Does the Salmonella Outbreak Prove the Need for Bigger Government?
Earlier I blogged about the Georgia peanut butter plant (I love that misleading phrase) and how leftists automatically assumed it proved the need for a stronger FDA, when a hardcore libertarian would argue that it shows you can’t trust government to keep your food (or your planes) safe. Today at LRC’s blog David Kramer offers more of the story:
For those of you following the story about the salmonella outbreak resulting from tainted peanut products that were produced at a Georgia plant–an outbreak which is now responsible for at least eight deaths and 575 illnesses in 43 states, I noticed something quite revealing in this latest report on the incident:
“Problems at the plant are not new. FDA inspectors found in 2001 [sic] that products potentially were exposed to insecticides, one of several violations uncovered during the last visit federal officials made before the current food-poisoning scare, according to a report obtained by The Associated Press.”
Further on, the article says:
“Some of the problems FDA discovered at the plant in 2001 are similar to those found last month, when federal inspectors returned to the plant after nearly eight years [emphasis mine].”
Let’s reflect on those two quotes. In 2001, the FDA sent its health inspectors out to inspect a food plant. The inspectors uncovered what is considered an unacceptable/possibly dangerous situation at the plant. Why did the FDA then wait EIGHT YEARS to send their health inspectors back for a follow-up visit to the same plant to see if the situation has been rectified, and to see if any other unacceptable situations may have cropped up since their first inspection?
Kramer later on comes up with a great response to those who say, “Well, it’s because George Bush likes dead Americans and so he slashed the FDA’s budget”:
If these people think that the EIGHT YEAR gap was due to underfunding, well since the FDA has still been around since 2001, the FDA obviously had enough time and money to send out notices (how about cheap, fast, efficient paperless emails?) alerting all food retailers of the initial situation at the Georgia plant–but warning the retailers that the FDA is so underfunded that it won’t be able to do a follow-up visit for EIGHT YEARS. (You would think that, at the very least, it is the FDA’s responsibility and professional duty to do this.)
What a great response. People who are fans of the government make up all sorts of ridiculous excuses for it. But Kramer is perfectly right: If it really were a matter of inadequate funding, and the FDA people knew that this peanut butter plant was operating very dangerously, then they should have notified its customers of the possible dangers, and told them to hire their own private inspections.
For what it’s worth, in FY 2008 the FDA’s budget request was $2.1 billion. (I think their actual number must have been close to this, but I got sick of browsing their website.) In FY 2001, the last (fiscal) year that could be fully attributed to Clinton, the FDA’s budget request was $1.3 billion. So yeah, I can see how George Bush’s paltry increase of 62% during the period in question is probably the culprit. If only we hadn’t had such a Rothbardian in office, the FDA might not have had its hands tied. Ah well, there will be no food deaths in the U.S. for at least four years now. Phew!
(BTW, perhaps I shouldn’t be so sarcastic when people really died. That is a tragedy, and if the people running that plant really were as reckless as some of the reports indicate, that is a serious matter. But I just wonder if the people shouting “Bush budget cuts!” even looked at the numbers, or if they were just so sure that had to be it that they didn’t even need to check. It is possible, of course, that despite the increase in overall funding, some critical aspect of enforcement received less money, but I have not seen someone make the case. And even if it were true, again, that really just underscores why it’s crazy to entrust food safety to the political process. In the eyes of their worst critics, are Republicans going to all of a sudden care about poor people from now on? If not, then do we just have to eat peanut butter during Democratic administrations, or maybe can we think about depoliticizing this service?)
Three Articles From Readers
Now that the book manuscript is turned in, I am attending to the black hole known as my Inbox. Here are three items of interest:
* Arthur Foulkes (not related to Guy Fawkes) sent his column giving a great critique of Keynesianism for the layperson.
* Foulkes also sent this Keynesian professor’s response.
* Brian Shelley sent this hilarious article on boom-busts in US history. My personal favorite:
The Panic of 1907 started the way many panics do, with a greedy capitalist. Multimillionaire Augustus Heinze, who had made his fortune mining in Montana, believed he had enough control over the copper industry to corner the market.
With the help of several major banks, he concocted a scheme to buy up all the shares of United Copper. But Heinze had overestimated his prowess, and the scheme failed, bringing down Heinze, United Copper, the banks, and many, many stockholders.
The debacle sent ripples of anxiety throughout the market, and investors started pulling their money out of banks altogether. After one of New York City’s biggest trusts went under, panic ensued, and the stock market collapsed.
At the time, there were no central banks in place, so the federal government had no means of bailing out businesses or injecting cash into the economy. It just stood by, idly waiting for a hero to save the day. Amazingly, one did.
James Pierpont Morgan, banker extraordinaire, rescued the American economy. He propped up many of the failing banks in New York by twisting the arms of other financiers, and he assuaged investors’ fears by backing up the market with his own vast cash reserves. Before long, Wall Street was on the mend.
The government also learned its lesson. With the panic resolved, it created the Federal Reserve, ensuring that it could buttress the economy during hard times. Since then, the government has taken a more active role in financial matters and relied less on the kindness of robber barons.
Phew! I’m glad the government learned its lesson from the Panic of 1907. You know how everyone nowadays is comparing the current mess to the Panic of 1907? Man I can’t believe how bad the financial markets were in 1907. Glad we don’t ever have to worry about living through that again.
Where to Start Reading for a Free Market Education?
I get this question a lot, so it makes sense for me to blog the answer. Whether you’re a homeschooling parent or a nerdy teenager who decides that learning is more important than dating, here is my suggested approach to learning free market economics in general, and Austrian economics in particular. Note that I am not endorsing 100% of everything on the below list, but if you asked a philosopher what books to start out with, he would recommend stuff he didn’t totally agree with too.
(1) Henry Hazlitt’s Economics in One Lesson (pdf here).
(2) Robert Murphy’s Politically Incorrect Guide to Capitalism. (The Amazon link is to the left somewhere; the capitalist pigs at Regnery wouldn’t dare put up a pdf of it.)
(3) Milton & Rose Friedman’s Free to Choose.
(4) Thomas Sowell’s Basic Economics.
(5) Gene Callahan’s Economics for Real People (pdf).
(6) Murphy’s Home Study Course in Austrian Economics. (This will be some $$.)
(7) Murray Rothbard’s Man, Economy, and State With Power and Market, scholar’s edition here and my study guide here (pdf).
(8) Ludwig von Mises’ Human Action, online here (pdf) and my study guide here (pdf).
I will leave two slots open because I’m sure Free Advice readers will recommend obvious titles I’m forgetting.
Bank Bailout Blues
My column at Townhall today. I actually came up with a defense of golden parachutes that I hadn’t realized before:
And so that type of candidate, who realizes he or she might get let go in a few years, is not going to relish a compensation package as CEO where the payout is $20 million a year if things go well, but only $100,000 and a kick in the pants if things go poorly.
Ironically, if the CEO’s incentives were the lopsided arrangement I just discussed, then the CEO would adopt an extremely narrow, short-sighted mentality. Only when corporations offer a more balanced compensation package—where the CEO does well even if the company tanks—will he have the right incentives as a steward of the assets. The Board of Directors never wants the CEO to feel trapped, and that he needs to turn the numbers around on the books in three months or else his pay drops by $19 million.
More Hilarious Job Numbers
One of the central points of IER’s critique of “green jobs” studies is that these studies would assume that jobs could be “created” without destroying other jobs. And it’s not just an issue of taxes or borrowing, but even of workers quitting their current jobs and going into the subsidized sector. To illustrate, suppose the government goes ahead and subsidizes solar panel manufacturers, and they end up hiring 20,000 more people. Unless every single one of those new hires had previously been unemployed, it would be overstating to say that the subsidy “created 20,000 jobs.”
Ah, but these are subtleties. It’s almost conceding too much to argue with the PhDs from the Center for American Progress on the above point, when the people actually writing the legislation say things like this:
Incidentally, what shocks me with the clip is not that Pelosi obviously botched whatever her factoid was–presumably her staff told her to go with 500 thousand and Pelosi isn’t good with numbers.
No, what really shocks me is that the CNN reporter just plays that, and then moves on to the “Republican response,” without saying, “Of course, there aren’t even that many Americans, so Speaker Pelosi’s figure doesn’t make any sense. We contacted her staff, and they clarified blah blah blah.”
Nope, it’s the media’s job just to blindly report whatever our fearless leaders say, with no analysis at all, even if it’s demonstrably false. That’s not an issue of “attacking Pelosi,” or “opposing stimulus,” it’s an issue of knowing that you can’t have more Americans lose their jobs in a month than there are Americans.
Banks Should Raise Prices in a Recession
In doing research for the book, I had an epiphany. And what is embarrassing is that this obvious truth has been sitting around for more than a century, but it was buried by Milton Friedman and others: During a financial panic, central banks should raise rates. An excerpt from my Mises Daily:
If the owner of a trucking company experiences a huge rush for his services, he might decide to postpone essential maintenance on his fleet, to take advantage of the unprecedented demand. But during this period he will be charging record shipping prices to make it worth his while to deviate from the normal, “safe” way of running his business. He will only be willing to bear the extra risk (either to the safety of his drivers or just the long-term operation of the trucks) if he is being compensated for it.
The same is true for the banks. Just as every other business during a recession wants to bolster its cash reserves, so too with the business that rents out cash reserves. If there’s a hurricane, the stores selling flashlights and generators should raise the prices on those essential items, to make sure they are rationed correctly. The same is true for liquidity — the moment after the community realizes they are in desperate need of it.
Murphy Interviewed on Roland and Diane Show
We conducted this interview (mp3) last Wednesday. It was a full hour, with (I believe) only one commercial break at the bottom of the hour, so lots of ground covered here. Also, their show wasn’t the standard right-wing shock jock stuff, so it was a different type of interview. The official topic was my book on capitalism, but we actually didn’t spend much time tied directly to it.
"Great achievements in American socialism"
That is Salon’s title, not mine. Yes, they are adopting the term just to spite talk show hosts, but go ahead and check it out. It is a monument to “What Is Seen.” (HT2 my wife Rachael)
Rather than publish another essay, though there have been some fine ones lately, about just what really happened during America’s last episode of so-called socialism, we’ve opted to go to the visual record. As Marshall Auerback noted, in the process of modernizing the rural South and upgrading the infrastructure of America’s largest cities, President Roosevelt’s New Deal left behind a durable, physical and very visible legacy of schools and hospitals — even aircraft carriers. (We’ll leave discussion of Social Security and unemployment insurance for another time.) The following slide show gives a small sampling of the bricks-and-mortar achievements of red, white and blue “socialism.”
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