Many Nazis considered their vile rites to be steeped in pure science, and they condemned the religious sentimentality of those who thought that men are men and not livestock.
Perhaps the most egregious ghost is Trofim Lysenko, the man who ruled the life sciences of Soviet Russia from the late 1920s until the early 1960s. He had a theory which fit Marxism perfectly: acquired characteristics can be inherited. This is not true, of course, but Lysenko had the Politburo and Stalin behind him. It was science that fit the political needs of the Bolsheviks, and so it was science backed by the awful power of the party and the state.
Lysenko's experiments were heralded, although the experiments were never replicated. The Soviet Union was full of botanists, biologists, geneticists, and other life scientists, and it was obvious to anyone with a free mind that Lysenko was propounding nonsense. But it was not until 1962 that the Soviet government allowed a real critique of his cartoon science. Why?
Because in the Soviet Union, as in Nazi Germany, truth was never "objective." Science could literally be "Aryan," or "proletariat," or otherwise fit into some sort of sociopolitical mindset. God was dead in Nazi Germany and Soviet Russia, so no one was there to acknowledge the lies or account for the intellectual mischief. Honest scientists were imprisoned, tortured, and killed because they rested on the thin reed of the scientific method, which ill withstood the hurricane of politically correct science. Inconceivably, the life sciences of the largest nation in the world taught blatantly false "science" for decades. When criticism of Lysenko, an honored figure in Soviet "science" until 1964, was finally permitted, his acolytes realized that fear, bribes, lies, and false honors work much better than empiricism where science devoid of God is concerned. The ghosts spawned by Lysenko still haunt us today. The "science" of a modern Lysenko -- Albert Gore, Jr. (son of the famous racist, Albert Gore, Sr.) -- is totalitarian nonsense. The only question is this: How many good men must be consigned to the gulag before the dulled consciences of the administrators of academic "learning" smell Lysenko's stench?
Bruce Walker is the author of two books: Sinisterism: Secular Religion of the Lie and The Swastika against the Cross: The Nazi War on Christianity.
32 Comments on "The Ghost of Lysenko"
Monday, November 30, 2009
Tuesday, November 24, 2009
November 24, 2009
The Wilding of Sarah Palin
By Robin of Berkeley
When I was in college, I read a book that changed my life. It was Susan Brownmiller's tome, Against Our Will: Men, Women, and Rape, which explained rape as an act of power, not just lust. What I found particularly chilling was the chapter on war -- how rape is used to terrorize a population and destroy the enemy's spirit.
While edifying, the book magnified the vulnerability I already felt as a female. Fear of rape became a constant dread, and I sought a solution that would help shield me from danger.
The answer: seek safe harbor within the Democratic Party. I even became an activist for feminist causes, including violence against women. Liberalism would protect me from the big bad conservatives who wished me harm.
Like most feminists, it was a no brainer to become a Democrat. Liberal men, not conservatives, were the ones devoted to women's issues. They marched at my side in support of abortion rights. They were enthusiastic about women succeeding in the workplace.
As time went on, I had many experiences that should have made me rethink my certainty. But I remained nestled in cognitive dissonance -- therapy jargon for not wanting to see what I didn't want to see.
One clue: the miscreants who were brutalizing me didn't exactly look Reagan-esque. In middle and high schools, they were minority kids enraged about forced busing. On the streets of New York City and Berkeley, they were derelicts and hoodlums.
Another red flag: while liberal men did indeed hold up those picket signs, they didn't do anything else to protect me. In fact, their social programs enabled bad behavior and bred chaos in urban America. And when I was accosted by thugs, those leftist men were missing in action.
What else should have tipped me off? Perhaps the fact that so many men in ultra left Berkeley are sleaze bags. Rarely a week goes by that I don't hear stories from my young female clients about middle aged men preying on them. With the rationale of moral relativism, these creeps feel they can do anything they please.
What finally woke me up were the utterances of bitch, witch, and monster toward Hillary Clinton and her supporters early last year. I was shocked into reality: the trash talk wasn't coming from conservatives but from male and female liberals.
I finally beheld what my eyes had refused to see: that leftists are Mr. and Ms. Misogyny. Both the males and the females don't care a whit about women.
Women are continually sacrificed on the altar of political correctness. If under Radical Islam women are enshrouded and stoned and beheaded, so be it.
My other epiphanies:those pony tailed guys were not marching for abortion rights because they cherished women's reproductive freedom. It was to keep women available for free and easy sex.
And the eagerness for women to make good money? If women work hard, leftist men don't have to.
Then along came Sarah, and the attacks became particularly heinous. And I realized something even more chilling about the Left. Leftists not only sacrifice and disrespect women.
It's far worse than that: many are perpetuators.
The Left's behavior towards Palin is not politics as usual. By their laser focus on her body and her sexuality, leftists are defiling her.
They are wilding her. And they do this with the full knowledge and complicity of the White House.
The Left has declared war on Palin because she threatens their existence. Democrats need women dependent and scared so that women, like blacks, will vote for liberals.
A strong, self sufficient woman, Palin eschews their protection. Drop her off in the Alaskan bush, and she'll survive just fine, thank you very much. Palin doesn't need or want anything from liberals, not hate crimes legislation that coddles her, not abortion, which she abhors.
Palin is a woman of deep and abiding faith. She takes no marching orders from messiah like wannabes, like Obama.
And so the Left must try to destroy her. And they are doing this in the most malicious of ways:
By symbolically raping her.
Just like a perpetuator, they dehumanize her by objectifying her body. They undress her with their eyes.
They turn her into a piece of ass.
Liberals do this by calling her a c___t, ogling her legs, demeaning her with names like "sexy flight attendant," and "Trailer Park Barbie," and exposing her flesh on the cover of Newsweek.
And from The Atlantic Magazine's Andrew Sullivan: "Sarah Palin's vagina is the font of all evil in the galaxy."
Nothing is off limits, not actress Sandra Bernhard's wish that Palin be gang raped or the sexualizing of Palin's daughters.
As every woman knows, leering looks, lurid words, and veiled threats are intended to evoke terror. Sexual violence is a form of terrorism.
The American Left has a long history of defiling people to control and break them. The hard core 60‘s leftists were masters of guerilla warfare, like the Symbionese Liberation Army repeatedly raping Patty Hearst. Huey P. Newton sent a male Black Panther to the hospital, bloodied and damaged, from a punishment of sodomy.
The extreme Left still considers themselves warriors, righteous soldiers for their Marxist cause. With Palin, they use sexual violence as part of their military arsenal.
Palin is not the only intended victim. As the book, Against Our Will described, the brutality is also aimed at men. By forcing men to witness Palin's violation, the Left tries to emasculate conservative men by rendering them powerless.
The wilding of any woman is reprehensible. But defiling a mother of five, with a babe in her arms, and a grandmother, is particularly obscene. It is, of course, Palin's unapologetic motherhood that provides fuel to the leftist fire.
Because, as a mother, and a fertile woman, Palin is as close to the sacred as a person gets. She is not just politically pro life. Palin's whole being emanates life, in stark contrast to the darkness of the left, the life despoilers.
These "progressives" are so alienated from the sacred that they perceive nothing as sacred. And they will destroy anyone whose goodness shines a mirror on their pathology. The spiritually barren must annihilate the vital and the fertile.
It has been almost two years since I woke up and broke up with liberalism. During these many months, I've discovered that everything I believed was wrong.
But the biggest shock of all has been realizing that the Democratic Party is hardly an oasis for women. Now that it has been infiltrated by the hard Left, it's a dangerous place for women, children, and other living things.
In the wilding of Sarah Palin, the Left shows its true colors. Rather than a shelter for the vulnerable, leftists will mow down any man, woman, or child who gets in their way. Not a movement of hope and change, it is a cauldron of hate.
From Dr. Martin Luther King, Jr.
Hatred paralyzes life; love releases it. Hatred confuses life; love harmonizes it. Hatred darkens life; love illuminates it.
In these dark times, with spiritually bankrupt people at the helm, thank God we have bright lights like Sarah Palin to illuminate the darkness.
A frequent AT contributor, Robin is a psychotherapist and a recovering liberal in Berkeley.
115 Comments on "The Wilding of Sarah Palin"
The Wilding of Sarah Palin
By Robin of Berkeley
When I was in college, I read a book that changed my life. It was Susan Brownmiller's tome, Against Our Will: Men, Women, and Rape, which explained rape as an act of power, not just lust. What I found particularly chilling was the chapter on war -- how rape is used to terrorize a population and destroy the enemy's spirit.
While edifying, the book magnified the vulnerability I already felt as a female. Fear of rape became a constant dread, and I sought a solution that would help shield me from danger.
The answer: seek safe harbor within the Democratic Party. I even became an activist for feminist causes, including violence against women. Liberalism would protect me from the big bad conservatives who wished me harm.
Like most feminists, it was a no brainer to become a Democrat. Liberal men, not conservatives, were the ones devoted to women's issues. They marched at my side in support of abortion rights. They were enthusiastic about women succeeding in the workplace.
As time went on, I had many experiences that should have made me rethink my certainty. But I remained nestled in cognitive dissonance -- therapy jargon for not wanting to see what I didn't want to see.
One clue: the miscreants who were brutalizing me didn't exactly look Reagan-esque. In middle and high schools, they were minority kids enraged about forced busing. On the streets of New York City and Berkeley, they were derelicts and hoodlums.
Another red flag: while liberal men did indeed hold up those picket signs, they didn't do anything else to protect me. In fact, their social programs enabled bad behavior and bred chaos in urban America. And when I was accosted by thugs, those leftist men were missing in action.
What else should have tipped me off? Perhaps the fact that so many men in ultra left Berkeley are sleaze bags. Rarely a week goes by that I don't hear stories from my young female clients about middle aged men preying on them. With the rationale of moral relativism, these creeps feel they can do anything they please.
What finally woke me up were the utterances of bitch, witch, and monster toward Hillary Clinton and her supporters early last year. I was shocked into reality: the trash talk wasn't coming from conservatives but from male and female liberals.
I finally beheld what my eyes had refused to see: that leftists are Mr. and Ms. Misogyny. Both the males and the females don't care a whit about women.
Women are continually sacrificed on the altar of political correctness. If under Radical Islam women are enshrouded and stoned and beheaded, so be it.
My other epiphanies:those pony tailed guys were not marching for abortion rights because they cherished women's reproductive freedom. It was to keep women available for free and easy sex.
And the eagerness for women to make good money? If women work hard, leftist men don't have to.
Then along came Sarah, and the attacks became particularly heinous. And I realized something even more chilling about the Left. Leftists not only sacrifice and disrespect women.
It's far worse than that: many are perpetuators.
The Left's behavior towards Palin is not politics as usual. By their laser focus on her body and her sexuality, leftists are defiling her.
They are wilding her. And they do this with the full knowledge and complicity of the White House.
The Left has declared war on Palin because she threatens their existence. Democrats need women dependent and scared so that women, like blacks, will vote for liberals.
A strong, self sufficient woman, Palin eschews their protection. Drop her off in the Alaskan bush, and she'll survive just fine, thank you very much. Palin doesn't need or want anything from liberals, not hate crimes legislation that coddles her, not abortion, which she abhors.
Palin is a woman of deep and abiding faith. She takes no marching orders from messiah like wannabes, like Obama.
And so the Left must try to destroy her. And they are doing this in the most malicious of ways:
By symbolically raping her.
Just like a perpetuator, they dehumanize her by objectifying her body. They undress her with their eyes.
They turn her into a piece of ass.
Liberals do this by calling her a c___t, ogling her legs, demeaning her with names like "sexy flight attendant," and "Trailer Park Barbie," and exposing her flesh on the cover of Newsweek.
And from The Atlantic Magazine's Andrew Sullivan: "Sarah Palin's vagina is the font of all evil in the galaxy."
Nothing is off limits, not actress Sandra Bernhard's wish that Palin be gang raped or the sexualizing of Palin's daughters.
As every woman knows, leering looks, lurid words, and veiled threats are intended to evoke terror. Sexual violence is a form of terrorism.
The American Left has a long history of defiling people to control and break them. The hard core 60‘s leftists were masters of guerilla warfare, like the Symbionese Liberation Army repeatedly raping Patty Hearst. Huey P. Newton sent a male Black Panther to the hospital, bloodied and damaged, from a punishment of sodomy.
The extreme Left still considers themselves warriors, righteous soldiers for their Marxist cause. With Palin, they use sexual violence as part of their military arsenal.
Palin is not the only intended victim. As the book, Against Our Will described, the brutality is also aimed at men. By forcing men to witness Palin's violation, the Left tries to emasculate conservative men by rendering them powerless.
The wilding of any woman is reprehensible. But defiling a mother of five, with a babe in her arms, and a grandmother, is particularly obscene. It is, of course, Palin's unapologetic motherhood that provides fuel to the leftist fire.
Because, as a mother, and a fertile woman, Palin is as close to the sacred as a person gets. She is not just politically pro life. Palin's whole being emanates life, in stark contrast to the darkness of the left, the life despoilers.
These "progressives" are so alienated from the sacred that they perceive nothing as sacred. And they will destroy anyone whose goodness shines a mirror on their pathology. The spiritually barren must annihilate the vital and the fertile.
It has been almost two years since I woke up and broke up with liberalism. During these many months, I've discovered that everything I believed was wrong.
But the biggest shock of all has been realizing that the Democratic Party is hardly an oasis for women. Now that it has been infiltrated by the hard Left, it's a dangerous place for women, children, and other living things.
In the wilding of Sarah Palin, the Left shows its true colors. Rather than a shelter for the vulnerable, leftists will mow down any man, woman, or child who gets in their way. Not a movement of hope and change, it is a cauldron of hate.
From Dr. Martin Luther King, Jr.
Hatred paralyzes life; love releases it. Hatred confuses life; love harmonizes it. Hatred darkens life; love illuminates it.
In these dark times, with spiritually bankrupt people at the helm, thank God we have bright lights like Sarah Palin to illuminate the darkness.
A frequent AT contributor, Robin is a psychotherapist and a recovering liberal in Berkeley.
115 Comments on "The Wilding of Sarah Palin"
Thursday, November 19, 2009
Jamaica vs. Singapore
By Josh Lerner Thursday, November 19, 2009
Filed under: Economic Policy, Boardroom, Government & Politics, World Watch
In 1965 the two nations were equal in wealth. Four decades later, their standing was dramatically different. What accounts for the difference?
Silicon Valley, Singapore, Tel Aviv—the global hubs of entrepreneurial activity all bear the marks of government investment. Yet, for every successful public intervention spurring entrepreneurial activity, there are many failed efforts, wasting untold billions in taxpayer dollars. When has governmental sponsorship succeeded in boosting growth, and when has it fallen terribly short? Should the government be involved in such undertakings at all? These issues are particularly timely, given the many billions of dollars governments spend worldwide to prop up troubled industries such as automobiles, as well as the urgent public efforts to encourage “green shoots” in areas such as clean-tech in hope of stimulating an economic recovery.
Programs to boost new ventures might seem like an esoteric corner of public policy, far less important than the big issues of war and peace and health benefits, not to mention the rescue of giant firms that are on the ropes. But this perception can mislead because of the magnitude of changes that can occur when venture programs are done well.
To understand their importance, we can contrast Jamaica and Singapore. Both are relatively tiny states, with under 5 million residents apiece. Upon Singapore’s independence in 1965—three years after Jamaica’s own establishment as a nation—the two nations were about equal in wealth: the gross domestic product (in 2006 U.S. dollars) was $2,850 per person in Jamaica, slightly higher than Singapore’s $2,650. Both nations had a centrally located port, a tradition of British colonial rule, and governments with a strong capitalist orientation. (Jamaica, in addition, had plentiful natural resources and a robust tourist industry.) But four decades later, their standing was dramatically different: Singapore had climbed to a per capita GDP of $31,400 (2006 data, in current dollars), while Jamaica’s figure was only $4,800.
The World Bank's analysis suggests that the total cost of complying with all tax laws in Jamaica amounts to just over one-half of gross profits for the typical entrepreneur.
What accounts for the amazing difference in growth rates? There are many explanations: soon after independence, Singapore aggressively invested in infrastructure such as its port, subsidized its system of education, maintained an open and corruption-free economy, and established sovereign wealth funds that made a wide variety of investments. It has also benefited from a strategic position on the key sea lanes heading to and from East Asia. Jamaica, meanwhile, spent many years mired in political instability, particularly the disastrous administration of Michael Manley during the 1970s. Dramatic shifts from a market economy to a socialist orientation and back again, with the attendant inflation, economic instability, crippling public debt, and violence, made the development and implementation of a consistent long-run economic policy difficult.
But in explaining Singapore's economic growth, it is hard not to give considerable credit to its policies toward entrepreneurship. The government has experimented with a wide variety of efforts to develop an entrepreneurial sector:
– Providing public funds for venture investors seeking to locate in the city-state
– Subsidies for firms in targeted technologies
– Encouraging potential entrepreneurs and mentoring fledgling ventures
– Subsidies for leading biotechnology researchers to move their laboratories to Singapore
– Awards for failed entrepreneurs (with a hope of encouraging risk-taking)
While much of the initial growth in Singapore can be attributed to sound macroeconomic policies, political stability, and various other factors, the nation’s entrepreneurship initiatives have played an increasingly important role in stimulating growth.
The contrast with Jamaica is striking. Jamaica has long had a high rate of subsistence entrepreneurship: for instance, the 2006 Global Entrepreneurship Monitor survey placed it among the highest of the 42 nations it examined in various rates of entrepreneurial activity. Yet other data collected by the Monitor—and corroborated in anecdotal accounts—suggests that early-stage entrepreneurship is translated into full-fledged business activity at a very low rate. On this measure, the island nation ranked among the lowest nations (28th among the 35 countries ranked by the Monitor in 2005).
Some of the reasons for the inability of Jamaican entrepreneurs to grow can be seen in the World Bank’s reports on the barriers to entrepreneurs. The "Doing Business" series assesses, across 178 countries, the obstacles faced by an entrepreneur in performing various standardized tasks (thereby avoiding some of the subjectivity associated with other attempts to rank entrepreneurship). In several critical indicators, Jamaica ranked extremely low in the World Bank’s 2008 analysis. These suggest some of the barriers that hold back the growth of entrepreneurial enterprises:
– Of the 178 countries studied, Jamaica ranked 170th in the burden of complying with tax regulations. The ranking reflects not just the cost of the taxes themselves, but also the administrative burdens associated with complying with the tax code. The World Bank's analysis suggests that the total cost of complying with all tax laws in Jamaica amounts to just over one-half of gross profits for the typical entrepreneur. Numerous studies have suggested that one of the most important sources of financing for the typical entrepreneur is cash flow generated by the business itself, which is plowed back into the business. If so much of entrepreneurs’ income is going to meet tax obligations, business owners are unlikely to have the resources to invest in their enterprises. By way of contrast, Singapore ranked second worldwide, with a burden of just 23 percent.
– Similarly, when the cost of registering property is compared, Jamaica ranked 108th out of 178: the cost of registering property equaled 13.5 percent of the value of the property. (By comparison, the ratio in the United States is 0.5 percent of the value.) The high cost of registering property means that fewer people register their holdings, which in turn leads to less-secure property rights. Most critically, entrepreneurs who do not hold a firm legal title to property are unlikely to be able to borrow against this holding from a bank. Once again, this comparison suggests that entrepreneurs have fewer resources for growing their enterprises.
One of the most visible manifestations of this lack of activity may be in Jamaica’s productivity: from 1973 to 2007, the nation actually experienced negative productivity growth. Even more striking about this poor performance is the fact that during this period developed nations experienced substantial growth through implementing information technology, and many developing markets experienced even faster growth as they caught up with technologies adopted earlier in the West.
While much of the initial growth in Singapore can be attributed to sound macroeconomic policies, political stability, and various other factors, the nation’s entrepreneurship initiatives have played an increasingly important role in stimulating growth.
This disparity may change in future years: Jamaica enjoyed a surge in income with the rise of energy and commodity prices, and the most recent prime ministers have shown a greater awareness of, and willingness to lower, barriers to entrepreneurship. But the disparate experiences of Singapore and Jamaica over the past four decades demonstrate why all of us should care about public efforts to stimulate entrepreneurship.
Thus, while the dollars spent each year on entrepreneurship programs—though significant on an absolute basis—pale compared to defense and healthcare expenditures, the picture changes when we consider the long-run consequences of policies that facilitate or hinder the development of a venture sector: that is, the impact on national prosperity of a vital entrepreneurial climate. In the long run, the significance of entrepreneurial policies looms much larger
What public policies are most effective in encouraging the growth of a venture economy? Three principles in particular seem critical as guideposts.
Remember that entrepreneurial activity does not exist in a vacuum. Entrepreneurs are tremendously dependent on their partners. Without experienced lawyers able to negotiate agreements, skilled marketing gurus and engineers willing to work for low wages and a handful of stock options, and customers willing to take a chance on a young firm, success is unlikely. But despite the importance of the entrepreneurial environment, in many cases government officials hand out money without thinking about other barriers that entrepreneurs face. In some cases, crucial aspects of the entrepreneurial environment may seem tangential: for instance, the importance of robust public markets for young firms to spur venture investment. It is critical to take a broad view and address not just the availability of capital, but other components of a productive arena in which entrepreneurs could operate.
When the cost of registering property is compared, Jamaica ranked 108th out of 178: the cost of registering property was equal to 13.5 percent of the value of the property. By comparison, the ratio in the United States is 0.5 percent of the value.
Let the market provide direction. Two successful efforts have been the Israeli Yozma program and the New Zealand Seed Investment Fund. While these programs differed in details—the former was geared toward attracting foreign venture investors; the latter encouraged locally based, early-stage funds—they shared a central element: each used matching funds to determine where public subsidies should go. In using the market for guidance, policy makers should keep in mind that these initiatives should not compete with independent venture funds or finance substandard firms that cannot raise private capital. Emulating successful initiatives in the past, programs should require a substantial amount of funds be raised from nonpublic sources. To be sure, in encouraging seed companies and groups, leaders should be aware that extensive intervention may be needed before they are “fund-able.” Programs may need to work closely with the organizations to refine strategies, recruit additional partners (perhaps even from other regions), and identify potential investors. But only through a market-based system are the critical flaws that have doomed so many earlier programs likely to be avoided.
Resist the temptation to over-engineer. In many instances, government requirements that limit the flexibility of entrepreneurs and venture investors have been detrimental. It is tempting to add restrictions on several dimensions: for instance, the locations in which the firms can operate, the type of securities venture investors can use, and the evolution of the firms (e.g., restrictions on acquisitions or secondary sales of stock). Government programs should eschew such efforts to micromanage the entrepreneurial process. While it is natural to expect that firms and groups receiving subsidies will retain a local presence or continue to target the local region for investments, these requirements should be as minimal as possible.
The promotion of new business ventures is of critical importance to all of us. While the challenges facing government initiatives may seem arcane and technical, well-considered policies are likely to profoundly influence our opportunities, as well as those of our children and grandchildren. Misguided policies, unfortunately, will also help determine the future. However challenging the encouragement of entrepreneurship may seem, it is truly too important to leave to the policy specialists!
Josh Lerner is the Jacob H. Schiff Professor of Investment Banking at Harvard Business School.
This essay is adapted from Lerner’s book, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed—and What to Do about It.
Image by Darren Wamboldt/Bergman Group.
By Josh Lerner Thursday, November 19, 2009
Filed under: Economic Policy, Boardroom, Government & Politics, World Watch
In 1965 the two nations were equal in wealth. Four decades later, their standing was dramatically different. What accounts for the difference?
Silicon Valley, Singapore, Tel Aviv—the global hubs of entrepreneurial activity all bear the marks of government investment. Yet, for every successful public intervention spurring entrepreneurial activity, there are many failed efforts, wasting untold billions in taxpayer dollars. When has governmental sponsorship succeeded in boosting growth, and when has it fallen terribly short? Should the government be involved in such undertakings at all? These issues are particularly timely, given the many billions of dollars governments spend worldwide to prop up troubled industries such as automobiles, as well as the urgent public efforts to encourage “green shoots” in areas such as clean-tech in hope of stimulating an economic recovery.
Programs to boost new ventures might seem like an esoteric corner of public policy, far less important than the big issues of war and peace and health benefits, not to mention the rescue of giant firms that are on the ropes. But this perception can mislead because of the magnitude of changes that can occur when venture programs are done well.
To understand their importance, we can contrast Jamaica and Singapore. Both are relatively tiny states, with under 5 million residents apiece. Upon Singapore’s independence in 1965—three years after Jamaica’s own establishment as a nation—the two nations were about equal in wealth: the gross domestic product (in 2006 U.S. dollars) was $2,850 per person in Jamaica, slightly higher than Singapore’s $2,650. Both nations had a centrally located port, a tradition of British colonial rule, and governments with a strong capitalist orientation. (Jamaica, in addition, had plentiful natural resources and a robust tourist industry.) But four decades later, their standing was dramatically different: Singapore had climbed to a per capita GDP of $31,400 (2006 data, in current dollars), while Jamaica’s figure was only $4,800.
The World Bank's analysis suggests that the total cost of complying with all tax laws in Jamaica amounts to just over one-half of gross profits for the typical entrepreneur.
What accounts for the amazing difference in growth rates? There are many explanations: soon after independence, Singapore aggressively invested in infrastructure such as its port, subsidized its system of education, maintained an open and corruption-free economy, and established sovereign wealth funds that made a wide variety of investments. It has also benefited from a strategic position on the key sea lanes heading to and from East Asia. Jamaica, meanwhile, spent many years mired in political instability, particularly the disastrous administration of Michael Manley during the 1970s. Dramatic shifts from a market economy to a socialist orientation and back again, with the attendant inflation, economic instability, crippling public debt, and violence, made the development and implementation of a consistent long-run economic policy difficult.
But in explaining Singapore's economic growth, it is hard not to give considerable credit to its policies toward entrepreneurship. The government has experimented with a wide variety of efforts to develop an entrepreneurial sector:
– Providing public funds for venture investors seeking to locate in the city-state
– Subsidies for firms in targeted technologies
– Encouraging potential entrepreneurs and mentoring fledgling ventures
– Subsidies for leading biotechnology researchers to move their laboratories to Singapore
– Awards for failed entrepreneurs (with a hope of encouraging risk-taking)
While much of the initial growth in Singapore can be attributed to sound macroeconomic policies, political stability, and various other factors, the nation’s entrepreneurship initiatives have played an increasingly important role in stimulating growth.
The contrast with Jamaica is striking. Jamaica has long had a high rate of subsistence entrepreneurship: for instance, the 2006 Global Entrepreneurship Monitor survey placed it among the highest of the 42 nations it examined in various rates of entrepreneurial activity. Yet other data collected by the Monitor—and corroborated in anecdotal accounts—suggests that early-stage entrepreneurship is translated into full-fledged business activity at a very low rate. On this measure, the island nation ranked among the lowest nations (28th among the 35 countries ranked by the Monitor in 2005).
Some of the reasons for the inability of Jamaican entrepreneurs to grow can be seen in the World Bank’s reports on the barriers to entrepreneurs. The "Doing Business" series assesses, across 178 countries, the obstacles faced by an entrepreneur in performing various standardized tasks (thereby avoiding some of the subjectivity associated with other attempts to rank entrepreneurship). In several critical indicators, Jamaica ranked extremely low in the World Bank’s 2008 analysis. These suggest some of the barriers that hold back the growth of entrepreneurial enterprises:
– Of the 178 countries studied, Jamaica ranked 170th in the burden of complying with tax regulations. The ranking reflects not just the cost of the taxes themselves, but also the administrative burdens associated with complying with the tax code. The World Bank's analysis suggests that the total cost of complying with all tax laws in Jamaica amounts to just over one-half of gross profits for the typical entrepreneur. Numerous studies have suggested that one of the most important sources of financing for the typical entrepreneur is cash flow generated by the business itself, which is plowed back into the business. If so much of entrepreneurs’ income is going to meet tax obligations, business owners are unlikely to have the resources to invest in their enterprises. By way of contrast, Singapore ranked second worldwide, with a burden of just 23 percent.
– Similarly, when the cost of registering property is compared, Jamaica ranked 108th out of 178: the cost of registering property equaled 13.5 percent of the value of the property. (By comparison, the ratio in the United States is 0.5 percent of the value.) The high cost of registering property means that fewer people register their holdings, which in turn leads to less-secure property rights. Most critically, entrepreneurs who do not hold a firm legal title to property are unlikely to be able to borrow against this holding from a bank. Once again, this comparison suggests that entrepreneurs have fewer resources for growing their enterprises.
One of the most visible manifestations of this lack of activity may be in Jamaica’s productivity: from 1973 to 2007, the nation actually experienced negative productivity growth. Even more striking about this poor performance is the fact that during this period developed nations experienced substantial growth through implementing information technology, and many developing markets experienced even faster growth as they caught up with technologies adopted earlier in the West.
While much of the initial growth in Singapore can be attributed to sound macroeconomic policies, political stability, and various other factors, the nation’s entrepreneurship initiatives have played an increasingly important role in stimulating growth.
This disparity may change in future years: Jamaica enjoyed a surge in income with the rise of energy and commodity prices, and the most recent prime ministers have shown a greater awareness of, and willingness to lower, barriers to entrepreneurship. But the disparate experiences of Singapore and Jamaica over the past four decades demonstrate why all of us should care about public efforts to stimulate entrepreneurship.
Thus, while the dollars spent each year on entrepreneurship programs—though significant on an absolute basis—pale compared to defense and healthcare expenditures, the picture changes when we consider the long-run consequences of policies that facilitate or hinder the development of a venture sector: that is, the impact on national prosperity of a vital entrepreneurial climate. In the long run, the significance of entrepreneurial policies looms much larger
What public policies are most effective in encouraging the growth of a venture economy? Three principles in particular seem critical as guideposts.
Remember that entrepreneurial activity does not exist in a vacuum. Entrepreneurs are tremendously dependent on their partners. Without experienced lawyers able to negotiate agreements, skilled marketing gurus and engineers willing to work for low wages and a handful of stock options, and customers willing to take a chance on a young firm, success is unlikely. But despite the importance of the entrepreneurial environment, in many cases government officials hand out money without thinking about other barriers that entrepreneurs face. In some cases, crucial aspects of the entrepreneurial environment may seem tangential: for instance, the importance of robust public markets for young firms to spur venture investment. It is critical to take a broad view and address not just the availability of capital, but other components of a productive arena in which entrepreneurs could operate.
When the cost of registering property is compared, Jamaica ranked 108th out of 178: the cost of registering property was equal to 13.5 percent of the value of the property. By comparison, the ratio in the United States is 0.5 percent of the value.
Let the market provide direction. Two successful efforts have been the Israeli Yozma program and the New Zealand Seed Investment Fund. While these programs differed in details—the former was geared toward attracting foreign venture investors; the latter encouraged locally based, early-stage funds—they shared a central element: each used matching funds to determine where public subsidies should go. In using the market for guidance, policy makers should keep in mind that these initiatives should not compete with independent venture funds or finance substandard firms that cannot raise private capital. Emulating successful initiatives in the past, programs should require a substantial amount of funds be raised from nonpublic sources. To be sure, in encouraging seed companies and groups, leaders should be aware that extensive intervention may be needed before they are “fund-able.” Programs may need to work closely with the organizations to refine strategies, recruit additional partners (perhaps even from other regions), and identify potential investors. But only through a market-based system are the critical flaws that have doomed so many earlier programs likely to be avoided.
Resist the temptation to over-engineer. In many instances, government requirements that limit the flexibility of entrepreneurs and venture investors have been detrimental. It is tempting to add restrictions on several dimensions: for instance, the locations in which the firms can operate, the type of securities venture investors can use, and the evolution of the firms (e.g., restrictions on acquisitions or secondary sales of stock). Government programs should eschew such efforts to micromanage the entrepreneurial process. While it is natural to expect that firms and groups receiving subsidies will retain a local presence or continue to target the local region for investments, these requirements should be as minimal as possible.
The promotion of new business ventures is of critical importance to all of us. While the challenges facing government initiatives may seem arcane and technical, well-considered policies are likely to profoundly influence our opportunities, as well as those of our children and grandchildren. Misguided policies, unfortunately, will also help determine the future. However challenging the encouragement of entrepreneurship may seem, it is truly too important to leave to the policy specialists!
Josh Lerner is the Jacob H. Schiff Professor of Investment Banking at Harvard Business School.
This essay is adapted from Lerner’s book, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed—and What to Do about It.
Image by Darren Wamboldt/Bergman Group.
Wednesday, November 18, 2009
Have you ever seen so much hatred for, and vitriolic criticism of, someone who had only a brief stint on the national political stage? More than a year after the presidential election in which Sarah Palin, as the GOP nominee for Vice-President, campaigned for about three months, she is still being pilloried by the left-wing loons as though she had been elected and were actively engaged in dismantling the liberal establishment. Not a day goes by in which we don't hear or read vicious attacks on a woman who represents the wholesome conservative values of Middle America -- values that have been insidiously and incrementally eroded during the last few decades.
There's an interesting contrast between Palin and Barack Obama. We keep hearing that she's not qualified to be president, but Obama is. Why? Some say it's because she didn't have enough experience in government. Yet as Governor of Alaska, Palin earned executive experience, while the current Oval Office resident had only a few years of legislative work. Others point to the interviews with Katie Couric and Charles Gibson during the campaign last year.
Let's understand something: Couric and Gibson are liberal journalists who live for those gotcha moments when they can embarrass a conservative and get a round of high-fives at the next penthouse cocktail party on Central Park West. In contrast, Obama's interviewers seemed like they were more interested in dating him than they were in getting answers to questions. Obama's personal lapdog, MS-NBC's Chris Mathews, gets a thrill up his leg from the chosen one. It's obvious that Mathews has some sort of unresolved intimacy issues to deal with.
In the liberal mind, Obama can do no wrong, mainly because he's black. If he fouls up with a misstatement or a faux pas, they'll cover for him as though they were protecting a child with a debilitating disease. It reminds me of what Bush 2 used to refer to as "the soft bigotry of low expectations." When one of these sycophants asks Obama a question, it's not only a softball, but it comes with heavy breathing and dangling tongues.
Compare that to the lion's den that Palin walked into every time she sat down with one of Obama's obsequious panderers. Given the ideology of the interviewers, I already knew how things would turn out. What really impressed me was watching this woman muster the courage to face her liberal antagonists on national television. How much courage does it take for Obama to engage in one of those cozy love-fests with his fan club?
What this country needs is a strong conservative leader with the courage of her convictions. Sensing those qualities in Sarah Palin, the liberal left is becoming frantic because they can't seem to halt her popularity. The reason they're panicking is because they're afraid of her connection with regular folks who work for a living, pay their taxes, attend a religious worship service regularly, and believe that our country has lost the moral fiber that once united us. The book Profiles in Courage by John F. Kennedy covered several historical figures who stood up against the corruption surrounding them and defeated it. Sarah Palin did exactly that in her home state of Alaska. In a saner time in our history, she'd be a shoo-in for the White House.
But we're living in an era of in-your-face corruption, a time when elected officials rob us blind and dare us to do something about it. The powerful Chairman of the Ways and Means Committee, New York Congressman Charles Rangel, is facing a growing investigation of ethics violations and tax scandals. When the man empowered with the responsibility to write our tax laws refuses to pay his own taxes, something terrible has happened to our country. With a laundry list of misbehavior attributed to him, Rangel boldly clings to his seat, his chairmanship, and his reelection bid.
This has become a pattern across the country. Whether the politicians get caught with their fingers wrapped around bribe money, or with their arms wrapped around someone else's spouse, they arrogantly tell the public that it will not deter them from running for reelection. Once upon a time in America, a politician might be unscrupulous, but if he got caught, he'd be history. Now, we have a president of the United States who appointed a tax cheat (Treasury Secretary Tim Geithner) to his cabinet and attempted to appoint another tax cheat (Tom Daschle) to lead Health and Human Services. Kathleen Sebelius, the Kansas Governor, ended up with her job only after paying about $8,000 in back taxes.
I could illustrate hundreds of other examples of rampant corruption by people in elective office. Pointing to government decay is the job of the free press. But are they hounding any of the power-hungry scoundrels that masquerade as symbols of decency and honor? No, they're engaged in a continuous merciless attack on a woman who has led the way in the fight against the very corruption being overlooked by those who have become blinded by ideology.
Sarah Palin is a threat because she symbolizes decency in a country taken hostage by moral degenerates. If she isn't stopped, this country might end up reclaiming some of the values that made us the envy of the world.
Bob Weir is a former detective sergeant in the New York City Police Department. He is the executive editor of The News Connection in Highland Village, Texas. E-mail Bob.
73 Comments on "Why the Left Fears Sarah"
There's an interesting contrast between Palin and Barack Obama. We keep hearing that she's not qualified to be president, but Obama is. Why? Some say it's because she didn't have enough experience in government. Yet as Governor of Alaska, Palin earned executive experience, while the current Oval Office resident had only a few years of legislative work. Others point to the interviews with Katie Couric and Charles Gibson during the campaign last year.
Let's understand something: Couric and Gibson are liberal journalists who live for those gotcha moments when they can embarrass a conservative and get a round of high-fives at the next penthouse cocktail party on Central Park West. In contrast, Obama's interviewers seemed like they were more interested in dating him than they were in getting answers to questions. Obama's personal lapdog, MS-NBC's Chris Mathews, gets a thrill up his leg from the chosen one. It's obvious that Mathews has some sort of unresolved intimacy issues to deal with.
In the liberal mind, Obama can do no wrong, mainly because he's black. If he fouls up with a misstatement or a faux pas, they'll cover for him as though they were protecting a child with a debilitating disease. It reminds me of what Bush 2 used to refer to as "the soft bigotry of low expectations." When one of these sycophants asks Obama a question, it's not only a softball, but it comes with heavy breathing and dangling tongues.
Compare that to the lion's den that Palin walked into every time she sat down with one of Obama's obsequious panderers. Given the ideology of the interviewers, I already knew how things would turn out. What really impressed me was watching this woman muster the courage to face her liberal antagonists on national television. How much courage does it take for Obama to engage in one of those cozy love-fests with his fan club?
What this country needs is a strong conservative leader with the courage of her convictions. Sensing those qualities in Sarah Palin, the liberal left is becoming frantic because they can't seem to halt her popularity. The reason they're panicking is because they're afraid of her connection with regular folks who work for a living, pay their taxes, attend a religious worship service regularly, and believe that our country has lost the moral fiber that once united us. The book Profiles in Courage by John F. Kennedy covered several historical figures who stood up against the corruption surrounding them and defeated it. Sarah Palin did exactly that in her home state of Alaska. In a saner time in our history, she'd be a shoo-in for the White House.
But we're living in an era of in-your-face corruption, a time when elected officials rob us blind and dare us to do something about it. The powerful Chairman of the Ways and Means Committee, New York Congressman Charles Rangel, is facing a growing investigation of ethics violations and tax scandals. When the man empowered with the responsibility to write our tax laws refuses to pay his own taxes, something terrible has happened to our country. With a laundry list of misbehavior attributed to him, Rangel boldly clings to his seat, his chairmanship, and his reelection bid.
This has become a pattern across the country. Whether the politicians get caught with their fingers wrapped around bribe money, or with their arms wrapped around someone else's spouse, they arrogantly tell the public that it will not deter them from running for reelection. Once upon a time in America, a politician might be unscrupulous, but if he got caught, he'd be history. Now, we have a president of the United States who appointed a tax cheat (Treasury Secretary Tim Geithner) to his cabinet and attempted to appoint another tax cheat (Tom Daschle) to lead Health and Human Services. Kathleen Sebelius, the Kansas Governor, ended up with her job only after paying about $8,000 in back taxes.
I could illustrate hundreds of other examples of rampant corruption by people in elective office. Pointing to government decay is the job of the free press. But are they hounding any of the power-hungry scoundrels that masquerade as symbols of decency and honor? No, they're engaged in a continuous merciless attack on a woman who has led the way in the fight against the very corruption being overlooked by those who have become blinded by ideology.
Sarah Palin is a threat because she symbolizes decency in a country taken hostage by moral degenerates. If she isn't stopped, this country might end up reclaiming some of the values that made us the envy of the world.
Bob Weir is a former detective sergeant in the New York City Police Department. He is the executive editor of The News Connection in Highland Village, Texas. E-mail Bob.
73 Comments on "Why the Left Fears Sarah"
Wednesday, November 04, 2009
Why Markets Fail
Ben Shapiro
Wednesday, November 04, 2009
President Obama says he is a fan of the free market. Back in September, Obama spoke to Wall Street. He stated, "I have always been a strong believer in the power of the free market." He then explained that he wanted common-sense regulation of the market: "Common-sense rules of the road don't hinder the market, they make the market stronger. Indeed, they are essential to ensuring that our markets function fairly and freely."
To paraphrase Spanish dueler Inigo Montoya from "The Princess Bride": President Obama, you keep using the phrase "free markets." I do not think it means what you think it means.
Here is how the free market works: open competition among sellers, informed bidding among buyers. Sellers are responsible for competing; buyers are responsible for informing themselves. When the government pledges to increase competition or keep buyers informed, the market is no longer free. And when the government makes those pledges and then fails to enforce them, the free market is utterly perverted.
AUnfortunately, President Obama's favorite "common-sense" regulations attack both sides of the free market: they restrict competition among sellers while providing false guarantees to buyers. They require that sellers charge certain prices or meet certain conditions, and they incentivize buyers not to do their research -- after all, the government will ensure that no one puts bad products into the market place, right?
Wrong. Goldman Sachs is a perfect example of how the quasi-free market championed by Obama leads to chaos. On Monday, McClatchy Newspapers reported that Goldman Sachs, the nation's leading investment bank, profited handsomely from the downturn in the housing market by falsely selling mortgage-backed securities as triple-A rated investments. The securities were actually closer to junk. In 2006 and 2007, Goldman sold more than $40 billion in mortgage-backed securities, meanwhile betting against the housing market in shady ways.
The question isn't whether Goldman committed legal fraud here, although the indicators say that Goldman did. The real question is why buyers would buy these securities? The wizards of finance who bought the mortgage-backed securities while listening to Goldman's triple-A sales line must have been willfully blind -- many of these securities were backed by immensely hazardous subprime mortgages. So why did the buyers fall for it?
They fell for it because they assumed that the federal government would prevent fraud. They fell for it for the same reason that Bernie Madoff's investors fell for his scam -- the U.S. Securities and Exchange Commission is supposed to prevent these sorts of things. We pay our taxes so that a government agency will do our research for us and ensure that sales pitches are proper and accurate. We do not want to abide by the age-old aphorism "caveat emptor" -- buyer beware. We do not want to be self-informed buyers. We want to be spoon-fed information by our investment advisers, no matter how ridiculous the information.
The only problem is that the federal government has proved itself utterly incapable of preventing fraud. Instead, the federal government provides the illusion of security to buyers while allowing sellers to do anything until proven guilty in a court of law.
The easy solution would be to reinvigorate a healthy sense of self-reliance in investors and buyers -- tell Americans to do their own research, to do business with those they trust.
President Obama's solution is to create more regulations -- regulations that will undoubtedly be ignored by bad actors and that will undoubtedly hamper honest businessmen. On Tuesday, the Huffington Post reported that the House is considering legislation, backed by Obama, that would allow the Federal Deposit Insurance Corp. (FDIC) to interfere in private derivatives contracts in cases of emergency. In short, if a company like Goldman Sachs were to buy a derivative from Morgan Stanley, and Morgan Stanley were to go under, the government could stop Goldman Sachs from collecting the derivative.
In theory, this sounds great. In practice, it creates an incentive for Morgan Stanley to sell too many risky securities. Then, if Morgan Stanley fails, the federal government would allow Morgan Stanley to skate on its financial obligations.
This all sounds far more complicated than it actually is. The bottom line is this: When the government assures market actors that they do not have to live up to their obligations -- basic obligations like research or paying their obligations -- the market collapses. That is not a failure of the free market. It is a failure of a government-perverted free market. Financial thieves are the same as all other thieves: they do not respect the law. More financial laws will not make financial liars more honest any more than gun laws prevent criminals from acquiring firearms. In fact, more financial regulations will only provide market participants the same false sense of security that brought about the current crisis.
Copyright © 2009 Salem Web Network. All Rights Reserved.
Ben Shapiro
Wednesday, November 04, 2009
President Obama says he is a fan of the free market. Back in September, Obama spoke to Wall Street. He stated, "I have always been a strong believer in the power of the free market." He then explained that he wanted common-sense regulation of the market: "Common-sense rules of the road don't hinder the market, they make the market stronger. Indeed, they are essential to ensuring that our markets function fairly and freely."
To paraphrase Spanish dueler Inigo Montoya from "The Princess Bride": President Obama, you keep using the phrase "free markets." I do not think it means what you think it means.
Here is how the free market works: open competition among sellers, informed bidding among buyers. Sellers are responsible for competing; buyers are responsible for informing themselves. When the government pledges to increase competition or keep buyers informed, the market is no longer free. And when the government makes those pledges and then fails to enforce them, the free market is utterly perverted.
AUnfortunately, President Obama's favorite "common-sense" regulations attack both sides of the free market: they restrict competition among sellers while providing false guarantees to buyers. They require that sellers charge certain prices or meet certain conditions, and they incentivize buyers not to do their research -- after all, the government will ensure that no one puts bad products into the market place, right?
Wrong. Goldman Sachs is a perfect example of how the quasi-free market championed by Obama leads to chaos. On Monday, McClatchy Newspapers reported that Goldman Sachs, the nation's leading investment bank, profited handsomely from the downturn in the housing market by falsely selling mortgage-backed securities as triple-A rated investments. The securities were actually closer to junk. In 2006 and 2007, Goldman sold more than $40 billion in mortgage-backed securities, meanwhile betting against the housing market in shady ways.
The question isn't whether Goldman committed legal fraud here, although the indicators say that Goldman did. The real question is why buyers would buy these securities? The wizards of finance who bought the mortgage-backed securities while listening to Goldman's triple-A sales line must have been willfully blind -- many of these securities were backed by immensely hazardous subprime mortgages. So why did the buyers fall for it?
They fell for it because they assumed that the federal government would prevent fraud. They fell for it for the same reason that Bernie Madoff's investors fell for his scam -- the U.S. Securities and Exchange Commission is supposed to prevent these sorts of things. We pay our taxes so that a government agency will do our research for us and ensure that sales pitches are proper and accurate. We do not want to abide by the age-old aphorism "caveat emptor" -- buyer beware. We do not want to be self-informed buyers. We want to be spoon-fed information by our investment advisers, no matter how ridiculous the information.
The only problem is that the federal government has proved itself utterly incapable of preventing fraud. Instead, the federal government provides the illusion of security to buyers while allowing sellers to do anything until proven guilty in a court of law.
The easy solution would be to reinvigorate a healthy sense of self-reliance in investors and buyers -- tell Americans to do their own research, to do business with those they trust.
President Obama's solution is to create more regulations -- regulations that will undoubtedly be ignored by bad actors and that will undoubtedly hamper honest businessmen. On Tuesday, the Huffington Post reported that the House is considering legislation, backed by Obama, that would allow the Federal Deposit Insurance Corp. (FDIC) to interfere in private derivatives contracts in cases of emergency. In short, if a company like Goldman Sachs were to buy a derivative from Morgan Stanley, and Morgan Stanley were to go under, the government could stop Goldman Sachs from collecting the derivative.
In theory, this sounds great. In practice, it creates an incentive for Morgan Stanley to sell too many risky securities. Then, if Morgan Stanley fails, the federal government would allow Morgan Stanley to skate on its financial obligations.
This all sounds far more complicated than it actually is. The bottom line is this: When the government assures market actors that they do not have to live up to their obligations -- basic obligations like research or paying their obligations -- the market collapses. That is not a failure of the free market. It is a failure of a government-perverted free market. Financial thieves are the same as all other thieves: they do not respect the law. More financial laws will not make financial liars more honest any more than gun laws prevent criminals from acquiring firearms. In fact, more financial regulations will only provide market participants the same false sense of security that brought about the current crisis.
Copyright © 2009 Salem Web Network. All Rights Reserved.
Tuesday, November 03, 2009
This is pure GOLD from Dr. Thomas Sowell:
We are incessantly being told that the cost of medical care is "too high"-- either absolutely or as a growing percentage of our incomes. But nothing that is being proposed by the government is likely to lower those costs, and much that is being proposed is almost certain to increase the costs.
There is a fundamental difference between reducing costs and simply shifting costs around, like a pea in a shell game at a carnival. Costs are not reduced simply because you pay less at a doctor's office and more in taxes-- or more in insurance premiums, or more in higher prices for other goods and services that you buy, because the government has put the costs on businesses that pass those costs on to you.
Costs are not reduced simply because you don't pay them. It would undoubtedly be cheaper for me to do without the medications that keep me alive and more vigorous in my old age than people of a similar age were in generations past.
Letting old people die would undoubtedly be cheaper than keeping them alive-- but that does not mean that the costs have gone down. It just means that we refuse to pay the costs. Instead, we pay the consequences. There is no free lunch.
Providing free lunches to people who go to hospital emergency rooms is one of the reasons for the current high costs of medical care for others. Politicians mandating what insurance companies must cover is another free lunch that leads to higher premiums for medical insurance-- and fewer people who can afford it.
Despite all the demonizing of insurance companies, pharmaceutical companies or doctors for what they charge, the fundamental costs of goods and services are the costs of producing them.
If highly paid chief executives of insurance companies or pharmaceutical companies agreed to work free of charge, it would make very little difference in the cost of insurance or medications. If doctors' incomes were cut in half, that would not lower the cost of producing doctors through years of expensive training in medical schools and hospitals, nor the overhead costs of running doctors' offices.
What it would do is reduce the number of very able people who are willing to take on the high costs of a medical education when the return on that investment is greatly reduced and the aggravations of dealing with government bureaucrats are added to the burdens of the work.
Britain has had a government-run medical system for more than half a century and it has to import doctors, including some from Third World countries where the medical training may not be the best. In short, reducing doctors' income is not reducing the cost of medical care, it is refusing to pay those costs. Like other ways of refusing to pay costs, it has consequences.
Any one of us can reduce medical costs by refusing to pay them. In our own lives, we recognize the consequences. But when someone with a gift for rhetoric tells us that the government can reduce the costs without consequences, we are ready to believe in such political miracles.
There are some ways in which the real costs of medical care can be reduced but the people who are leading the charge for a government takeover of medical care are not the least bit interested in actually reducing those costs, as distinguished from shifting the costs around or just refusing to pay them.
The high costs of "defensive medicine"-- expensive tests, medications and procedures required to protect doctors and hospitals from ruinous lawsuits, rather than to help the patients-- could be reduced by not letting lawyers get away with filing frivolous lawsuits.
If a court of law determines that the claims made in such lawsuits are bogus, then those who filed those claims could be forced to reimburse those who have been sued for all their expenses, including their attorneys' fees and the lost time of people who have other things to do. But politicians who get huge campaign contributions from lawyers are not about to pass laws to do this.
Why should they, when it is so much easier just to start a political stampede with fiery rhetoric and glittering promises?
We are incessantly being told that the cost of medical care is "too high"-- either absolutely or as a growing percentage of our incomes. But nothing that is being proposed by the government is likely to lower those costs, and much that is being proposed is almost certain to increase the costs.
There is a fundamental difference between reducing costs and simply shifting costs around, like a pea in a shell game at a carnival. Costs are not reduced simply because you pay less at a doctor's office and more in taxes-- or more in insurance premiums, or more in higher prices for other goods and services that you buy, because the government has put the costs on businesses that pass those costs on to you.
Costs are not reduced simply because you don't pay them. It would undoubtedly be cheaper for me to do without the medications that keep me alive and more vigorous in my old age than people of a similar age were in generations past.
Letting old people die would undoubtedly be cheaper than keeping them alive-- but that does not mean that the costs have gone down. It just means that we refuse to pay the costs. Instead, we pay the consequences. There is no free lunch.
Providing free lunches to people who go to hospital emergency rooms is one of the reasons for the current high costs of medical care for others. Politicians mandating what insurance companies must cover is another free lunch that leads to higher premiums for medical insurance-- and fewer people who can afford it.
Despite all the demonizing of insurance companies, pharmaceutical companies or doctors for what they charge, the fundamental costs of goods and services are the costs of producing them.
If highly paid chief executives of insurance companies or pharmaceutical companies agreed to work free of charge, it would make very little difference in the cost of insurance or medications. If doctors' incomes were cut in half, that would not lower the cost of producing doctors through years of expensive training in medical schools and hospitals, nor the overhead costs of running doctors' offices.
What it would do is reduce the number of very able people who are willing to take on the high costs of a medical education when the return on that investment is greatly reduced and the aggravations of dealing with government bureaucrats are added to the burdens of the work.
Britain has had a government-run medical system for more than half a century and it has to import doctors, including some from Third World countries where the medical training may not be the best. In short, reducing doctors' income is not reducing the cost of medical care, it is refusing to pay those costs. Like other ways of refusing to pay costs, it has consequences.
Any one of us can reduce medical costs by refusing to pay them. In our own lives, we recognize the consequences. But when someone with a gift for rhetoric tells us that the government can reduce the costs without consequences, we are ready to believe in such political miracles.
There are some ways in which the real costs of medical care can be reduced but the people who are leading the charge for a government takeover of medical care are not the least bit interested in actually reducing those costs, as distinguished from shifting the costs around or just refusing to pay them.
The high costs of "defensive medicine"-- expensive tests, medications and procedures required to protect doctors and hospitals from ruinous lawsuits, rather than to help the patients-- could be reduced by not letting lawyers get away with filing frivolous lawsuits.
If a court of law determines that the claims made in such lawsuits are bogus, then those who filed those claims could be forced to reimburse those who have been sued for all their expenses, including their attorneys' fees and the lost time of people who have other things to do. But politicians who get huge campaign contributions from lawyers are not about to pass laws to do this.
Why should they, when it is so much easier just to start a political stampede with fiery rhetoric and glittering promises?
Will the Entrepreneur Boom Miss the U.S.?
As we marvel (or worry) about the Dow reaching 10,000, let's look again at how closely the crash and recovery are tracking the 1970s. From January 1973 to December 1974--23 months--stocks fell 48%. Over 17 months (October 2007 to March 2009) stocks dropped 54%--a little faster and more dramatically, but comparable. In 1975 stocks rose 38%, in 1976 another 24%. The bounce from this year's Mar. 9 low is nearly 60%. Again, faster and bolder but roughly the same, so far.
The 1975--76 rally didn't last. What torpedoed stocks from 1977 to 1982? I would argue it was the 1976 election, which elevated an unknown, underqualified reformer named Jimmy Carter to the presidency. The 1976 election also produced 61 Democratic seats in the Senate, along with a two-thirds majority in the House.
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There wasn't much pro-market advocacy in Washington during the late 1970s. Thus, it was no surprise when the worrisome inflation that had erupted under Gerald Ford took a turn for the worse. The Carter Administration and Congress believed the Federal Reserve's job was to ensure stable employment. The result? Inflation kicked into hyperdrive and pushed up taxes by way of bracket creep. Economic activity was distorted by a witches' brew of inflation and high taxes, which meant that speculators and tax lawyers got rich while the rest scrambled.
Looks scarily familiar, doesn't it?
The saving grace of the 1970s was entrepreneurship and innovation. During that otherwise rotten decade we saw the creation of startups that remain mighty today: FedEx ( FDX - news - people ), Southwest Airlines ( LUV - news - people ), Microsoft ( MSFT - news - people ), Apple ( AAPL - news - people ), Genentech ( DNA - news - people ), Charles Schwab ( SCHW - news - people ), Oracle. In 1971 Intel ( INTC - news - people ) introduced the microprocessor, which technology futurist George Gilder calls the most important invention in the last 50 years. Silicon Valley-style venture capital emerged during the 1970s, as did venture debt, better (and unfortunately) known as junk bond financing.
Will entrepreneurs and innovation bail us out again? They're already doing so. The rub is that most of this entrepreneurship and innovation is occurring outside the U.S. Americans--the mainstream media and the political class, especially--are terribly parochial regarding this. For example:
--How many Americans have heard of Huawei, the Chinese rival of mighty Cisco ( CSCO - news - people )? Huawei was started in 1988 and will sell $30 billion in telecom gear in 2009. Cisco was started in 1984 and will do $40 billion in sales. But Huawei's recent sales trajectory is steeper. It's possible Huawei could pass Cisco during the next few years.
--Did you know that Korean automaker Hyundai achieved record sales numbers in the lousy month of August? The J.D. Power quality ratings put Hyundai solidly in the top half, which belies the image of junky Korean cars.
--Did you know that Brazil's aircraftmaker Embraer ( ERJ - news - people ) has taken the airplane press by storm with its innovative light jets, the Phenom 100 and 300? In my Oct. 5 column I quoted Cessna's CEO, Jack Pelton, as saying he's "scared to death" of Embraer.
--Are you aware that outcomes of heart bypass surgeries are as good in India as anywhere else in the world?
--Or that Singapore is willing to pay U.S. research stars in biotechnology about $715,000 in annual salary?
Entrepreneurs and innovation will once again save the economy. But this time the miracle won't happen predominantly in the U.S. Policymakers seem not to care.
Apple the Outlier
Apple is now 33 years old, yet it seems like a perpetually new company. The company's blowout performance in its fiscal Q4--and really since the iPod's launch in 2001--has everything to do with Apple's keen sense of cultural shifts, which keeps the company at the edge of new. The genius of Steve Jobs has always been to marry his solid layman's understanding of technology to his world-class design eye and preternatural understanding of cultural moods.
Apple ( AAPL - news - people ) always seems one step ahead, even when it comes from behind. Apple didn't invent the personal computer, but it made the computer personal. It didn't invent the MP3 player, but the iPod put it all together. Smart phones existed before the iPhone. The forthcoming Apple iPad (or whatever it's called) will stand on the shoulders of the Amazon Kindle.
The lesson of Apple is to think deeply about what touches customers in an enduring way. What endures is great design and product coherence--stuff that looks cool, works well and, thus, justifies higher prices. This formula works even in a recession. Apple is a secular company with a religious following. It understands that people want transcendence and hope, especially during a difficult period. Apple's products have a quality that reaches beyond the economic dirge and reminds us of what is possible.
Movies did that in the 1930s. Apple is doing it now. Which is why Apple is an outlier.
Read Rich Karlgaard's daily blog at http://blogs.forbes.com/digitalrules or e-mail him at publisher@forbes.com. See Rich Karlgaard’s new TalkBack video series at http://forbes.com/talkback.
As we marvel (or worry) about the Dow reaching 10,000, let's look again at how closely the crash and recovery are tracking the 1970s. From January 1973 to December 1974--23 months--stocks fell 48%. Over 17 months (October 2007 to March 2009) stocks dropped 54%--a little faster and more dramatically, but comparable. In 1975 stocks rose 38%, in 1976 another 24%. The bounce from this year's Mar. 9 low is nearly 60%. Again, faster and bolder but roughly the same, so far.
The 1975--76 rally didn't last. What torpedoed stocks from 1977 to 1982? I would argue it was the 1976 election, which elevated an unknown, underqualified reformer named Jimmy Carter to the presidency. The 1976 election also produced 61 Democratic seats in the Senate, along with a two-thirds majority in the House.
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There wasn't much pro-market advocacy in Washington during the late 1970s. Thus, it was no surprise when the worrisome inflation that had erupted under Gerald Ford took a turn for the worse. The Carter Administration and Congress believed the Federal Reserve's job was to ensure stable employment. The result? Inflation kicked into hyperdrive and pushed up taxes by way of bracket creep. Economic activity was distorted by a witches' brew of inflation and high taxes, which meant that speculators and tax lawyers got rich while the rest scrambled.
Looks scarily familiar, doesn't it?
The saving grace of the 1970s was entrepreneurship and innovation. During that otherwise rotten decade we saw the creation of startups that remain mighty today: FedEx ( FDX - news - people ), Southwest Airlines ( LUV - news - people ), Microsoft ( MSFT - news - people ), Apple ( AAPL - news - people ), Genentech ( DNA - news - people ), Charles Schwab ( SCHW - news - people ), Oracle. In 1971 Intel ( INTC - news - people ) introduced the microprocessor, which technology futurist George Gilder calls the most important invention in the last 50 years. Silicon Valley-style venture capital emerged during the 1970s, as did venture debt, better (and unfortunately) known as junk bond financing.
Will entrepreneurs and innovation bail us out again? They're already doing so. The rub is that most of this entrepreneurship and innovation is occurring outside the U.S. Americans--the mainstream media and the political class, especially--are terribly parochial regarding this. For example:
--How many Americans have heard of Huawei, the Chinese rival of mighty Cisco ( CSCO - news - people )? Huawei was started in 1988 and will sell $30 billion in telecom gear in 2009. Cisco was started in 1984 and will do $40 billion in sales. But Huawei's recent sales trajectory is steeper. It's possible Huawei could pass Cisco during the next few years.
--Did you know that Korean automaker Hyundai achieved record sales numbers in the lousy month of August? The J.D. Power quality ratings put Hyundai solidly in the top half, which belies the image of junky Korean cars.
--Did you know that Brazil's aircraftmaker Embraer ( ERJ - news - people ) has taken the airplane press by storm with its innovative light jets, the Phenom 100 and 300? In my Oct. 5 column I quoted Cessna's CEO, Jack Pelton, as saying he's "scared to death" of Embraer.
--Are you aware that outcomes of heart bypass surgeries are as good in India as anywhere else in the world?
--Or that Singapore is willing to pay U.S. research stars in biotechnology about $715,000 in annual salary?
Entrepreneurs and innovation will once again save the economy. But this time the miracle won't happen predominantly in the U.S. Policymakers seem not to care.
Apple the Outlier
Apple is now 33 years old, yet it seems like a perpetually new company. The company's blowout performance in its fiscal Q4--and really since the iPod's launch in 2001--has everything to do with Apple's keen sense of cultural shifts, which keeps the company at the edge of new. The genius of Steve Jobs has always been to marry his solid layman's understanding of technology to his world-class design eye and preternatural understanding of cultural moods.
Apple ( AAPL - news - people ) always seems one step ahead, even when it comes from behind. Apple didn't invent the personal computer, but it made the computer personal. It didn't invent the MP3 player, but the iPod put it all together. Smart phones existed before the iPhone. The forthcoming Apple iPad (or whatever it's called) will stand on the shoulders of the Amazon Kindle.
The lesson of Apple is to think deeply about what touches customers in an enduring way. What endures is great design and product coherence--stuff that looks cool, works well and, thus, justifies higher prices. This formula works even in a recession. Apple is a secular company with a religious following. It understands that people want transcendence and hope, especially during a difficult period. Apple's products have a quality that reaches beyond the economic dirge and reminds us of what is possible.
Movies did that in the 1930s. Apple is doing it now. Which is why Apple is an outlier.
Read Rich Karlgaard's daily blog at http://blogs.forbes.com/digitalrules or e-mail him at publisher@forbes.com. See Rich Karlgaard’s new TalkBack video series at http://forbes.com/talkback.
More good stuff in the era of hope n change...
Blue State Exodus
Joel Kotkin, 11.03.09, 12:01 AM ESTWhy the middle-class are fleeing for the hills.
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For the past decade a large coterie of pundits, prognosticators and their media camp followers have insisted that growth in America would be concentrated in places hip and cool, largely the bluish regions of the country.
Since the onset of the recession, which has hit many once-thriving Sun Belt hot spots, this chorus has grown bolder. The Wall Street Journal, for example, recently identified the "Next Youth-Magnet Cities" as drawn from the old "hip and cool" collection of yore: Seattle, Portland, Washington, New York and Austin, Texas.
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It's not just the young who will flock to the blue meccas, but money and business as well, according to the narrative. The future, the Atlantic assured its readers, did not belong to the rubes in the suburbs or Sun Belt, but to high-density, high-end places like New York, San Francisco and Boston.
This narrative, which has not changed much over the past decade, is misleading and largely misstated. Net migration, both before and after the Great Recession, according to analysis by the Praxis Strategy Group, has continued to be strongest to the predominately red states of the South and Intermountain West.
This seems true even for those seeking high-end jobs. Between 2006 and 2008, the metropolitan areas that enjoyed the fastest percentage shift toward educated and professional workers and industries included nominally "unhip" places like Indianapolis, Charlotte, N.C., Memphis, Tenn., Salt Lake City, Jacksonville, Fla., Tampa, Fla., and Kansas City, Mo.
The overall migration numbers are even more revealing. As was the case for much of the past decade, the biggest gainers continue to include cities such as San Antonio, Dallas and Houston. Rather than being oases for migrants, some oft-cited magnets such as New York, Boston, Los Angeles and Chicago have all suffered considerable loss of population to other regions over the past year.
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Much the same pattern emerges when you look at longer-term state demographic patterns. A recent survey by the Empire Center for New York State Policy found that the biggest net losers in terms of per capita outmigration between 2000 and 2008 were, with the exception of Louisiana, all blue state bastions. New York residents lead in terms of rate of exodus, closely followed by the District of Columbia, Michigan, Pennsylvania, Massachusetts and California.
An even greater shock to the sensibilities of the insular, Manhattan-centric media, the report found that most of the movement from the Empire State was not from the much-dissed suburbia, but from that hip and cool paragon, New York City. This can not be ascribed as a loss of the unwanted: According to the report, those leaving the city had 13% higher incomes than those coming in.
How can this be, when everyone who's smart and hip is headed to the Big Apple? This question was addressed in a report by the center-left, New York-based Center for an Urban Future. True, considerable numbers of young, educated people come to New York, but it turns out that many of them leave for the suburbs or other states as they reach their peak earning years.
Indeed, it's astonishing given the many clear improvements in New York that more residents left the five boroughs for other locales in 2006, the peak of the last boom, than in 1993, when the city was in demonstrably worse shape. In 2006, the city had a net loss of 153,828 residents through domestic out-migration, compared to a decline of 141,047 in 1993, with every borough except Brooklyn experiencing a higher number of out-migrants in 2006.
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Of course, blue state boosters can point out that the exodus has slowed with the recession, as opportunities have dried up elsewhere. True, the flood of migration has slowed across the nation. Yet it has only slowed, not dried up. When the economy revives, it's likely to start flowing heavily again.
More important, the key group leaving New York and other so-called "youth-magnets" comprises the middle class, particularly families, critical to any long-term urban revival. This year's Census shows that the number of single households in New York has reached record levels; in Manhattan, more than half of all households are singles. And the Urban Future report's analysis found that even well-heeled Manhattanites with children tend to leave once they reach the age of 5 or above.
The key factor here may well be economic opportunity. Virtually all the supposedly top-ranked cities cited in this media narrative have suffered below-average job growth throughout the decade. Some, like Portland and New York, have added almost no new jobs; others like San Francisco, Boston and Chicago have actually lost positions over the past decade.
In contrast, even after the current doldrums, San Antonio, Orlando, Houston, Dallas and Phoenix all boast at least 5% more jobs now than a decade ago. Among the large-narrative magnet regions only one--government-bloated greater Washington--has enjoyed strong employment growth.
The impact of job growth on the middle class has been profound. New York City, for example, has the smallest share of middle-income families in the nation, according to a recent Brookings Institution study; its proportion of middle-income neighborhoods was smaller than that of any metropolitan area except Los Angeles.The same pattern has also emerged in what has become widely touted as America's "model city"--President Obama's adopted hometown of Chicago.
The likely reasons behind these troubling trends are things rarely discussed in "the narrative"--concerns like high costs, taxes and regulations making it tough on industries that employ the middle class. One clear culprit: out of control state spending. State spending in New York is second per capita in the nation (anomalous Alaska is first); California stands fourth and New Jersey seventh. Illinois is down the list but coming up fast. Over the past decade, while its population grew by only 7%, Illinois' spending grew by an inflation-adjusted 39%.
The problem here is more than just too-large government; it lies in how states spend their money. Massive public spending increases over the past decade in California, New Jersey, Illinois and New York have gone overwhelmingly into the pockets and pensions of public employees. It certainly has not flowed into such basic infrastructure as roads, bridges and ports that are needed to keep key industries competitive.
The American Association of State Highway Transportation, for example, ranked New York 43rd in the country and New Jersey dead last in terms of quality of roads. Some 46% of the Garden State's roads were rated in poor condition, compared with the national average of 13%, even as the state's spending reached new highs. The typical New Jersey driver spends almost $600 a year in auto repairs necessitated by the poor conditions of the roads.
In contrast, states in the South and parts of the Plains tend to pour their public resources into productive uses. Cities like Mobile, Ala., Houston, Charleston, S.C., and Savannah, Ga., have been investing in port facilities to take advantage of the planned widening of the Panama Canal. The primary goal is to take business away from the increasingly expensive, overregulated and under-invested ports of the Northeast and West Coast. Similarly, places like Kansas City and the Dakotas are looking to boost their basic rail and road networks to support export-heavy industries.
Even in the face of the Obama administration's strongly urban-centric, blue state-oriented economic policy, these generally less than hip places appear poised to grow as the economy recovers. Virtually all the top 10 economies that have withstood the recession come from outside the "youth-magnet" field: San Antonio; Oklahoma City; Little Rock, Ark.; Dallas, Baton Rouge, La.; Tulsa, Okla., Omaha, Neb.; Houston and El Paso, Texas. The one exception to this rule, Austin, also benefits from being located in solvent, generally low-tax Texas.
This continued erosion of jobs and the middle class from the blue states and cities is not inevitable. Many of these places enjoy enormous assets in terms of universities, strategic location, concentrations of talented workers and entrenched high-wage industries. But short of a massive and continuing bailout from Washington, the only way to reverse their decline will be a thorough reformation of their governmental structure and policies. No narrative, no matter how well spun, can make up for that reality.
Joel Kotkin is a distinguished presidential fellow in urban futures at Chapman University. He is executive editor of newgeography.com and writes the weekly New Geographer column for Forbes. He is working on a study on upward mobility in global cities for the London-based Legatum Institute. His next book, The Next Hundred Million: America in 2050, will be published by Penguin early next year.
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I think it's great. If there's a silver lining to all the yankees moving south, it's that it turned North Carolina and Florida blue in 2008. The Republicans are in serious trouble in national elect....
