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Thursday, December 22, 2005

Conversation With A Liberal- Free Market

This is one of many "conversations" I have with my Liberal friend(he calls himself a Lefty) every now and then. I send to him columns on economic issues. Usually, he responds with an attack on free market issues, big business or the harm done to the environment by technology. Of course, he readily uses technology to keep warm, travel and entertain himself. Sometimes he veers into attacks on Bush that were never the substance of the original e-mail I sent him. But to many a liberal, all comments propounding the benefits of free trade and less government intrusion, can be traced to a war-mongering Republican view on everything else.

Who am I to analyze what goes on in their minds.

Here we discuss the recent Walter Williams column on price controls. Williams best paragraphs were the following:

There's a phenomenon economists refer to as narrowly dispersed large benefits versus widely dispersed small costs. Take the case of a dairymen association. Members agree to contribute money to lobby federal and state legislators to get the U.S. Department of Agriculture and their state agricultural agencies to enact minimum milk price laws. Since dairy producers have narrow interests and are small in number, compared to dairy consumers, their organization costs are low. Their spending of several million dollars to lobby legislators to mandate minimum milk prices might mean hundreds of millions in higher profits and wages in the dairy industry.

That's the benefit side, the costs of which are borne by the tens of millions of milk consumers who're forced to pay maybe $20 or $30 more per year than they'd have to pay if there weren't congressionally-mandated minimum prices. Which one of us is willing to bear the expenses to go to Washington or state capitols to try to unseat legislators who created the opportunity for the dairy industry to rip us off? Individually, we correctly conclude that it's cheaper just to pay the $20 or $30 more a year and get on with our lives. Plus, since milk consumers have diverse interests, it'd be costly to organize us to fight the dairy interests and their congressional allies.

Now, even a 60's "it's all the fault of the corporations" liberal would have to find common ground with the Williams analysis.

Here are his comeback and my responses:

Liberal:

The free open markets can be cruel to people on fixed incomes.

My responses:

Did you read Williams? If not, refer to it. The free market charges the prices the market bears. It can be higher or lower. That is what Wal-Mart is all about. (I forgot that is a bad company for charging too little). What about gas prices paid at the pump? What about the taxes on gas? Are you ignoring that massive price increase we all have to pay? The people on fixed incomes are that way because of a free market?

Then I wrote some more:

Americans who work for 40 years (or more) have 12% of their pay taken in Social Security, a program not contractually guaranteed and with no method to see it grow as the country's economy grows. The math is easy. The market has had no drops over any 10-year period for 70 years. Even low income workers would be better off by many multiples under a private system. And own the account to boot for their heirs.

Then we have to consider these reductions:

The massive taxation over the income fleeced by FICA.

Then various local, state taxes on income. The sales taxes on purchases and usage taxes on utilities.

Now after we recognize how much of our earned money has been taken from us either before or after we get paid, we must consider the negative impact all of this has on entrepreneurial endeavors and capital needs of business. Starving businesses (and the overall profits of most business are in the single digits while we ignore the massive risk by investors) means less employment, lower production and, thus, lower salaries.

Then we have government deciding what is good for you and me regarding our purchases of products, drugs, food and everything else. Besides the intrusion on our liberties (bad enough), they drive up the cost of everything we buy.

Meanwhile, they decide who businesses can hire and fire and at what minimum pay. So businesses cannot hire a bunch of green workers at their true value, weed out the unproductive workers from the productive. Without such an option they just decide to go with machines and fewer local bodies.

So after all the above, people get back "fixed incomes" from their caring government- a mere shred of what they would have had absent such benevolence. And you call that a free market result?

Skip March adds this:

Regarding the Social Security System...ask yourself what you would say to an advisor who came to you and offered an investment vehicle that maybe would return 1% on your money over 30 to 50 years and is a Ponzi scheme. The answer you would think is pretty easy to figure out.

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