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Francis, Papal Perónista, Courts Redistributional Mirage

15 Thursday Mar 2018

Posted by pnoetx in Markets, Marxism, Redistribution, statism, Welfare State

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Argentina, Che Guevara, Daniel J. Mitchell, Economic Freedom, Eva Peron, Juan Peron, Judialismo, Maureen Mullarkey, Pope Francis, Property Rights, Robert P. Murphy, Vatican, World Bank, World Poverty

Is world poverty really increasing? Actually, no, quite the opposite, and you can blame economic liberalism, capitalism, and free markets for that. Yet we hear exactly the contrary from Pope Francis who, despite his evident compassion, has an amazingly poor understanding of economics. He misstates basic facts, offers dimly reasoned analyses of human rights, and promotes ill-considered policies. Now that the Vatican is set to release the Pope’s first feature film, no doubt a stirring piece of social justice propaganda, it seems as good a time as any to review the confounded state of Francis’ economic reasoning. This is not the first time I’ve discussed the Pope’s policy views: this link contains three previous posts from SacredCowChips on which Francis was tagged.

The False Narrative

My inspiration for this post comes from Robert P. Murphy, whose recent commentary on Francis’ pronouncements is trenchant. Murphy covers this speech written by Francis for the World Economic Forum, but delivered by a Vatican proxy, in which the Pope asserts the following:

“… governments must confront … the growth of unemployment, the increase in various forms of poverty, the widening of the socio-economic gap and new forms of slavery, often rooted in situations of conflict, migration and various social problems.“

Francis refers to increasing unemployment and poverty, and I could let that phrase pass if he was referring to certain nations or locales that have experienced chronically depressed economic growth. But Francis’ description is rather general, as evidenced by his diagnosis of causes. More on that below. Regarding his statement about trends in poverty, he is flatly incorrect. Here is Murphy:

“As the World Bank reports, the global “extreme poverty” rate in 1990 was cut in half by 2010. Back in 1990, 1.85 billion people lived on less than $1.90 per day, but by 2013, the figure had dropped to 767 million such people—meaning that more than a billion people had been lifted out of crushing poverty.“

After the Great Recession, world unemployment decreased from 2009-2015, according to the World Bank, though it is estimated to have crept up slightly in 2016-17. Again, the Pope’s woeful tale of growing unemployment and increasing poverty is nonsense.

But the world is a difficult place. In the underdeveloped world, the range and quality of goods available is extremely limited, and $1.90 represents bare subsistence, yet it’s a condition that exceeds the historical norm in many places. Movement above that threshold can represent a meaningful improvement in economic well-being.

Francis may lack an appreciation for the general enrichment in material conditions that has been taking place over the last two centuries, which is ongoing, or perhaps he believes that even greater achievements are easily within reach but for certain injustices, though he offers no qualifications. Perhaps he is mistakenly generalizing specific instances of exploitation in the underdeveloped world, which often occur with the explicit blessing of the state apparatus in exchange for kickbacks.

Rights and Markets

Even more egregious is the Pope’s presumption that private markets are at fault for any stagnation that he has identified. A notable difference between countries with successful, growing economies and those mired in stagnation is the degree to which their citizens enjoy freedoms, especially economic freedom. That is a well-established empirical fact, as Murphy explains. But the Pontiff goes further with preposterous dogma on the meaning of human rights. Again, from Murphy:

“Although inspired by concern for the poor and the marginalized, the Vatican’s message is seriously flawed…. On a conceptual level, Pope Francis posits a false dichotomy between economic freedom and human rights. … ‘Economic freedom must not prevail over the practical freedom of man and over his rights, and the market must not be absolute, but honour the exigencies of justice.’ 

What does the concept of “economic freedom” entail? It means freedom to work in any occupation of one’s choice, without permission from the government, and certainly without being conscripted into service against one’s will. It means the freedom to start a business. It means the freedom to keep what you have produced, without having your assets seized by a rapacious regime. It means the freedom to trade with people who live in another country. It means the rule of law, where contracts are interpreted fairly and government officials can’t exercise arbitrary power.“

Economic freedom, more than anything else, means that individuals are endowed with property rights. To deny such rights is to banish any reward for work and differential rewards for work well done. If free individuals are rewarded, it is a matter of their own discretion as to whether they immediately consume the reward or save it in order to accumulate wealth. Yet Francis takes the misanthropic and childish view that economic freedom, private property and markets imply exploitation. He lacks a basic understanding of the revolutionary power of markets as a form of social organization.

Within just a few hundred years, a small fraction of the many millennia during which mankind was mired in poverty and pestilence, markets have dramatically transformed the existence of most human populations. Peaceful, arms length transactions made in mutual self-interest exploit only one thing: gains from trade that would otherwise be wasted. And only a form of social organization that enables those gains can dovetail with the human rights and justice that Francis so strongly desires. The denial of economic freedom, property rights, and self-interest prohibits those gains, however, denying humanity of the wealth necessary to achieve anything like justice.

Pope Francis is a redistributionist, and that goes well beyond the charitable giving, good works and service performed voluntarily by individuals. In fact, he is a statist, advocating an economic system in which property rights are abrogated, wholly or in part, and wages above a politically determined threshold are confiscated.

The Pope and Perón

Francis is often described as a “Perónist”, after Juan Perón of Argentina, the so-called “right-wing socialist” (and sometime associate of the murderous Che Guevara). Anyone familiar with the economic history of Argentina should know that’s not praise. Here is Maureen Mullarkey from the last link:

“Both Juan and Eva understood the enchantments of populism. A charismatic pair, they ruled more by dint of personality—personalismo—than democratic procedure. Ushers of an ‘option for the poor,’ they glorified the lower classes and denigrated the wealthy. (This, while they amassed a huge personal fortune from the Eva Perón Welfare Foundation.) …

When Francis speaks of ‘the people’ as a revolutionary vanguard that ‘overflows the logical procedures of formal democracy,’ he is lapsing toward that ecstatic Peronist vision of a Third Way—justicialismo. That the disposition and design of it ended in economic collapse and misery is nothing against the splendor of the mystique.

In his youth, Francis absorbed the myth but not its lessons. Chief among them is how much Argentina’s fiscal catastrophe owed to an extravagant welfare system that favored enforced wealth redistribution over development. Among the many factors of Argentina’s historic economic crisis, one cries for attention: Perón’s increasing reliance on redistributing income, not only between industries and occupations but between skilled and unskilled workers.“

For further perspective on Francis, Perónism, and the disastrous Argentine “experiment”, see this piece by Daniel J. Mitchell.

For many years, naive Marxists have accepted the myth that central economic planners could and would direct productive and distributional activities with foresight, efficiency, and integrity. None of those is possible. The only form of social organization capable of registering and processing the myriad and dynamic signals on preferences and scarcity is free market capitalism. It is the only system capable of spontaneously harnessing appropriate responses based on the complex incentives faced by consumers and producers, and all at a minimal administrative cost for society, free of the government intervention that typifies the Peronist welfare state and corporatism.

Conclusion

Pope Francis should know better than to make claims having no empirical support. He should also have the wisdom to understand and advocate for the empowering nature of private property rights and markets. Elevating the human condition is possible only by allowing people to be free — economically free — and endowed with opportunities to earn private rewards and build wealth. Francis should realize that the massive private gains afforded by the market mechanism enable rewards which spill over, inuring to the benefit of parties external to a given exchange. On the other hand, state domination and control of economic activity gives over decision-making to selfish and ill-informed public commandants, who are all too pleased to grant special advantages to those in a position to return private favors. Such graft and mismanagement of resources comes at the expense of others. That way lies decay and a return to the much more brutal conditions of the past, unlike the mutually beneficial promise of market exchange.

Anti-Capitalists Prescribe Third-World Phlebotomy

12 Monday Oct 2015

Posted by pnoetx in Free Trade, Human Welfare

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Benjamin Powell, Economic Development, Fair Trade, Huffington Post, International Food Policy Research Institute, James Bovard, Johan Norberg, Penn Jillette, Protectionism, Sweatshops, Texas Tech University, The Freeman, Third-World Wages, World Bank

nike-sweatshop-cartoon3

Working conditions and wages in the third-world usually look so undesirable to observers in developed countries that we commonly use the term “sweatshops” to describe production facilities serving global markets in developing countries. Those facilities, however, are relatively modern by their domestic standards. The wages and working conditions are far superior to traditional opportunities available to the workers, offering them a rare opportunity to get out of poverty. But it is not uncommon to hear a narrow view that these workers are “exploited”, as if shutting down those operations was a better alternative. Calls for boycotts and other measures to punish firms with ties to those facilities are a common refrain from the Left, but if successful, the real victims of such activists would be the very workers whose interests they claim to represent.

Johan Norberg makes this all too clear in the Huffington Post, in “How Your T-Shirt Saves the World“, citing reports from the World Bank and the International Food Policy Research Institute: 

“The number of extremely poor in Bangladesh fell from 44 to 26 million between 2000 and 2010, despite the population growing by 15 million. Since 2004, the level of poverty in Cambodia has more than halved, from 52 to just over 20 percent. It is ‘one of the best performers in poverty reduction worldwide’, according to the World Bank.

This is a stunning success in the countries that need it the most, and the export sector has been instrumental in bringing it about. It increases the workers’ productivity, and therefore also their wages and working conditions, which has been especially important for women. In a study from the International Food Policy Research Institute, the researchers show that the increase in Bangladeshi wages from the garment sector ‘dwarfed’ the rise attributed to government programs. …

Obviously even the best jobs in very poor countries look bad compared to what we are used to in Europe and America, but that is not the alternative in an economy at a low level of capital and education. As a worker I interviewed in Vietnam once put it, the main complaint to management was that she wanted the factories to expand so that her relatives could get the same kinds of jobs.“

This is a very basic lesson in the process of economic development, and no one pretends that it’s easy. In this interview of Professor Benjamin Powell of Texas Tech University in The Freeman, he quotes Penn Jillette of Penn & Teller:

“The way Penn … put it once when he interviewed me is that ‘it’s better than tilling the soil with Grandpa’s femur.’ That is a bit crass . . . but true. Wishing away reality doesn’t give these workers better alternatives. Workers choose to work in sweatshops because it is their best available option. Sweatshops, however, are better than just the least bad option. They bring with them the proximate causes of economic development (capital, technology, the opportunity to build human capital) that lead to greater productivity—which eventually raises pay, shortens working hours, and improves working conditions.“

When you hear anyone talk about “exploitation” of workers in the third world by capitalists, ask them what alternatives they have in mind for lifting those workers out of poverty. Chances are they will pretend that firms can offer pay at levels far exceeding the current productivity of the workers — a prescription for closing the operations. Or they might offer naive suggestions that rely heavily on government as a benefactor, which are unlikely to succeed in ending poverty. They might even advocate for “fair trade”, which is leftist ear-candy code for protectionism. Nothing could be worse for first-world consumers or more harmful to the cause of economic development in the third world. As Norberg says of the so-called “sweatshops”: “The world needs more jobs like these, not fewer.“

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