Tuesday, March 8, 2011

Born to Cook the Books

My first right-wing acquaintance (or RWA1, as I've dubbed him in these parts) has been on a roll lately, linking on Facebook to so much deranged blather from right-wing media that I can't keep up with it, even if I wanted to. Last week he posted a link to "Why Koch Industries Is Speaking Out," Charles Koch's op-ed at the Wall Street Journal, and commented, "The 'sinister conspirator' lays out a more plausible program for the public good than George Soros or Paul Krugman."

First, I should mention that I don't consider the Kochs to be "sinister conspirators." They're entitled to spend their money as they wish, though I'm skeptical of the claim I've often encountered from certain libertarians that money equals speech, and that limiting the freedom of the rich to contribute as much as they want to political campaigns would violate their First Amendment rights. Something like that claim underlies the headline of Koch's op-ed. There's something very mystical about the idea that a corporation is a person and can speak.  [P.S. Is it just my imagination, or is there also an underlying suggestion that the more money you have, the more you deserve to be heard, and the wiser your opinions must therefore be?  I'd say that there's empirical evidence against such a notion, but I think a lot of people believe it anyway.]

As luck would have it, when RWA1 went to town I'd already received a link to a partial rebuttal of Koch in e-mail from a friend. Unfortunately the rebuttal is anonymous, but the writer makes a good case that Koch's statistics are at best dubious, so it doesn't matter too much who he or she is. I'm neither an economist nor a businessman, but I noticed some other problems with Charles Koch's cri de coeur.
Recent studies show that the poorest 10% of the population living in countries with the greatest economic freedom have 10 times the per capita income of the poorest citizens in countries with the least economic freedom. In other words, society as a whole benefits from greater economic freedom.
Koch's anonymous critic tracked down this claim to a study by something called the National Center for Policy Analysis. I don't know whether it's worth spending time to look over the pages in detail, but for now, the term "economic freedom" here is clearly an obfuscatory slogan, like "marriage equality." Who could be against "freedom" or "equality"? But what does it mean? For one thing, it means "lowering tax rates." And which countries are the authors referring to?

One is Hong Kong. As the economist Ha-joon Chang writes in his new book 23 Things They Don't Tell You About Capitalism (Bloomsbury, 2010), "Even though it did not do it on such principled grounds, Hong Kong was until recently even more notorious for its violation of intellectual property" (71) than the Netherlands and Switzerland, or the US in the 19th century. Ignoring other countries' intellectual property claims is not what free-market orthodoxy means by "economic freedom" these days -- in fact you'll frequently hear it deplored in the business media, usually in connection with mainland China. But copyright and patents are good examples of what Charles Koch denounces as "market-distorting programs", along with immigration restrictions and child labor laws. As with religious believers who merely disagree over which parts of the Bible to take literally, the disagreement in economic matters is over which "market-distorting programs" to implement.

The NCPA study also refers to Singapore as a haven of "economic freedom." But "Singapore, which is famous for its free-trade policies and welcoming attitude towards foreign investors, produces over 20 per cent of its output through state-owned enterprises, when the international average is around 10 per cent" (Chang, 70). State-owned enterprises, of course, are "market-distorting programs." Most of the countries formerly touted as free-market "Asian tigers" relied heavily on state direction of economic development; the crash of the 90s that did so much damage to their populations was a result of the imposition from outside of "economic freedom" for the wealthy. Since purity is rarely to be found in the real world, the devout can simply dismiss any problems as the result of lingering "market-distorting programs." But they were happy to ignore those distortions when the Asian tigers were flourishing.

Numerous other people noticed the funniest part of Koch's op-ed:
Because every other company in a given industry is accepting market-distorting programs, Koch companies have had little option but to do so as well, simply to remain competitive and help sustain our 50,000 U.S.-based jobs. However, even when such policies benefit us, we only support the policies that enhance true economic freedom.
For example, because of government mandates, our refining business is essentially obligated to be in the ethanol business. We believe that ethanol—and every other product in the marketplace—should be required to compete on its own merits, without mandates, subsidies or protective tariffs. Such policies only increase the prices of those products, taxes and the cost of many other goods and services.
Koch is factually wrong, of course, about the effects of "mandates, subsidies or protective tariffs." In high-tech industries like computers or, earlier, transistors, government subsidies allowed producers to achieve economies of scale and lower prices. Maybe we'd be as well off without such things, but again, people tend to ignore past market distortions that they have benefited from, and only deplore contemporary ones that they benefit from.

I suppose Koch deserves minimal credit for acknowledging that he's a corporate welfare looter, even if only because all the other kids are doing it. But I can't help wondering about some things. For example, since according to free-market theology private enterprise is more efficient and productive than public enterprise, wouldn't a company that refused to knuckle under to government interference have an advantage, and quickly leave its competitors in the dust?

Nor can I work up much sympathy for a billionaire who made his fortune on the public dole, but wishes he hadn't. Obviously "market-distorting programs" didn't keep the Kochs from making out like bandits. Does Charles think he's entitled to more? Probably, but he'd like you to believe that he only cares about the little people who have to pay more for consumer goods because of government subsidies.

I wonder what the Kochs think about this provision of Scott Walker's "Budget Repair Bill" which seeks to bring economic freedom to Wisconsin:
16.896 Sale or contractual operation of state-owned heating, cooling, and power plants. (1) Notwithstanding ss. 13.48 (14) (am) and 16.705 (1), the department may sell any state-owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant, and any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project under s. 196.49 (3) (b).
As the writer, Andrew Leonard, notes, "There's also plenty of evidence that no-bid contracts are an invitation to cronyism and backroom deals. The blanket authorization that Walker's bill offers for cutting deals with the private sector to get rid of state assets is blatantly undemocratic."

The reason I'm not all that concerned about the Kochs' spending their money on libertarian propaganda is that it's not all that successful with the public. (More attention needs to be paid to the simple buying of right-wing politicians, but as someone pointed out somewhere, it's not as if the Kochs must actively suborn and corrupt their purchases: right-wing politicians market themselves actively.) Avedon at the Sideshow linked to this post by David Swanson (via):
The public, unlike the White House or the Congress, would cut space spending . The public would more than double investment in renewable energy and conservation, while the President would increase it only 44% and the House Republicans would cut it by 36%. The public would increase spending on controlling pollution by 17%, while Obama would cut it by 13% and the House would cut it by 39%. The public would more than double spending on job training while Obama would cut it slightly and the Republicans cut it substantially. The public would boost higher education spending by 92% while Obama would only raise it 9% and the Republicans cut it 26%. The public would cut foreign aid to dictatorships but increase humanitarian assistance abroad. The White House and Congress? Not even on the same page with us. The public and the President both want to cut subsidies to big agriculture, but the public is alone in wanting that funding to assist small farmers.
Polls are tricky, of course, but even in more controlled situations it's not as easy to 'brainwash' the public as many critics believe. Pete Peterson, another right-wing billionaire on a crusade against market-distorting programs, found this out last summer when his organization sponsored nationwide "town hall" meetings to show that America is on his side. Peter Hart of FAIR wrote:
But a funny thing happened this weekend at these "America Speaks" events. Members of the public, after being given what Roger Hickey calls "misleading background information about the federal deficit and economic options to achieve fiscal 'balance' and future prosperity," got a chance to weigh in on what they thought the most prudent course of action might be. As Thomas Frank points out in the Wall Street Journal today (6/30/10; subscription required), the results were likely a huge disappointment to Peterson:
The event took place as scheduled last Saturday, with thousands of citizens meeting in different cities. They duly absorbed a booklet alerting them to the danger of deficits. They deliberated. And then something funny happened on the way to the consensus.
According to a preliminary compilation of results, participants supported "an extra 5 percent tax" on incomes of greater than $1 million per year (by 68 percent) and an increase in the corporate income tax rate (59 percent). They thought a "carbon tax" was a good idea (64 percent) as well as a "securities transactions tax" (61 percent). On Social Security, austerity was nowhere in sight as 85 percent backed raising the limit on taxable income, and only a miserable 27 percent thought that we should "create personal savings accounts." Majorities favored cutting defense spending and expressed support for further recovery measures even if they increase the deficit.
Raising taxes on the wealthy, a carbon tax, cutting military spending--who ARE these people? It sounds a political agenda that most pundits would tell you is politically impossible. (It also happens to be what a lot of people want, but never mind that.)
It seems that Joe Sixpack isn't quite as malleable as the media (and many media critics) like to think. If anything, it's highly educated, sophisticated connoisseurs of the arts like RWA1 who guzzle down the Koolaid and pronounce it champagne. And since most of the corporate media aren't ideologically pure enough, he has to go to crank websites like National Review Online, Daily Caller, and the Washington Examiner (here's the latest!).

I'm not advocating complacency, of course. But there's a certain hopelessness in the media-brainwashing model that leaves us at the mercy of the next 'liberal' billionaire like George Soros or Bill Gates, and I don't trust them either. As the protests in Wisconsin have shown, though, we don't have to match the Kochs and Peterson dollar-for-dollar to frustrate their agenda.