Donnerstag, September 10, 2009

History Repeats Once Again...Redux

This has been commented on extensively, I won't do a direct fisking.

Suffice to say history repeats itself once again. This time it's the 1930s, and pundits everywhere thought the sheer efficiency of fascist and communist economies - which, yes, put people back to work and in the case of the Soviets, created heavy industry in a country that had none - meant that classic capitalism was, to coin a phrase, doomed to the garbage heap of history and that as a result, democracy would not, could not, dare not survive.

Friedman is wrong.

He is headed down that same slippery slope as Krugman, the slope where ideology and personal preferences blind and twist thought and reality. Krugman, who deserved the Nobel for his economics work, deserves at the same time to be stripped of it for constantly cherry-picking data for ideological arguments in violation of any normal sense of integrity (and this isn't me speaking: the New York Times ombudsman basically states this as well).

Let's go back, briefly, to the Greeks, who correctly recognized that the best form of government is a truly selfless and benevolent dictator, who can command things to be so for the common good and for the benefits of all. But let us also remember the Greeks who pointed out that this person simply didn't exist and that the only real form of government that ensures that despotism, corruption and incompetence be held to a minimum is democracy.

What Friedman and Krugman suffer from is delusions of superiority, that their political goals are both just and reasonable, and hence any opponent is injust and unreasonable. It is an attitude that has poisoned political dialogue in the US to the point where there is, right now, no sense in even talking: the Democratic Party is the party of "my way or the highway", and if one takes a measured and honest look at how dominant parties deal with minority parties in the US, the Democratic Party does not come away well. There is no "bipartisanship" when that means "I need a Republican to vote along with me so that I can use him as an excuse when things go wrong, claiming it wasn't just me who screwed things up".

That's not bipartisanship: that's scapegoating. It's taken the Republican Party a while to realize how they've been abused this way, but they are capable of learning from their errors (of course, it'd have been better not to have lost the Senate whilst learning this, but sometimes it does take a 2x4 to the head to get things through what can be admittedly thick skulls) and are increasingly reluctant to become the Democratic Party's scapegoats by giving up principles, since they've learned that they will be made the scapegoats regardless of how they behave.

Getting back to Friedman: if you want to compete with China, he is saying, we need to emulate them in being able to make decisions quickly for what he considers to be "the industries of the future".

We can do that right now: it doesn't take government intervention to drive investments if private investors are convinced that they can make profits by doing so.

Aye,and there is the rub: we know the laws of physics and the laws of economics better than the Chinese (who famously under the orders of Mao tried to make steel in backyard furnaces in contradiction of the laws of phsyics, producing junk and destroying millions of tons of scrap metals in the process) and while we'd all love to have batteries that charge in 10 minutes that power cars for thousands of miles, that is a chimera.

The Chinese are producing electrical scooters (small motorcycles) right now: they are, however, inefficient, expensive and a dead-end track, since the fundamental question of where to produce the needed electricity hasn't been answered, given that batteries are a energy storage mechanism with high investment costs and low utility in comparison with petroleum fuels.

I will quote Friedman once:

The only way for us to match them is by legislating a rising carbon price along with efficiency and renewable standards that will stimulate massive private investment in clean-tech. Hard to do with a one-party democracy.

In other words, Mr. Friedman wants to manipulate markets to generate investments, and to do so proposes that energy be taxed.

Mr. Friedman, a small word of advice: manipulating markets to generate consumer and investment behavior is what got us into this mess in the first place. It's the LAST thing that we need now: the first thing we need is less market manipulation and the freedom for investors to spend their money where it makes the most sense economically, not where it makes the most sense ideologically.

That is the real problem we are facing today: a government and pundits who truly believe that they know better than the economy does, with all its warts and problems.

The fundamental complaint of Friedman and his fellow travelers is nothing but a repeat of the laments of pundits and politicians of the past, who mistakenly believed that either fascism or socialism, both variants of collectivism, were truly and permanently superior to the individualistic democratic system.

Friedman fails to see that collectivist societies invariably fail. China doesn't have enormous economic growth because of collectivism, but rather because the government there is desperately trying to ride the wave of individualist economic activity, dreading the day when the Chinese people start to understand that the rule of law, rather than the rule of party bosses, is fundamental for long-term growth and that the Party is corrupt, incompetent and blind. Dreading the day when it becomes important that Chinese intellectual property be respected.

In many ways China has had a free ride on intellectual property issues: they deny it is a problem and fail to enforce the few laws they have, while gladly supporting companies to steal intellectual property to beggar their competitors. This isn't sour grapes: these are serious problems that have never been properly addressed, as the Chinese government refuses to discuss this.

Friedman has chosen to believe the Potemkin facade of China. He is failing as a journalist, playing the role that Walter Duranty played, whitewashing the atrocities and human rights violations of the Soviets and winning a Pulitzer prize whilst doing so.

I think the correct term is "useful idiot".  Shame on the New York Times - who has never admitted that Duranty was a useful idiot and wrote fantasy bits - and shame on Friedman.

But history doesn't always repeat: fool me once, shame on you. Fool me twice, shame on me.

This time it's time not to be fooled.

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