Wednesday's interesting reads - 5/28/08

"The Moral Challenge of Globalization" by Robert Samuelson for Newsweek (via RealClearPolitics):

"The solution to being poor is getting rich. It's economic growth. We know this. The mystery is why all societies have not adopted the obvious remedies...

Good government is relative; some fast-growing societies tolerated much corruption. Still, broad lessons are clear.

One is: Globalization works. Countries don't get rich by staying isolated. Those that embrace trade and foreign investment acquire know-how and technologies, can buy advanced products abroad and are forced to improve their competitiveness...

A second is: Outside benevolence can't rescue countries from poverty. There is a role for foreign aid, technical assistance and charity in relieving global poverty. But it is a small role...

"Windfall-Profit Nonsense" by John Stossel:

""They sure can afford it," she told an audience in Indianapolis (http://tinyurl.com/5tymvo).

Whom does she think "they" are?

Obama says: "It isn't right that oil companies are making record profits at a time when ordinary Americans are going into debt. ... That's why we'll put a windfall profits tax on oil companies..." (http://tinyurl.com/5b3aor).

Taxing "windfalls" is politically rewarding, but in the final analysis, only people pay taxes. When a corporation is taxed, the burden falls on workers (through smaller raises), consumers (through higher prices) and shareholders (through lower stock prices).

Do Clinton and Obama really want to tax these innocent people just to spite oil executives for high profits?

Anyway, what is a "windfall"? Any answer is arbitrary. Obama says it's the profit made off oil that's priced above $80 a barrel. Why not $70? Or $90? Did he pull that number out of a hat?"

"Income Inequality in the NFL" by Steven Malagna for RealClearMarkets:

"What accounts for this madness among professional sports owners? Perry, writing about Major League Baseball salaries, opines that “above-average competence commands higher monetary rewards in an increasingly competitive” environment. Why? Because professional sports are quintessential human-capital industries, valuing the talents of individuals far more than anything else. The old saw about the new economy, that your assets walk out the door every night, is especially true in sports.

Still, it’s not as if the top players are capturing all of the rewards of the growth in professional sports, to the exclusion of everyone else. As MLB and especially the NFL have cashed in over the years, everyone’s share has grown...

Something similar is going on in the rest of society, where the premium paid for talent has been rising, pushing up salaries fastest among those at the top even as everyone gains. In a highly influential paper published last year, Harvard economists Claudia Goldin and Lawrence Katz attributed rising income inequality not to the standard culprits we hear about in presidential campaigns—like globalization or the decline of unions—but rather to the growing premium that a knowledge-based economy places on education, especially on a college degree. The authors estimate that the returns on a college education actually fell from 1915 to 1950 as our universities supplied more grads than the economy could absorb, narrowing the income gap in the process between college grads and everyone else. That began to change, however, when rapid technological innovation created a demand, which has outstripped supply, for highly educated workers, something that began in earnest in the 1980s and has continued since then.

Facing such a dynamic in the labor market, there are a few things a society may be able to do to narrow the income gap for some people, like ensuring that public schools do the best job possible preparing kids for college, so that those with the potential for college don’t get their aspirations quashed because they’re stuck in a bad system. "

"Our Collectivist Candidates" WSJ op-ed by David Boaz:

"Sen. Obama told the students [of Wesleyan University] that "our individual salvation depends on collective salvation." He disparaged students who want to "take your diploma, walk off this stage, and chase only after the big house and the nice suits and all the other things that our money culture says you should buy."

The people Mr. Obama is sneering at are the ones who built America – the traders and entrepreneurs and manufacturers who gave us railroads and airplanes, housing and appliances, steam engines, electricity, telephones, computers and Starbucks. Ignored here is the work most Americans do, the work that gives us food, clothing, shelter and increasing comfort...

The real issue is that Messrs. Obama and McCain are telling us Americans that our normal lives are not good enough, that pursuing our own happiness is "self-indulgence," that building a business is "chasing after our money culture," that working to provide a better life for our families is a "narrow concern."

They're wrong. Every human life counts. Your life counts. You have a right to live it as you choose, to follow your bliss. You have a right to seek satisfaction in accomplishment. And if you chase after the almighty dollar, you just might find that you are led, as if by an invisible hand, to do things that improve the lives of others."

"Change You'll Have to Pay For" WSJ editorial:

"Mr. Obama's objection [to the Korean free trade agreement], as stated in his letter, is that the deal "would give Korean exports essentially unfettered access to the U.S. market and would eliminate our best opportunity for obtaining genuinely reciprocal market access in one of the world's largest economies." In other words, ordinary American consumers would get too good a deal...

On the record so far, Mr. Obama is the most protectionist U.S. presidential candidate in decades. In February he inserted a statement opposing the Korean trade deal into the Congressional record only days before securing the endorsement of the powerful Teamsters union."

Jon Henke, guest-blogging for Megan McArdle adds:

"Obama is offering a subsidy to Unions, paid for by higher consumer prices. Needless to say, Obama is supported by quite a few powerful Unions...whose election-year financial and mobilization support is essentially crucial to Democratic Party success...

But only a small percentage of the US labor force is unionized - meanwhile, 100% of the US labor force are also consumers. That Obama endorsement was awfully expensive for you and me."

After several of the comments went back and forth on the merits of free trade, I added this one:

"Two other thoughts.

First, I don't buy the argument that we should buy from Americans because it's in the national interest. The only real interest I have is to put food on my family's table, clothe my children and put a roof over their heads, and generally do the best for me and my family I can, all the while being as honest and ethical as I can. I don't have a problem with anyone else doing the same thing, no matter where they live or how they choose to do it, as long as they don't impede my ability to do the same. Tariffs, subsidies, protective regulation, etc prevents all of us who are impacted from doing that.

Second, I take issue with the idea that free trade alone "calls for unequal sacrifice". Forcing me to sacrifice by paying more for what I buy so someone else doesn't have to take a lower paying job or improve their skillset to get an equal paying job is no different. Actually, they are different - free trade lets people choose while other policies don't."