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People who believe in the power of individual liberty and free enterprise have had a rough time lately. And with so many recent examples of government intrusion, its hard to feel good about the future of capitalism.

In the case of financial markets, the tide has never really turned in favor of free markets. At the federal level, the 2010 Dodd-Frank Act effectively enshrines as law the progressive movements paternalistic view of regulation. Under this view, its not enough to merely deter and punish fraud; the government also has to protect everyone from virtually everything that could go wrong.

Thankfully, theres a ray of hope for everyones inner capitalist a spirited defense of capitalism from Frank Keating, president of the American Bankers Association. In a recent Wall Street Journal interview, Keating argued its not the federal governments business to dictate private companies salaries. According to Keating:

[I]f its private money, if its not FDIC-insured money, for example, if its private capital, private stockholders, whatever they pay or dont pay is their business. This is a free enterprise capitalist system after all.

Now, if youd like to remain in a state of capitalistic bliss, read no further in that interview. Please. Because the rest of Keatings interview displays symptoms far more in keeping with the paternalistic approach to regulating financial markets.

This approach goes well beyond simply providing legal protections for property rights and against fraud. Instead, it defines exactly what people must consider high risk versus low risk, and it dictates which risky activities are acceptable for which people.

As a result, we end up with exactly what we have: a giant mess that hinders the formation and use of capital and subjects it to political whims.

The last part of Mr. Keatings defense is dead wrong because we really dont have a free enterprise capitalist system. We havent had one for decades.

To paraphrase financial journalist Jim Grant, what we have is much closer to some sort of smiley-faced socialism. Government doesnt fully own the means of production, but it directs the daylights out of them. Especially in financial markets.

The 2010 Dodd-Frank Act is a great example of the ills that come with smiley-faced socialism.

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Capitalism vs. "Smiley-Faced Socialism"

Published February 14, 2015

Cornell president David Skorton had a "testy" exchange with students who stormed his office in protest of health care opt-out fees by the school.

Students at vaunted Cornell University are plenty smart enough to know they should not have to pay a penalty for not buying the school's health insurance if they already have coverage, but that's exactly what a new policy at the Ivy League school requires.

The $350 "health fee" for opting out of the schools insurance plan was announced in a memo school President David Skorton posted on Cornells website last week, according to higher education blog The College Fix. But it is just setting in with the student body, and many attending the Ithaca, N.Y., school are not pleased. Under the Affordable Care Act, students must have insurance, but making those already covered pay an extra fee to skip the school's plan is not sitting well.

Effective next academic year, 2015-16, we will be introducing a student health fee for those not enrolled in the Cornell Student Health Insurance Plan (SHIP), read the memo. As a physician, parent and president, I am proud of our university's long history of providing quality medical, mental health, education and prevention services on campus. These essential services play a critical role in student well-being and, therefore, success. Yet funding these services and creating access to them for all students has been a growing fiscal challenge, and a personal concern of mine.

The announcement sent students into a fervor, leading to a series of rallies on campus and hashtag activism, with #FightTheFee trending on the social media website.

Students who do not opt in to the $2,352 per year plan must pay the $350 fee, which most likely wont be covered by financial aid, according to campus newspaper The Cornell Review. The newspaper also said the university plan is run through Aetna, whose CEO, Mark Bertolini, is a Cornell MBA grad. In addition the fee, students will have to pay a $10 co-pay fee when visiting the schools health center.

See the rest here:
'WELCOME TO SOCIALISM' Cornell students erupt over $350 health care fee

It was Adam Smith who pointed out that theres a lot of ruin in a nation: supposedly something that should comfort us if the idiots gain political power and then proceed to wreck the economy by enacting their fantasies. But it has to be said that a lot is not actually an indefinite amount, as the poor citizenry of Venezuela are finding out in the greatest economic implosion of a society since Zimbabwe collapsed. The Ukraine isnt doing so well either but at least theyve the excuse that someone is invading the industrial heartland of that country. As Ive remarked here before its not that the government of Venezuela, Chavez and then Maduro, didnt mean well with their Bolivarian socialism. Its just that the actual implementation violated near every economic rule that weve got written down in our little book on how to run a country. Most importantly, they decided that the way to beat inequality and poverty was to mess with market prices which is absolutely the wrong thing to do.

The results of this simply are not good:

Venezuelas minimum wage, which many workers receive, has tripled in local currency in the past three years to about 5,600 bolivars today. That hasnt kept up with a dramatic slump in the bolivars value against the U.S. dollar in the same period. The government has devalued its primary exchange rate once and introduced three weaker alternative rates. Using the weakest legal exchange rate, the minimum wage has tumbled from about $360 a month in 2012 to $31 a month today.

If we value that minimum wage at the more realistic black market exchange rate then its around $20 a month. Which for an oil rich nation is simply ridiculous. Or more importantly perhaps, thats on a par with the minimum wage in Ethiopia. Which at least has the excuse of being a dirt poor country largely reliant upon subsistence peasantry to have an economy at all.

And it really is this idea of setting prices which is at the bottom of all this pain and grief:

As the economist Francisco R. Rodrguez has argued, this simple step would eliminate much of Venezuelas huge budget deficit, because the government would get more local currency for every barrel of oil sold. That would bring down runaway inflation, because the government would no longer have to print the extra bolvars it needs to operate. And it would put an end to the long lines, because importers would no longer have overwhelming incentives to hoard cheap dollars rather than buy imports.

Even economists who often clash with Mr. Rodrguez, like Prof. Ricardo Hausmann of Harvard, agree that unifying the exchange rate would be an important first step in reform. Venezuela has the most ridiculous exchange-rate differential ever in the history of mankind, noted Mr. Hausmann.

Lets think back right to the beginning here. Venezuela has not had a happy economic history, this is absolutely true. Theres oil wealth there but historically this has not been shared widely amongst the population. That oil wealth also, in a small country, led to a high exchange rate (so called Dutch Disease) which means few exports and a high reliance upon imports. Enter Chavez announcing that he was going to make things better by making sure rather more of that oil wealth trickled down to the poor and that this would cut inequality.

See the rest here:
Venezuela's Minimum Wage Is Now $20 A Month. Congratulations To Bolivarian Socialism

Published: March 7, 2015

After reading Jim Greenwoods diatribe on the public interest on Feb. 1, its rather obvious Greenwood has no clue about socialisms destructiveness. As with nearly all of his letters to the Observer-Reporter, he speaks of a fear and ignorance of socialism within the body of his missive. Unfortunately, the ignorance of socialism is all his own. Socialism has nothing to do with self-government.

Greenwood also mentions that North Korea and Cuba, two of the worlds poorest nations, have universal education and health care, most important components of governments that serve the public interest. Greenwood fails to mention that both countries despite calling themselves socialist are in reality communist. Karl Marx and Frederich Engels wrote in Communist Manifesto in 1848 that their vision was to use socialism as an on-ramp into communist takeovers of sovereign nations. Ayn Rand once wrote of socialism, There is no difference between communism and socialism, except in the means of achieving the same ultimate end. Communism proposes to enslave men by force. Socialism, by vote. It is merely the difference between murder and suicide.

Let no individual make a the critical mistake in thinking that socialism is a benign or even beneficial form of governance. Ultimately, Greenwood must ask himself this question: With there being so many socialist nations in the world today, why would he seek to change one of the remaining few free nations to a socialist nation, when he can escape the freedom that he so disdains and ensconce himself in the socialism that he so reveres?

John A. Quayle

North Franklin

Original post:
Socialism is destructive

From Mark Zuckerberg to Barack Obama in four easy steps: do we want the tech industry to take over some functions of the state? Photographs by Getty/Rex. Photomontage by

The outside world might regard Silicon Valley as a bastion of ruthless capitalism but tech entrepreneurs fashion themselves as believers in solidarity, autonomy and collaboration.

These venture humanitarians believe that they and not the wily politicians or the vain NGOs are the true champions of the weak and the poor, making the maligned markets deliver material benefits to those on the fringes of society. Some of the valleys in-house intellectuals even cheer the onset of digital socialism, which to quote digital thinker and environmentalist Kevin Kellys 2009 cover story in Wired can be viewed as a third way that renders irrelevant the old debates.

Leaving aside the battles over the true meaning of sharing in buzzwords like the sharing economy, one can discern an intriguing argument in all this self-congratulatory rhetoric. The magnanimous Silicon Valley really wants to be the perfect antidote to the greedy Wall Street: if the latter yields an ever greater increase in income inequality, the former helps to bridge the gap in consumption inequality.

That is, you might be earning less and less than your rich neighbour, but both of you also pay less and less its probably nothing for listening to music on Spotify, doing research on Google, or watching funny videos on YouTube. Soon, this logic might apply to internet access itself: Internet.org, Facebooks flagship initiative in the developing world, offers users nominally free access to basic online services including Facebook or Wikipedia. Once education, health and other services move to the cloud, one can see Silicon Valley playing an even greater role in these matters. Couldnt Google notify you of any developing symptoms, once you share your everyday health data? Wouldnt that offer some basic healthcare to people who would otherwise not be able to afford it? And, in the absence of other options, who could possibly object to Google saving lives?

Silicon Valleys oft-repeated tales of user empowerment are made of these kinds of promises. Set against the background of the failing welfare state, unable to cope with the promises it made to its own people, Silicon Valley offers us a new social net: we might be forced to sell our cars and default on our mortgages, but we would never lose access to Spotify and Google. Death of starvation is still a possibility but death of content starvation is no longer in the cards.

But before those cars and homes disappear, Silicon Valley could also help us turn them into a productive asset. Thanks to startups like JustPark a trendy app which allows property owners to rent their underused parking space to desperate drivers even the income inequality gap can be bridged, if only by a little bit. Ordinary citizens should rejoice: not only would they pay nothing for basic services they could supplement their stagnant regular income by monetising their previously dead capital.

This claim to being the worlds great equaliser is the very factor that makes Silicon Valley into a non-stick industry impermeable to social criticism. But the premises of its venture humanitarianism are not as rigorous and unshakable as they seem. There are at least three possible lines of attack.

First, a nominal increase in equality of consumption does not always entail a corresponding increase in individual autonomy in fact, it might have the opposite effect. To take advantage of all the opportunities offered to us by Silicon Valley including such fancy-sounding projects as Internet.org one must first agree to share ones data in exchange for free services. One has to be very naive to believe that this data is not going to shape how we live the rest of our lives, especially when insurance companies and banks are so eager to incorporate it in their decision-making.

The end result will be more social complacency as we start adjusting our behaviour, expecting that everything we do will affect everything else. It also means that those who can actually afford to pay for all those services that the rest of us are getting for free will enjoy an even greater autonomy in the future: think of the people who dont already have to worry about qualifying for a mortgage or a loan. They are not the ones who would worry how Uber drivers rank them or whether skipping the gym might give them trouble with their insurer.

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Silicon Valley likes to promise digital socialism but it is selling a fairy tale | Evgeny Morozov