WSJ vs. FT

Our new enemy of economic freedom is an American and a Democrat. His name is Tom Vilsack and has an opinion piece in the FT today. But I must point out that we have somebody (another American) that sits in the other corner who is a champion of economic freedom, Susan Schwab, who has a piece in my beloved WSJ (More Trade, Less Poverty - A GREAT title).

First I must analyze what Vilsack has to say. He starts out with

While some businesses in my own state of Iowa are excited at the opportunity to export their products to new markets, powerful new competitors are challenging US economic leadership, threatening the nation’s growth and exposing Americans to a new kind of insecurity.

Mr. Vilsack wants us to believe that globalization will only help American exporters. The United States MUST be the economic leader. For a Democrat, that idea is not very democratic (small d) or liberal. Then he states that competition threatens our growth and creates insecurity. Competition is what makes capitalism great. Competition forces one to work harder, think outside the box, charge lower prices to your customer. Without competition, we would be stuck with inefficient monopolies like Mexico where the entire southern part of the country lives in near to total poverty.

Next, Mr. Vilsack discusses how he thinks the government should fight this competition. He organizes them into four pillars. The first...

We should create a “supersized” tax credit for research and experimentation, and establish a network of university-based venture capital funds to finance loans for start-up companies willing to find commercial applications for scientific and technological advances. We should also foster a new generation of scientists and engineers by establishing a national network of 250 publicly financed but independent science and technology academies.

This supersized tax credit is little more than a handout by the government for research. To make this proposal even better, let's have FEMA decide what kind of research we will fund. Then he states that we need a new fund a venture capital firm, a government sponsored one. Now we will have government deciding which companies deserve to be lifted off the ground. Sounds like China or Korea. Lastly, he proposes 250 new schools to be financed by who? Yes, you guessed it, the same government that is running a deficit.

Next suggestion...

It is time to provide transitional health insurance for all unemployed workers and create a new “universal pension” that can be carried from job to job.

The Universal Pension sounds like the personal accounts that President Bush talks about. While I believe Social Security promotes a lack of savings and destroys economic freedom of investment choices, Bush's ideas on Social Security are a step in the right direction. I highly doubt that Mr. Vilsack believes this universal pension contain individual investment choice. He probably thinks Americans are too stupid to decide how to invest their money.

Vilsack goes on to suggest that America should tighten its labor market with new laws and welfare payments that will in my view increase unemployment and widen the government's deficit...

We should cut through the bureaucracy and offer dislocated workers access to money for skills training, while modernising and expanding eligibility for unemployment insurance and trade adjustment assistance such as skills training. We also need to modernise labour laws to preserve the eroding ability of workers to form unions and bargain collectively for wages and benefits. This new compact for worker security is a worthy project that should unite all progressives and all Democrats.

With humor I provide Mr. Vilsack's next target which is the deficit. Hypocrisy follows...

Restoring fiscal sanity in Washington means dealing with a deficit crisis that represents a permanent handicap for our economic competitiveness, a threat to the prosperity of future generations and a dangerous dependence on creditor nations.

Mr. Vilsack ends with the following...

Surrendering to global competition is immoral and unpatriotic; pretending it can be made to go away is an illusion. Americans must do what they have always done in changing times: use their brain power to adapt and succeed.

Interesting way to end. First, he attacks competition again. But I think he is saying that we need to take part in competition and not just waive a white flag. So I agree with him here. But the interesting part is that he tells Americans to use their brains to succeed. The unfortunate part of this apt statement is that the paragraphs that preceded it told Americans that only their government could save them from the evil force of globalization.

Governor (Corzine?)

A great song is "Governor" by Robert Bradley's Black Water Surprise. But is also a great song that speaks of how big government HURTS poor people. It might be my campaign song when I run for president...

I wish the governor would just leave the poor man alone
He's messing up my home
I wish the governor y'all would just leave the poor man alone
He's screwing up my home

You know my taxes
Are gettin too high
I can't pay the rent
Oh Lord how can I make it by
My woman wanna leave
They cut off the phone
Now I got to spend all of my nights alone

I wish the governor would leave me alone
He's messing up my home
I wish the governor y'all would just leave the poor man alone
He's messing up my home

I went down to the grocery store
They got a food tax
I got to sleep on the floor
Tired of workin three jobs but I know the governor he ain't got it so hard, so hard

I wish the governor (oh Lord)
would just leave me alone (I'm doing alright out here by myself)
I wish the governor (would get his hands out of my pocket)
would just leave me alone I ain't bothering nobody (here we go)

I wish the governor all you folks down there in Washington DC
I wish you would just leave me alone you know
I need to go to work and get some money for the baby
I wish the governor
All y'all up on capitol hill I know you gettin your thrills but I just want you to leave me alone
Me and my cat and my dog and my car in the garage
Just leave us alone
You know I get nervous hey hey hey hey
Leave my mother and my brother why don't you just leave us alone
I'm gonna say goodbye now

Funny You Should Bring That Up

Madeline Albright has been reported in the FT pointing out the following:

Put in perspective, the $31bn (€25bn, £17bn) donation announced this week by
Warren Buffett, the investment guru, to the Bill and Melinda Gates Foundation
exceeds annual US government spending on foreign development and humanitarian
assistance.

There are two points I must make. First, the comparison of one individual to one bloated US government is interesting. However, the donation is spread out over many years as opposed to annual foreign aid expenditure which happens to be spread over (believe it or not) one year. Second, while Ms. Albright was making the above point to push America to spend more on foreign aid, the above point actually highlights why foreign aid is a failure.

Foreign aid finances consumption (if it reaches people) and corruption (if it does not). On the other hand, charity (in Buffet's case, $31 billion) is carefully monitored by the donor to make sure his hard-earned money is spent wisely. Furthermore, as evidenced by Buffet, rich people almost always give away millions and in this case billions to charity. These people would probably give even more to charity if they were not taxed as much. While Ms. Albright would like to see more aid money wasted on BMWs for Robert Mugabe, America should instead end its aid programs and start doing the only thing a government can do to alleviate poverty in the third world, move forward with trade liberalization.

Aid CAN work, but it must be voluntary. If it is mandatory and handed out through a bureaucracy, the money will be useless and in come cases harmful.

The right thing to do

Even before Sharon's historic decission regarding Gaza, I always stated that Israel must pull out of Gaza and the West Bank (however, for the West Bank - Israel should be able to make the borders considering the facts on the groung). The reason I stated was not because Israel was wrong in wanting to occupy land to defend itself; Israel needed to do something to stop Arabs from constantly trying to destroy it. My reasoning had to do with the World Opinion. Leftists (and anti-semites) around the world will always state that Israel is not acting under international law and has no right to occupy Arab land (they never cite the fact that Israel is fighting for its life). However, with Palestinians given their own land, Israel has every right under "international" law to attack.

As the recent events have shown, the Palestinians only want to destroy Israel. Therefore, when they act on this desire Israel will have every right to defend itself. They are no simply protecting themselves against an attack from their neighbor (in this case, Gaza).

Side Note: Leftists around the world love to slam Israel. However, where is the outrage over the abduction of an 18-year-old named Gilad and two other supposed kidnappings by Palestinian terrorists over the past week (yesterday, one of these victims was killed by Palestinian terrorists. On top of this horror, the Palestinian government (Hamas) actually condones these action.

One more note: As I search the news stories on this, I find more appalling news. France (no surprise) committs another act of anti-semitism. They are no condemning the actions that Israel is forced to take after an Israeli solidier is abducted (and this solidier is actually a FRENCH citizen).

NYT Rant

The New York Times has a wonderfully biased and uneducated ode to their favorite candidate in the Mexican elections, AMLO (the leftist Andres Manuel Lopez Obrador). Check it out here.

If you want to read the real story, check out my prof's article in the journal from a few weeks back.

Laffer Curves for the Article Below

The original Laffer Curve sketched onto a cocktail napkin by Art Laffer for Dick Cheney.

A simple sketch of the curve.

The Laffer Curve Lives

Art Laffer is a genius. This man created the Laffer Curve as seen below. This curve is the basis behind the supply-side economics. It sates that if you lower tax rates, you get MORE (not less) tax revenue. Conversely, if you move tax rates higher, you receive LESS (not more) tax revenue.

This is not the conventional wisdom nor does it seem logical. So how does it work. First, think about a world where you are taxed 100%. Are you going to work? Of course not. Why should you work hard if all your money will wind up going to the government? You might work, but you will hide all your money so that the government doesn't take it all. Also, if you had a 0% tax rate, the government would receive NO money. Obviously! (Even leftists agree to that)

The middle of the curve is where people get confused. The Laffer curve states that there is some optimum level of tax rates that net the government the most tax revenue it could possibly ask for. Let's think about you, the worker making $100,000 a year. Let's say that the tax rate is 40% and you were offered a raise of $50,000 a year with the caveat of working an extra 10 hours per week. With this tax rate, you would only see $30,000 of that raise and you might not take the promotion because the extra money does not merit extra hours at work. On the other hand, let's say that the tax rate is 15%. Now that raise will net you an extra $42,500 (an extra $1,000 a month over the raise at a 40% tax rate). This type of money might merit the extra work and you accept the promotion.

With the lower tax rate, now the government receives the extra taxes ($7,500) because you took the raise. Now lets apply this back to the Laffer Curve. The curve states that the government will receive higher revenues as it lowers taxes until it reaches the optimum tax rate. So what does this tell us about today. Well, Bush has based the economic side of his presidency on tax cuts. The highest tax rate on income has been lowered to 35% and the capital gains tax has been lowered to 15% (from the absurd 30% level pre-Bush). The results show that we are still at tax rates ABOVE the optimum as evidenced by yesterday's FT article on tax receipts ("Surge in US tax receipts eats away at budget deficit").

Figures from the Treasury and the Congressional Budget Office, the non-partisan
body advising US lawmakers, showed revenues climbing by 13 per cent to $1,545bn
in the first eight months of the fiscal year to May. A month ago, estimates suggested revenues were rising at 11 per cent.

The 13 per cent rise is the second-highest rate of growth for that period in the past 25 years, surpassed only by last year's 15.5 per cent.

So much for the leftist argument of "Tax Cuts for the Rich." In fact tax cuts for the rich (the job creators) make EVERYONE (including the government) wealthier.

Kristof does it again

(Please note: the below article that I refer to is located here if you have a nYT subscription. If you don't, email me at jaredkotler@hotmail.com and I will send you a copy.)

In today's New York Times, the leftist writer at the paper, Nicholas Kristof, has a wonderful expose of how leftists think. The title of his piece is 'Foreign Aid has Flaws, So What?" The piece is a critique of the superb economist's, William Easterly's, new book that points to how foreign aid does NOT help the world's poor.

First, Mr. Krsitof acknowledges the following…

Don't tell anyone, but a dirty little secret within the foreign aid world is
that aid often doesn't work very well.

Well there is a shock. As I have written before and Kristof cites in his piece, the countries who are flooded with aid wind up poorer in the future (Niger) and those who are not wind up rich in the future (China). Next he points to the left's disregard for the facts…

Mr. Easterly… has tossed a hand grenade at the world's bleeding hearts -- and,
worst of all, he makes some valid points.

God forbid, a conservative economist is actually correct!

Mr. Kristof then tells us on the right that we shouldn't read it.

Let me say right off that stingy Republicans should not read this book. It might
inflame their worst suspicions.

Mr. Krsitof exposes the left's dirty little secret. The argument that leftists always fall back on is that conservatives are stingy and greedy. We don't want to spend money on foreign aid or for local welfare programs because we do not care for poor people's welfare. However, the truth is that we believe welfare and aid actually hurts people. On top of this, we feel that US citizens shouldn't be forced to fund programs that destroy communities and small countries in Africa. In fact, foreign aid finances consumption (as opposed to investment) which makes those countries dependent on foreign aid or it finances corrupt dictators who allow his/her people to starve on the streets. Welfare also has disastrous effects. It discourages ambition and innovation at the same time it promotes inefficiency and laziness.

Mr. Kristof continues his piece by agreeing with all the flaws of foreign aid discovered by Easterly, Rajan, Subramanian, and other economists. Kristof admits that…

All these findings can be pretty shattering to a bleeding-heart American.

But Kristof tells the lefties to cheer up because…

Some other studies indicate that aid does improve growth (economists don't agree
about this any more than they agree about anything else). And whatever the
impact on economic growth rates, aid definitely does something far more
important: it saves lives.

Interesting that he now chooses to stop citing ACTUAL economists or ACTUAL studies when he wants to make HIS point.

He goes on to point out that all Americans should do as the righteous Mr. Kristoff does…

For my whole adult life, I've sponsored children through Plan USA, and in
visiting my ''adopted'' child in places like the Philippines and Sudan, I've
seen how the kids' lives are transformed by American sponsors. Aid is no
panacea, but it is a lifesaver.

This is my favorite part because, without realizing it, Mr. Kristof has proven the point of Milton Friedman and other conservative economists. The point is that PRIVATE charity is the best form of help for the poor in the world. Private charities have efficient practices that make sure aid is not abused by kleptocrats because the money is dependent on donors seeing results. This is the result of people having the CHOICE to give. Forced charity will never work and we must all continue to state this fact so that Mr. Kristof and his ilk do not continue to try to steal from the rich and give to the poor (which, unfortunately, is a transaction that hurts all individuals involved).

What type of equality?

Equality means nothing if a country is full of poor people. As Milton Friedman said, "A society that puts equality - in the sense of equality of outcome - before freedom will wind up with neither."

Who is really selfish (or does he mean greedy) ?

Donald J. Boudreaux of the brilliant economics department at GMU has posted a response to his letter in the NYT which calls for lower taxes. The response ends with

I am probably in the top 10% of earners. I am perfectly happy to pay more than people of modest means. It is the obligation of a responsible society.

I hope George Mason students are not learning the virtues of selfishness.

The first paragraph states that since the writer is happy to pay more taxes then ALL people should be forced to pay higher taxes. I used to think the same thoughts during my leftist days. However, this idea is based on the notion that people that are rich are lucky. This is not true. People who are rich have worked hard to attain their wealth. In a free society, an individual should NOT be forced to send all of his earnings to Washington to spend on wars, poorly design flood walls, and a failing school system. If these three subjects were left to the private sector, 2,500 dead soldiers would be alive today, New Orleans might have been saved, and our children would be getting a much better education. The obligations of a responsible society is not to force others to spend money on things they disagree with.

The second paragraph resorts to name calling. The leftist will usually use the terms selfish, greedy, etc. to describe economic conservatives. Here I will leave to Mr. Boudreaux to defend the “righteous” economic conservatives who retorts with the following against his detractor…

I assume -- I truly do -- that my correspondent is a decent human being. I would not say to him "I hope your children and friends and co-workers are not learning from you the virtues of greed" -- I would not say this despite his obvious preference for a government larger than one that I believe is optimal -- a government that, I believe, greedily takes from the unorganized and gives to the rapaciously greedy organized -- a government that officiously assumes that it knows better how individuals should conduct their lives than these individuals know.

Walmart is better than Welfare

Walmart has been the best thing to happen to low-income families since, well, sliced bread. They provide products at low, low prices that these families would normally not be able to buy or lose a good chunk of their pay check to. How liberals have turned Walmart into an idea that is worse than Satan-Worship I will never know.

Now, Walmart has done it again. They are providing tasty, healthier food to our country's low-income families (yours truly included) at low, low prices. They are doing this by introducing organic food at its stores. The WSJ has a great piece regarding this development. In the piece, Ms. Ward describes how the 'original' ogranic movement is upset that people don't have to spend $10 for a piece of organic lettuce at Whole Foods anymore. They disguise their argument by saying that the organic movement has sold out to big corporations. However, they should rejoice. People are demanding it and therefore big business is responding. If these liberal elites want everyone to live healthy lifestyles then they should support the only portion of society that can deliver organic food to rich and poor alike, big business. Wal-mart's CEO put it best with the following quote that closes Ms. Ward's piece...

"We don't think you should have to have a lot of money to feed your family
organic foods," Wal-Mart's CEO has said. To some, this sounds like a
threat--especially to the ethical eating elites who will have to find new ways
of distinguishing themselves from the hoi polloi--but for most of us it sounds
like good news about better food.

Another enemy of Israel

I meant to post this long ago...

On May 23rd, the FT ran an opinion piece entitled, "Why Israel cannot always rely on America's helping hand." In this piece, Tony Judt discusses Israel's immaturity. I will attempt to point out all the flaws to his argument. He starts out with

By the age of 58 a country - like a man - should have achieved a certain
maturity… But the state of Israel, which has just turned 58, remains
curiously immature.

This first sentence exposes Judt's ignorance to the situation. The following is a list of country's around Israel, type of government they have, and how old they are:

Saudi Arabia: A religious monarchy governed by Sharia law (74 years young and women still can not drive a car)
Jordan: A constitutional monarchy (60 years young)
Syria: An authoritarian, military-dominated dictatorship ruled by one family since 1963 (60 years young)
Egypt: A Republic with the People's Assembly basically appointing the President (84 years young and basically a dictatorship with the same president (Mubarak) since 1981)
Libya: A Military Dictatorship (55 years young with a law system based on Italian law and Islamic Law)
Kuwait: A Consitutional Hereditary Emirate (ruled by an Emir who is a descendant of the last Emir – The Emir appoints the government – political parties are illegal) (45 years young)
Iraq: Chaos
(Source: CIA Factbook)

I need say no more!

Judt goes on to state…

Before 1967 Israel may have been tiny and embattled, but it was not typically
hated: certainly not in the west. Most admirers (Jews and non-Jews) knew little
about the Palestinian catastrophe of 1948.

First, Judt asserts that 1948 was a catastrophe for Palestinians. While I agree, I assume he believes that this "catastrophe" was Israel's fault. However, if the Arabs agreed to the UN mandate and did not go to war against the infant Israel, the Arabs would never have known of any hardships resulting from a "catastrophe." Michael Bard puts it best with his view of the Palestinian "refugee":

The Palestinians left their homes in 1947-48
for a variety of reasons. Thousands of wealthy Arabs left in anticipation of a
war, thousands more responded to Arab leaders' calls to get out of the way of
the advancing armies, a handful were expelled, but most simply fled to avoid
being caught in the cross fire of a battle. Had the Arabs accepted the 1947 UN
resolution, not a single Palestinian would have become a refugee
and an independent Arab state would now exist beside Israel.

At this point in Judt's article, he explodes with why Israel is NOW hated:

But today everything is different. We can see, in retrospect, that Israel's
victory in June 1967 and its occupation of the territories it conquered then
have been the Jewish state's very own nakba: a moral and political catastrophe.
Israel's actions in the West Bank and Gaza have magnified its shortcomings to a
watching world. The routines of occupation and repression were once familiar
only to an informed minority; today, computer terminals and satellite dishes put
Israel's behaviour under daily global scrutiny. The result has been a complete
transformation in the international view of Israel.

Once again, Judt fogets that Israel was attacked and occupies former Arab land because it must protect itself. An analogy is sufficient for explanation. If you neighbor repeatedly bombs your house from a tree sitting between your two houses (but owned by your neighbor), you will be forced to "occupy" that tree and protect it from evil use.

Judt goes on to state that pro-Israeli advocates claims that anti-Israel sentiment is inherently anti-Semitic is self-fulfilling. While I agree that anti-Semitism is on the rise, it is not because of this assertion. This assertion is correct because Israel's justification for defense is sound and claims against this basic fact must be based on ignorance, bigotry, anti-Semitism, or all three.

Judt finishes with his explanation of why Israel is so aragant: US support. He also points to the flawed Mearsheimer/Walt essay. He continues this essay's questioning of the US support of such a small country that presents only a "strategic burden." However, Israel and the US have much in common: a robust economy, a democratic government, and they are both targets of political Islam and its attempts to destroy liberty and freedom around the world.

Judt's states that the US will not always back up Israel (he underestimates the American people's commitment to freedom and liberty). He also recommends that Israel start to dismantle settlements and open up negotiations with the Palestinians. He bases this recommendation on the fact that Israel is so distrusted that it must give in. I think he should read the history of Yasser Arafat's problems with the truth and currently Hamas's view towards Israel as a state.

Finally, Judt states that "colonies are always doomed unless you are willing to expel or exterminate the indigenous population." I think the public must be exposed to how the anti-Israel lobby views the world. They see the US and Israel as colonizers and apologizes for France, middle-eastern dictatorships, and socialism.

Stolen from two greats...

Larry Kudlow (a hero) has quoted Milton Friedman (a hero) on his blog so I will steal from both by posting these famous quotes...

"Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property."

"The greatest advances of civilization, whether in architecture or painting, in science and literature, in industry or agriculture, have never come from centralized government."

"Underlying most arguments against the free market is a lack of belief in freedom itself."

Chirac does it again

On my website, I have two articles. One by Chirac and one by Wolfowitz. Chirac states that he believed Europe should unite to take on globalization. He highlighted how his government (along with Germany) spent money on the "most promising sectors." He also reinforced the idea that if he helps to reform CAP, then other nations must "give and take" (reinforcing the mistaken view that trade liberalization is a zero sum game). On the other hand, Paul Wolfowitz's article points to trade liberalization as the best remedy for enriching the wealth all nations around the world.

And now in yesterday's Financial Times, President Chirac does it again. He continues his misguided fight to "protect" European wealth. This time he is opposed to foreign interests (in this case - America) taking over Euronext (a European conglomerate of exchanges). This is the third fight against foreign takeovers of French companies by Chirac in a couple months. First, it was his block of Enel's (Italy) potential takeover of Gaz de France (France) with a government-backed merger of Gaz de France with Suez (France). Then it was Chirac's opposition to the potential hostile takeover by Mittal Steel's Lakshimi Mittal of France's Arcelor (the world's second largest steelmaker). Now it is the potential NYSE/Euronext merger.

The problem is that mergers should be purely based on economics and shareholder interests. If politics were to get involved, efficiency would be its victim. Chirac might favor a "Franco-German" solution. However, if a politically forced merger were to take the place of the current one, the company might be set up for failure. This fact is best summed up by the difference in opinions between Chirac and his German counterpart, Merkel:

Mr Chirac said: "I will not hide the fact that I favour the Franco-German
solution for reasons of principle, and I would regret it if this solution is not
adopted in the end."Angela Merkel, Germany's chancellor, was more reserved,
saying: "We have always thought that in Europe it is good to build strong
economic units." But she added that any merger would be "a purely economic
decision" and said "these are events over which we can exert no influence".

The one of the largest shareholders of Euronext said it best with the following quote:

Yes, a merger makes sense with one or the other. But to decide which partner is
best, we must put them in competition until the very last moment.That is the
role of management, not to block one and to throw yourself into the arms of the
other.

A case study on how welfare fails

Welfare was near and dear to my heart. By being somebody with a big heart, I used to let my heart crowd out my brain. Therefore, I saw welfare as a way to help those that are less fortunate. However, after re-learning economics and studying the virtues of liberty and freedom, I realize that my faith was misplaced. It is with charity that we help the less fortunate. With welfare, we promote inefficiency and laziness and impede growth and creativity.

The Economist has a great article showing why Puerto Rico has failed to grow. Up until 1970, PR was growing at the same pace and vigor as the Asian Tigers. However, things started to deteriorate as welfare payments continued to invade the island from the do-good mainland Americans. The Economist describes PR's economy...

Puerto Rico's annual income per person was around $12,000 in 2004, less than half that of Mississippi, the poorest state. More than 48% of the island's people live below the federally defined poverty line. That poverty rate is nearly four times the national average, and more than twice as high as in poor states such as Kentucky, Louisiana, Mississippi and West Virginia

.

Half the working-age men in Puerto Rico do not work. Officially, only 46% of those who are not pursuing a degree have formal jobs, compared with a United States average of 76%.

The Economist goes on to state the culprits...

Many things have gone wrong. Most important, however, is that the United States government assumed too big a role in the Puerto Rican economy, and its largesse enabled the commonwealth's government to do the same. Through hubris, clumsiness and sheer size, these governments knocked Puerto Rico off the promising path that it was following, and the island's economy is now lost in a thicket of bad incentives. Two federal intrusions stand out: an oversized welfare state, and misguided rules on business investment.

So why do welfare payments not work. Because of abuse of the system and the way it discourages hard work and promotes dependence on the government.

Puerto Ricans are eligible for federal disability payments, for example, through Social Security. Ms Enchautegui and Mr Freeman point out that, in the territory, federal disability allowances are much higher than the United States average as a share of wages and pension income. Unsurprisingly, therefore, one in six working-age men in Puerto Rico are claiming disability benefits.

Because Puerto Ricans are paid to do nothing, crime grows and unemployment persists. This makes Puerto Rico poor and dangerous.

PR's government also discourages the private sector by favoring certain investment over others. They also crowd out the private sector.

Puerto Rico's bloated government also bears much of the blame. Around 30% of the territory's jobs are in the public sector.

Speaking of PR's population, the mayor of Aguadilla states, “All they want to do is find security only. They have no ambition...Everybody wants to work for the government.”

Contradictory Protectionist

Barry Lynn has a ridiculous article in the May 30th FT. He points to the state as the only entity able to control the economy. He views America's faith in the market as "utopian." However, to look towards the market and not the government is actually realist. Free-market economics is the better of the two options (Socialism vs. Capitalism). By taxing less, protecting national economies less, etc. you decrease the probability of deadweight loss in the global economy. In fact, the only utopian ideal is Marxism where one would have to believe the government to be run by saints.

Next, Lynn points to the "power vacuum" created by globalization...

Similarly, there is no better time than now to grasp that the real question is not, as Americans like to frame it, free trade versus protectionism. It is whether the world trading system will be regulated by private companies that are answerable only to the rich and powerful, and are profoundly un­equipped for the task of processing complex information for the sake of society, or by states built to assess risk and to be answerable to all citizens.

However, Lynn misses the point that consumers have most of the power in a market economy. If a product fails, so does the company. Monopolies are, for the most part, unsustainable when there is constant threat of competition. Only with regulation do consumers lose out and monopolies are created (see Mexico).

Lynn continues with...

Utopian universalism is dead. The sooner nations gather to bury its corpse – and harness, hobble or break up the immense companies that have grown so powerful in the shadow of that myth – the more likely we will be to save globalisation. This, of course, can happen only if we define globalisation, once again, as a political process that must be managed by nation states. The result may not be perfect, and it certainly will be no utopia. But it is the best we can expect on this earth. And that may be enough.

States are destrutive when it comes to economics. Lynn must have failed to learn economics before he began teaching at LSE. Look at what happened to SE Asia. They grew because of market economics but in an unsustainable way (see 1998 crisis) due to the inefficiencies created by protectionism and infant industry industrialization (does not prepare companies for future competition).

However, the best part of Lynn's piece is that he admits the destruction caused by a collapse of a free (for Lynn: free means no state intervention) trading system.

It would be Pollyannaish to deny that grave dangers abound. The last time a free-trade system unwound, when Britain’s “invisible empire” vanished almost overnight in the 1880s, one result was a scramble for territory. Europe’s powers carved up Africa, then began to hack away at China, in a process that helped set the stage for the first world war.