OMG! The Free Market Works!

 | 

An unintentionally hilarious piece recently appeared in the Pravda of contemporary progressive liberalism, The New York Times.

This lachrymose report laments the fact that major public school districts around the country are losing customers — oops! students — and the result is layoffs. Of teacher union members, no less! Quelle horreur!

Between 2005 and 2010, Broward County (FL), Chicago, Cleveland, Columbus (OH), Detroit, Los Angeles, Philadelphia, San Bernardino, and Tucson have all lost students, some massively.

The article tells some tragic tales. LA let go of 8,500 teachers in the face of an enrollment drop of 56,000 students. Mesa Unified District lost 7,155 students and had to close four middle schools and lay off librarians — the ultimate evil.

The cutbacks are threatening offerings in art, foreign languages, and music.

But to what do the authors of this mournful article attribute this decline? They mention declining birthrates, unemployed parents moving elsewhere to find work, and illegal immigration crackdowns. But they also mention — tentatively and skeptically — the movement of students from regular district schools (essentially run by the teacher unions) to charter schools (run more or less autonomously, i.e., not under the unions’ thumb).

In Columbus, enrollment in charter schools rose by 9,000 students while enrollment in the public school district dropped by 6,150. One honest parent explained, “The classes were too big, the kids were unruly and didn’t pay attention to the teachers.” So she sent her dyslexic daughter to a nearby charter school, where — GASP! — “one of the teachers stayed after school every Friday to help her.”

In an institution where pleasing the customer is actually important, it’s no surprise that her daughter received the help she needed.

Nationwide, while the number of kids in regular public schools dropped by 5%, the number in charter schools rose by 60%.

Naturally, the public school system special interest groups — greedy unions, self-righteous teachers, callous administrators, and so on — are hysterical. For example, one Jeffrey Mirel, an “education historian” at the University of Michigan, bleated that public schools are in danger of becoming “the schools nobody wants.”

Wrong! Public schools have been for some timethe schools that nobody wants. Before the 1960s, teachers unions either didn't exist or — where they did — didn't exert the control they assumed in the 1970s. Teachers unions run schools for the benefit of their members only. So the problems started accelerating.But what’s happening right now is that some few lucky kids are being given the choice to get out — and they’re taking it.




Share This


Batman and Business

 | 

Business is bad in Hollywood, and I'm not talking about the box office receipts. Businesspeople have been portrayed as bad guys in movies for the past several decades. When an audience member asked about this trend during the "Liberty in Film" panel at the Anthem Libertarian Film Festival last month, Hollywood biographer and insider Marc Eliot dismissed it with a wave of his hand. "It's just a shortcut," he explained. "When you see a businessman on the screen, you know it's the villain. It just streamlines the story."

As moderator of the panel, I agreed with him that these shortcuts are probably not intentionally sinister; in fact, the technique goes all the way back to Aesop, who used them in his fables. "If a character was a dog, you knew he would be loyal," I acknowledged. "A fox would be cunning. A crow would steal. In the old days," I went on, "a black hat meant 'bad guy' and a white hat meant 'good guy.' But shortcuts are dangerous and unfair when we're talking about whole groups of people." I specifically referenced the "shortcuts" of earlier generations of filmmakers: blacks were clowns; Indians were ferocious; women were weak. I suggested the danger of having a new generation automatically think "villain" when it sees a businessperson. The problem is that these characters often mirror and perpetuate basic prejudices within a culture. Onscreen stereotypes lead to real-life prejudices.

Panelist Gary Alexander added this biting criticism: "Using shortcuts is just plain lazy." It's true that filmmakers have always used stock characters as shortcuts to storytelling, and they probably always will. But that doesn't mean we have to accept them.

The silver lining to this clouded silver screen is that these shortcuts can be changed. The challenge for filmmakers is to break away from them and create independent characters who can surprise and satisfy. Just as filmmakers of the ’60s, ’70s, and ’80s deliberately challenged black and female stereotypes by casting against type and writing untraditional storylines, so libertarian filmmakers today need to write screenplays that challenge and overturn the stock business villain. These characters need to be portrayed in the rich, three-dimensional diversity that exists in the real world, where some business people are admittedly bad but others are surprisingly (to filmgoers) good.

What a reversal of stereotypical shortcuts! A businesswoman who expresses the proper role of business, and a burglar who reveals her petty jealousies.

This actually happens in The Dark Knight Rises, the latest entry in the Batman franchise. It's subtle, but it's clear: although there are some bad businesspeople in the film, there are just as many good ones, smashing the stereotype and insisting that viewers look past their stock expectations. For example, when Bruce Wayne (Christian Bale) discovers that his homes for at-risk and orphaned boys have not been funded for two years, he confronts his trusted friend and protector, Alfred. "The homes were funded by profits from Wayne Industries," Alfred sadly explains. "There have to be some." That’s a reminder to Bruce, who has been in a deep funk since his girlfriend died, that his neglect of his company has had wide-ranging effects. Bruce — and the audience — are thus informed that "excess profits" are a good thing. They can be used for doing good works, if that is the business owner's goal.

Similarly, in another brief interchange the audience is told that everyone is affected by the stock market, whether they own stocks or not. I don't think I'm giving away too much to tell you that, early in the film, the bad guys break into the stock exchange. The chief of police is unconcerned about the consequences of a financial meltdown, arguing that the average person saves his money under a mattress and doesn't care about what happens to the stock market. The head of the exchange tells him, "If this money disappears, your mattress will be worth a lot less." A simple truth, simply stated.

Later, Bruce Wayne teams up with Miranda Tate (Marion Cotillard), the head of another corporation, and she voices similar truths about the free market. "You have to invest to restore balance to the world," she tells him, acknowledging the importance of capital investment and private enterprise. And when he looks around at a lavish business party she is hosting, she tells him, "The proceeds will go wherever I want, because I paid for the spread myself." Even Ayn Rand would likely approve this self-interested heroine who understands the value of business.

Meanwhile, Catwoman (Anne Hathaway), one of Batman's archenemies, looks around at Bruce Wayne's huge estate and growls jealously, "You're going to wonder how you could live so large and leave so little for the rest of us." What a reversal of stereotypical shortcuts! A businesswoman who expresses the proper role of business, and a burglar who reveals her petty jealousies. Bravo, Christopher Nolan!

Cinematically The Dark Knight Rises delivers all that was promised in the weeks and months building up to its release. Christian Bale's troubled Bruce Wayne lifts the character far above the comic book hero created by Bob Kane and trivialized by the Adam West TV series in the ’60s. Gone, too, is the sardonic humor injected by George Clooney's portrayal in the ’80s. This Batman is a reluctant savior of a world that has largely misunderstood and rejected him. While he has a few ardent supporters, most consider him a traitor and want him destroyed. He is briefly tempted away from his mission by the love of a woman. He suffers indescribable agony in a dark prison at the hands of a monstrous villain named Bane (Tom Hardy) — the "bane" who wants to destroy the world. Despite his reluctance, Bruce accepts his arduous task. In short, he is a classic Christ figure, adding gravitas to the modern myth of Batman. He even says at one point, "My father's work is done."

I had to display the contents of my purse to a uniformed employee before entering the theater. I hope that a TSA-style Movie Safety Authority does not take over our malls and movie theaters.

But while the characters are rich and well acted, the story is interesting, Hans Zimmer's musical score is powerfully compelling, and the final hour is particularly thrilling, it was difficult to watch this film. Action movies have always provided an opportunity to enter another world, suspend one's disbelief, enjoy vicarious experience, then step back into the real world where "things like that" don't really happen. But in light of what did happen in Aurora, Colorado on opening night, I found it almost impossible to separate myself from the barrage of onscreen shooting in the first half hour of the film. It seemed devastatingly real because I knew it was during this scene of heartless shooting in a very public location that the actual shooting began. I was almost ashamed to be there, seeking a few hours' entertainment from a film that was the unwitting stage for such terror.

I also found myself looking around the aisles and corners of the theater, watching for suspicious characters and devising an escape plan. This was partly because I had to display the contents of my purse to a uniformed employee before entering the theater. I hope that fears like this dissipate for everyone. And I hope that a TSA-style MSA (Movie Safety Authority) does not take over our malls and movie theaters.

Spoiler alert — read the next paragraph only if you have already seen this movie, or if you have no intention of ever seeing it:

The film ends with an "aha" moment that is so thrillingly unexpected that, when I saw it, the entire audience gasped in disbelief. But I should have known from the beginning. Marc Eliot explained it to us in the “Liberty in Film” panel, and he was right: Hollywood uses shortcuts to tell us who the bad guy is. Even when a writer-director is planning the most delicious of twists for the end, he is helpless against his own Hollywood instincts. Nolan telegraphed it from the start: In modern movies, the business owner is always the bad guy. Even when you least expect it.


Editor's Note: Review of "The Dark Knight Rises," directed by Christopher Nolan. Warner Brothers, 2012, 164 minutes.



Share This


Defending Capitalism against Ayn Rand

 | 

The titles that Ayn Rand assigned to the three parts of Atlas Shrugged proclaim her insistence that logical contradictions cannot exist in reality. By contrast, the title of the magnum opus of the ultimate charlatan in Atlas Shrugged, Simon Pritchett, is The Metaphysical Contradictions of the Universe. Francisco d’Anconia and Hugh Akston explain to Dagny Taggart that whenever someone thinks he has encountered a contradiction, he must check his premises, and he will find that one of them is wrong (I.9, 7, 10).1

In this essay, I will follow d’Anconia’s and Akston’s advice. I will show that a fundamental contradiction pervades Atlas Shrugged because Rand failed to check her premises. She thought that the heroes she created were exemplars of pure, uncorrupted capitalism. In fact, the heroes she created in Atlas Shrugged came from her sense of life, which was not only un-capitalist but anti-capitalist. I will also show that this contradiction is extremely fortunate because it illuminates why capitalism is the most efficient and humane economic system ever implemented.

Rand often emphasized the importance of a person’s “sense of life” and of art as its expression (e.g., Rand 1975: 31, 33, 44). She defined her sense of life and its artistic expression most clearly in an essay she wrote on Victor Hugo (1975: 153–61). In it she said, “Victor Hugo is the greatest novelist in world literature” because his characters are “a race of giants,” who are not concerned with “penny ante.” “‘Grandeur’ is the one word that names the leitmotif . . . of all of Hugo’s novels — and of his sense of life.”

The heroes Rand created in Atlas Shrugged came from her sense of life, which was not only un-capitalist but anti-capitalist.

In Atlas Shrugged, Rand created heroes who embodied her sense of life and described how such heroes would fulfill their heroic natures if they engaged in economic activities. She thought that the sum of their economic activities and interactions provides a template of what laissez-faire capitalism would be like. She was wrong. When the heroes who embody her sense of life engage in economic activities, they function like Communist administrators, not capitalist businessmen.2

To paraphrase Rand, “Grandeur is the one word that names” the sense of life of Communist economies. They had no concern with anything “penny ante.” In the 1980s, when the economy of the Soviet Union was disintegrating, it was producing between 1.5 and two times more steel and cement than the United States and generating more electricity; it also had 2.5 times more machine tools. However, buttons, clothespins, babies’ pacifiers, and thermometers were always extremely difficult to find in the Soviet Union (Shmelev and Popov 1989: 82, 132, 144). Toilet paper and toilet seats were such rare and precious commodities that when McDonald’s opened a restaurant in Moscow, in 1990, its employees had to guard its restrooms to prevent customers stealing toilet paper and toilet seats (Goldman 1991: 166). The Soviet Union’s heroic economy also did not provide contraceptives or a single practical guide to contraception. As a result, Soviet women averaged at least four legal abortions during their lives; and the average was higher in the non-Muslim regions of the Soviet Union. In addition, large numbers of illegal abortions were performed. Anesthetics could be obtained only by a large bribe (Feshbach and Friendly 1992: 208–9).

In Rand’s novel The Fountainhead, the villain, Ellsworth Toohey, completely destroys Catherine Halsey’s soul, and the visible sign of her corruption is that her mouth has adapted to giving orders, “not big orders or cruel orders; just mean little ones — about plumbing and disinfectants” (IV.10). Toohey has turned her into the opposite of a Communist. The Communists gave big, cruel orders and had no concern with mean little considerations. The heroes of Atlas Shrugged are heroic because, like Communist bureaucrats, they produce or maintain impressive products, not mean little ones. It would be unimaginable for a Rand hero to be a manufacturer of “penny ante” products, such as disposable baby diapers, menstrual tampons, or dependable contraceptives. But these distinctively 20th-century inventions improved the quality of life immeasurably by freeing people from preoccupation with brute, animal existence.

Most services would be included among “mean little” occupations. The Communists’ heroic obsession with production caused them to ignore services, which, with a few exceptions, they did not even include in their gross domestic product statistics. In fact, Marxists always used the term “the means of production” as a synonym for “the economy.” In modern capitalist countries, most businesspeople provide services. With one exception that I will discuss below, the only service that a hero in Atlas Shrugged provides is running railroads. This is clearly not a “mean little” occupation, and it was one of the few services that the Soviet Union included in its gross domestic product statistics (weight of freight times kilometers carried).

Moreover, Rand ignored all services in her representation of history (1963: 10–57) as a battle between Attila and the Witch Doctor and their antithesis, the Producer. Indeed, her practice of using “industrialist” as a synonym for businessperson excludes businesspeople who produce “penny ante” products, along with those who provide services. In his long speech in Atlas Shrugged, John Galt (i.e., Ayn Rand) says, “Productiveness is your acceptance of morality . . . productive work is the process by which man’s consciousness controls his existence, a constant process of . . .  shaping matter to fit one’s purpose, of translating an idea into physical form, of remaking the earth in the image of one’s values;” and, “the industrialists, the conquerors of matter” “have produced all the wonders of humanity’s brief summer” (III.7).

It would be unimaginable for a Rand hero to be a manufacturer of disposable diapers, tampons, or dependable contraceptives.

It is true that the great philosopher Hugh Akston owns a diner and cooks its food, which he does with extraordinary skill, making “the best-cooked food she [Dagny] had ever tasted” (I.10). However, Rand does not let this fact affect her conceptualization of productive work when Galt tells Dagny, “We take nothing but the lowliest jobs and we produce by the effort of our muscles” (III.1).3

In her short story “The Simplest Thing in the World” (1975: 173-85), Rand depicts a writer of fiction who cannot make a living because he has the same sense of life as Rand. The writer decides he has to create the type of story that will sell: “a simple, human story,” which consists of “lousy bromides.” “It mustn’t have any meaning,” and its characters must be petty because “[s]mall people are safe.” However, he is incapable of writing such a story. Every time he tries, his sense of life thwarts his conscious efforts, and he starts composing a story about heroes. The reason, as Rand explains in her introduction, is that his “sense of life directs . . . and controls his creative imagination.” To exemplify this fact, he begins to write “a story about a middle-aged millionaire who tries to seduce a poor young working girl.” He is “a big tycoon who owns a whole slew of five-and tens [i.e., discount stores].” But the author cannot write this story. As he develops the story in his mind, his sense of life makes him forget about the girl and transform the villain into a hero. As part of the transformation, he says to himself, “to hell with the five-and-ten!” The hero now builds ships because he is driven by “a great devotion to a goal.” He is motivated by “a great driving energy . . . the principle of creation itself. It’s what makes everything in the world. Dams and skyscrapers and transatlantic cables.” “[H]e wants to work — not to make money, just to work, just to fight” (emphasis added). So, an author with Ayn Rand’s sense of life could not make the hero of his works a retailer, no matter how successful he might be; not even Sam Walton, who founded Walmart and built it into the company with the greatest revenue of any company in the world.

Because the Soviets had the same sense of life as the author in this short story (i.e., the same as Rand), they were extremely proud of the enormous hydroelectric dams they built, and their retailing was horribly inefficient. In the Soviet Union, people had to wait in long lines for any purchase. If someone had time to spare, he would wait in a line to buy something he did not need, in order to barter it with someone who had waited in another line to buy something else. When McDonald’s opened its first restaurant in Moscow, it set all records for number of customers: 40,000 to 50,000 a day, even though its food cost twice as much as the food in state-run cafeterias. It had twenty-seven cash registers. In Communist countries, the length of a line of customers showed how valuable the merchandise was at the end of that line. So, McDonald’s had to have ushers to tell customers not to go to the longest line (Goldman 1991: 166–7; Blackman 1990).

The opening of this first McDonald’s — an event that, as much as any other, marked the end of Communism — illustrates another serious defect in Communist-Objectivist ideals. A small notice in a Soviet newspaper drew 27,000 applicants for jobs as counter clerks, even though the anticipated salary was only average by Soviet standards. Those who were chosen had to be trained to smile at customers and speak politely to them. Their training was so successful that customers could not believe that the clerks were Soviet-raised Russians (Blackman 1990; Goldman 1991: 166–7).

An author with Ayn Rand’s sense of life could not make the hero of his works a retailer, no matter how successful he might be.

Rand used “grocery clerk” to symbolize the antithesis of her ideal (1964: viii; 1975: 84). In her first novel, We the Living, when the heroine, Kira, sees her future lover Leo for the first time,she observes that “[h]is mouth . . . was that of an ancient chieftain who could order men to die, and his eyes were such as could watch it.” However, Leo says to Kira, with bitter humor, “I’m nothing like what you think I am. I’ve always wanted to be a Soviet clerk who sells soap and smiles at customers” (I.4). Again, Rand reversed Communism and capitalism. Men who could order others to die and watch their death calmly characterized Communism. Smiling clerks, who sell unimpressive products, characterize capitalism.

When Nathaniel Branden was the official Objectivist expert on psychology, he wrote, “[P]roductive work is the process through which a man achieves that sense of control over his life which is the precondition of his being able fully to enjoy the other values possible to him … [P]roductive . . . achievements lead to pride” (“Self-Esteem: Part IV,”The Objectivist, June 1967). Branden, as he himself later realized, was exaggerating. But he was exaggerating a truth. A feeling of control over one’s life and pride in productive achievements are certainly wonderful feelings. They can derive directly from the type of work done by Communist administrators and the heroes of Rand’s novels, especially if, like Howard Roark, they have an uncapitalist indifference to money and accept only those projects that appeal to them. However, a feeling of control over one’s life and pride in achievements do not follow directly from the type of work that most people in a capitalist society do: salesmen, accountants, insurance brokers, bank clerks, and manufacturers of “penny ante” products, like clothespins and underpants.

Nearly all readers of Rand’s novels, even those who disagree with her philosophy, recognize that she was a brilliant novelist. But not even her brilliance as a novelist could have made a gripping, inspirational novel about the work that is done in distinctively capitalist occupations, occupations that do not exist in Communist countries, such as advertising or being a real estate agent. In fact, the first jobs of the odious Wesley Mouch were in advertising (Atlas II.6).

Let us consider briefly the novelist whom Rand (1975: 119) regarded as the best of the naturalists, Sinclair Lewis. When Lewis wanted to write novels about admirable protagonists, he made them a dedicated research scientist (Martin Arrowsmith) and the president of a car company (Sam Dodsworth), who began his career as assistant manager of production. When Lewis wanted a pathetic protagonist, he made him a real estate agent (George Babbitt). Babbitt, like Dodsworth, is successful at his work. But Lewis says in the first chapter that Babbitt “made nothing in particular, neither butter nor shoes nor poetry;” and he “detested the grind of the real estate business, and disliked his family, and disliked himself for disliking them.”

The discussion so far illuminates a crucial benefit of the love of money. It entices people into occupations that they may not find interesting or inspiring, but are socially necessary; and it exerts constant pressure on business owners to provide what the public wants, not what they enjoy doing.

In all of Rand’s novels, only one business owner completely embodies the capitalist ethos. That is the press tycoon Gail Wynand, in The Fountainhead, who becomes fabulously rich through selfless service to the public, by providing it with what it wants: a lowbrow, sentimental, lurid newspaper. As he says (IV.11), he has led a life of “[s]elflessness in the absolute sense.” He “erased [his] ego out of existence” by following the principle, “Give the greatest pleasure to the greatest number.” However, according to Rand, Wynand is guilty of the most horrible sin in her moral universe: betraying himself.

Men who could order others to die and watch their death calmly characterized Communism. Smiling clerks, who sell unimpressive products, characterize capitalism.

Wynand’s opposite is Nathaniel Taggart, in Atlas Shrugged, who is supposed to be the archetypal capitalist. As Dagny recalls (I.8), “He said that he envied only one of his competitors, the one who said, ‘The public be damned!’” Nothing could be more antithetical to the motivation of a successful business owner in a capitalist society. This is the ethos of the head of a production unit in a Communist economy, who derives exhilaration and pride from productive achievement without regard to providing the public with what it wants.

Rand’s story “The Simplest Thing in the World” is an excellent illustration of this point. It assumes that an author with Rand’s sense of life is compelled to create a protagonist who does not work for money and therefore chooses to build ships instead of discount stores. This contrast is factually accurate. Someone motivated by money would not consider shipbuilding as a business career since, in economically advanced countries, shipbuilders can stay in business only by means of tariff protection or government subsidies or both. But he would certainly consider the business of discount stores, since they have proved to be the most profitable (i.e., socially useful) branch of retailing.

The economic role of money in constantly driving economic participants to provide the public with what it wants is related to an admirable moral attribute of the free market. It is completely democratic and non-coercive; no one can interfere with other people spending their money on what they want. In her essay “What Is Capitalism?” (1967: 17, 20) Rand showed that she was fully aware of this fundamental attribute of capitalism (the italics are Rand’s):

[T]he works of Victor Hugo are objectively of immeasurably greater value than true-confession magazines. But if a given man’s intellectual potential can barely manage to enjoy true confessions, there is no reason why his meager earnings, the product of his effort, should be spent on books he cannot read.

The tribal mentalities attack this principle . . . by a question such as: “Why should Elvis Presley make more money than Einstein?” The answer is: Because men work in order to support and enjoy their own lives — and if many men find value in Elvis Presley, they are entitled to spend their money on their own pleasure.

It is the Gail Wynands who provide true-confessions magazines and Elvis Presley CDs.

At this point, many readers will object that Ayn Rand appreciated the value of money. She ended Atlas Shrugged with its hero tracing the sign of the dollar in space, made a gold dollar sign Atlantis’ “coat of arms, its trademark, its beacon” (III.1), and herself often wore a gold dollar sign pinned to her dress.

Yet in The Fountainhead, Toohey asks Peter Keating about Roark (II. 4), “Does he like money;” and Keating replies No. But long before that, the reader has learned that Roark’s abnormal indifference to money is one of the essential characteristics that make him the hero of this novel. Indeed, in “The Simplest Thing in the World,” Rand assumed that an author with her sense of life must write only about heroes who do not care about money.

Rand assumed that an author with her sense of life must write only about heroes who do not care about money.

In Atlas Shrugged, Rand sometimes has her heroes claim that their goal is to make money. At the opening of the John Galt Line, which is by far the greatest achievement of both Dagny and Hank Rearden (I.8), a reporter asks Dagny her “motive in building that Line.” She answers, “the profit which I expect to make.” Another reporter cautions her, “That’s the wrong thing to say.” But she repeats it. Yet before her trip begins, she looks at the crowd that has gathered and notices that they are there, not because these people expect to make a profit, but “because the sight of an achievement was the greatest gift a human being could offer to others.” The description of the ride on the John Galt Line is the most exhilarating fiction writing I can recall reading; and I have read a great deal of narrative fiction, in ancient Greek, Latin, English, and French. For Dagny, “It was the greatest sensation of existence; not to trust, but to know.” “She felt the sweep of an emotion which she could not contain, as of something bursting upward.” And what about the engine drivers? Every one of them who was available volunteered to drive the train despite persistent warnings of danger. Surely, they were not motivated by money.

At least in their economic interactions, money should be the primary consideration of the heroes of a novel that ends with the dollar sign traced in the air. In Part I, Chapter 1, Dagny’s parasitical brother James says to her, “I don’t like Hank Rearden.” Dagny replies, “I do. But what does that matter, one way or another? We need rails and he is the only one who can give them to us.” James Taggart, typically of him, replies, “You have no sense of the human element at all.” This conversation crystallizes capitalist and uncapitalist mentalities.

Nevertheless, the economic decisions of the heroes of Atlas Shrugged are constantly motivated by the human element. That is true even of the one major character in Atlas Shrugged who is a pure capitalist, Midas Mulligan. He says he joined the strike because of a vision, in which he “saw the bright face and the eyes of young Rearden . . . lying at the foot of an altar . . . and what stood on that altar was Lee Hunsacker, with the mucus-filled eyes” (III.1). In Part II, Chapter 3, Francisco asks Rearden: did you want the rail you made for the John Galt Line used by your equals, like Ellis Wyatt, and by men such as Eddie Willers, who do not match your ability but who “equal your moral integrity” and “riding on your rail — give a moment’s silent thanks”? Rearden answers Yes. Francisco then asks, “Did you want to see it used by whining rotters?” Rearden answers, “I’d blast that rail first.” Francisco then explains that by "whining rotter" he means “any man who proclaims his right to a single penny of another man’s effort.” But no economy, whether socialist or capitalist, could function for one day if producers acted in this way. In Part II, Chapter 10, Dagny says that Nathaniel Taggart, supposedly the archetypical capitalist, “couldn’t have worked with people like these passengers. He couldn’t have run trains for them.” But no one running a train line, even in a socialist economy, could possibly consider the moral worth of its passengers, or any consideration besides their paying for the ride.

No one running a train line, even in a socialist economy, could possibly consider the moral worth of its passengers, or any consideration besides their paying for the ride.

I will conclude with the most frequently quoted explanation of why the market is the most effective means of providing people with what they want. It is by Adam Smith, in Book I, Chapter II of The Wealth of Nations: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest. We address ourselves . . . to their self-love.” Butchers, brewers, and bakers had a very low priority in Communist countries. When McDonald’s opened its first restaurant in Moscow, it had to train its own butchers (Goldman 1991: 166). It is also unimaginable for an Ayn Rand hero to be a butcher, brewer, or baker. The self-interest and self-love that induces people to become butchers, brewers, and bakers and to perform those jobs well is totally different from the heroic self-love of Rand’s heroes. It is an unheroic desire to support themselves and their families in comfort and security.

In her essay “What Is Capitalism?” Ayn Rand showed that she understood as well as Smith why love of money is wonderfully socially beneficial. In her fiction, however, her anti-capitalist sense of life obliterated that knowledge.

***

Footnotes
1. I cite passages in Rand’s novels by the part of the novel in which they occur and the chapter in that part. I do not cite page numbers because there are many editions, and each has different pagination from the others.
2. I write “Communist” with a capital “C” to indicate a member of a Marxist-Leninist Communist Party. Many people have championed a communist society (with a small “c”), beginning with the first two extant projections of an ideal society: Plato’s Republic and Aristophanes’ Ecclesiazusae, both from the 4th century BC.
3. Several of the heroes provide services while they are in Galt’s Gulch. But these jobs are merely stopgaps until they return to the world and use their talents again in their real work.

Bibliography
Blackman, Ann 1990: “Moscow’s Big Mak Attack.” Time (February 5).
Feshbach, Murray and Friendly, Alfred Jr. 1992: Ecocide in the USSR: Health and Nature under Siege. London: Aurum Press.
Goldman, Marshall 1991: What Went Wrong with Perestroika. New York: W.W. Norton & Company.
Rand, Ayn 1963: For the New Intellectual. New York: Signet.
Rand, Ayn 1964: The Virtue of Selfishness. New York: Signet.
Rand, Ayn 1967: Capitalism: The Unknown Ideal. New York: Signet.
Rand, Ayn 1975: The Romantic Manifesto, revised edition. New York: Signet.
Shmelev, Nikolai and Popov, Vladimir 1989: The Turning Point: Revitalizing the Soviet Economy, translated by Michele A. Berdy. New York: Doubleday.


Editor's Note: This article is part of a much longer monograph with the same title. It can be obtained from the author at stevenfarron@gmail.com.



Share This


Populist Fizzle

 | 

The Obama campaign and the DNC appear increasingly desperate in their attempts to find some attack on Romney that resonates with the American people. They’re desperate, of course, because the economy continues to drift in the doldrums, and the election looms.

The latest is a populist ploy. Key Democratic politicians started attacking Romney for having invested in foreign companies and having assets in Swiss and other offshore accounts. This was immediately trumpeted by the mainstream media. How dare Romney invest abroad! He’s the pioneer of offshoring!

Now, it is by no means illegal — yet — to put some of your portfolio into foreign assets, and it is in all the “Investing 101” books that you ought to do so. You need to diversify your assets to minimize risks, and this may include diversifying outside your home country. Putting money in a Swiss account, for example, is a good hedge against inflation, given the historic stability of the Swiss monetary system. But the Dems are banking on the fact that the average person doesn’t understand all this — and that is a very good bet.

Alas, however, the attack fizzled when it was discovered that Rep. Debbie Wasserman Schultz (D-FL), chair of the DNC, had herself invested abroad, repeatedly. She invested in the Davis Financial Fund, with holdings on the State Bank of India, as well as a Swiss private banking group. She also invested in the Fidelity Advisor Overseas Fund, which has holdings in HSBC (a British bank), Novo Nordisk (a Danish drug company),VW, Rakuten (a Japanese shipping firm) and so on.

It also turns out that another person who has invested abroad is the ever-offensive Rep. Nancy Pelosi (D-Venus), “head” (though not the brains) of the House Democrats. She earned millions from her investment in Matthews International Capital Management, which focuses primarily on Asian equities.

Obama, like his spiritual mentor Nixon, is much given to what psychologists call “projection” — calling others what you yourself are. Obama once accused McCain’s campaign of “throwing stuff up against the refrigerator to see what sticks.” Yes, President Obama, and you don't have an infamous "enemies list."

But it looks like this little piece of magnetized crap isn’t sticking. Try again, guys.




Share This


The Paradoxical Comfort of Bureaucracy

 | 

Back in the days when your grandfather was still looking at your grandmother with inquisitive lust, I spent about 18 months on an aircraft carrier. I was a draftee in the French Navy, untrained for anything and possibly the lowest man on the totem-pole. I was 21 when I got out. In good time, I attended the university and graduate school in the US and I became a scholar in organizational theory (a pretty good one if I say so myself).

But my brief military experience remains vivid in my memory. In part, that's because everything you do at 20 tends to live in the brain in Technicolor and in Panavision. In part it's alive in my mind because interesting things happened there. When I write now about my naval period, I feel almost forced to apply a bit of organizational analysis to my memories. It's a slightly disturbing experience because being a small cog in a bureaucratic organization, a state organization at that, unexpectedly fails to evoke bad feelings.

It's disturbing because life and work within a bureaucracy is at the antipodes of libertarian utopian imagery. It's disturbing, additionally, because government routinely acts as the principal agent of routine state oppression in societies with a constitutional government such as the US. This malaise is also an opportunity. I believe that people who think of themselves as libertarians, even those with a mere libertarian bent, don't spend enough time thinking about disconfirming evidence, about experiences that run counter to their main existential choices. Here is a brief analysis, one that may speak a little to the issue of why some people are attached to bureaucracies in spite of their libertarian leanings.

In the navy, for days and weeks on end, I lived in an environment made entirely of steel except for the small patch of linoleum I cleaned every morning and the occasional spare piece of rubber connection. To be completely accurate, I have to specify that there were also plastic curtains around the bunks and part-cotton sheets inside. And the metal surroundings were all not especially unpleasant. Perhaps, if you are going to venture on the treacherous ocean, it's good to do it in a vessel made of thick sheets of steel joined together by large and visible steel nuts and bolts.

I felt the same about the organizational environment as I did about the physical environment of the ship. In general, I felt safe on the aircraft carrier. There were several reasons, some of which it costs me to remember because doing so constitutes a confession of sorts.

First, there were well-thought-out and well-rehearsed routines for everything, at least for everything that I knew then and, to a large extent, even for what I now know. (I never experienced naval combat, but I think the same principle prevailed there.) You could believe that whatever happened, the people doing something about the whatever would not be improvising a response. You could also be confident that their response would be familiar — familiar to them, that is, however alien it seemed to you.

Perhaps, if you are going to venture on the treacherous ocean, it's good to do it in a vessel made of thick sheets of steel.

Even my living-quarters close neighbors, the bosun's mates who were operating under the influence of alcohol most of the time, projected an air of competence. Bringing two small boats smoothly side by side in a choppy sea did not seem to tax the young guys who I would have bet could probably not negotiate the gangway to get themselves ashore for a fresh drink.

The second behavioral factor contributing to this feeling of safety was chronic overstaffing. I think that personnel redundancy is a general organizational principle in navies, military organizations, as opposed to merchant fleets, for example. The aircraft carrier is a special case because of its multiple functions. So I will focus on the case of a small destroyer that is similar in size to many cargo-ships of the pre-container period. My considered, serious guess is that the crew of a destroyer was at least three times larger than the crew of a freighter of similar tonnage. Or, to put it another way, the captain of a small freighter of the day could easily have boasted: “I can run this destroyer with my eighteen men. Just put ashore its current excessive crew of sixty. We will do the job, no problem. Perhaps, leave one gunner behind; no big deal.”

Overstaffing is a luxury that ensures that few if any organizational members will be stressed by overwork, except perhaps at the very top. There were telling details supporting this perspective, details that would have bespoken laziness in any framework other than a military one. Thus, when the officer on watch on the bridge made an announcement over the ship's public address system, he did not conclude his address with a greeting or introduce himself or give a summary, nor did he hang the mike himself. He had an enlisted gopher standing by to make these small gestures for him.

Another way to speak of overstaffing is to refer to underwork. My boss was the Chief of Operations, the third ranker on board. He had one full yeoman, a guy who had signed up voluntarily and who had been more or less trained by the navy. I, a draftee, had received no training beyond boot camp. My boss agreed early in our acquaintance that his assistant-yeoman, myself, was to deliver each day a given, limited amount of work. The amount was one single typed stencil. That would have been the amount of typing a careful, well-trained professional typist (working on terra firma) could easily have supplied in one hour. The key to understanding the apparent waste is this: At any one time, my boss the Operations Chief knew that he could put seaman Delacroix to work to do the urgent or the unexpected — hand-carry a message, sharpen his pencils, or pick up his laundry in a raging storm — without sacrificing any other aspect of his, the Chief's, responsibilities. So the abundance of underutilized work capacity was a source of comfort for all aboard ship; it implied that those with serious responsibilities were unlikely to be overwhelmed by them.

The principle of overstaffing, or of an underutilized work force, ran throughout and up and down the complex organizational chart of the aircraft carrier. There were three apparent exceptions. First, some menial functions might be understaffed for a short time. Second, one crucial but rarely performed task apparently failed to command sufficient personnel. Third, the most industry-like subpart of the ship's organization seemed to be perennially short of qualified bodies.

First, the menials. It might happen occasionally and for a brief period that some small functional department was short one man. That would always be in areas of activity where overworking the remaining men, by giving each the equivalent of half a civilian work load, for example, would not seriously endanger other operations. I am literally referring to peeling potatoes and to cutting hair while at sea. It was common practice among petty-officers to bribe the crewmen thus rudely put upon, with a couple of bottles of beer. (Yes, there was and there is alcohol on French naval ships. Their crews may not shoot straight but they are not stressed!)

A second exception to the rule of underutilization of personnel still puzzles me a little. There was only one old senior petty-officer on board who was able to steer the huge ship through certain narrow harbor entrances in very stormy seas. This scarcity perplexes me because the task was in no way comparable in its importance to peeling potatoes, for instance. The preservation of extremely expensive matériel and possibly the safeguarding of many lives demanded that this skill be available.

Yes, there was and there is alcohol on French naval ships. Their crews may not shoot straight but they are not stressed!

I have no solid explanation for this queer penury. Here is my best guess though: most of the functions to be performed on the ship could be reduced to small gestures that could in turn be described concretely and thereby routinized. Most of those functions could be reduced to routines that were easy to learn even for the moderately gifted. Producing in advance of need a ready supply of people to perform those functions was not a big deal. Those common functions demanded only carefulness for successful performance. By contrast, the ability to drive a gigantic floating object battered by winds and contradictory wave conditions through a narrow passage depended on tacit knowledge.

Tacit knowledge is knowledge that is difficult to transfer deliberately. It's what can be learned but cannot be taught, or only taught to a limited extent. Tacit knowledge is found also in art, in dress-designing, in bread-baking and of, course, in the brewing of beer. I mean with respect to the latter that it's easy to brew beer and fiendishly difficult to brew good beer. Because much of tacit knowledge cannot be taught, precisely, it may often be in short supply. Alternatively, it may occur naturally more commonly than is objectively necessary (as with artists, for example). Such oversupply does not receive much notice, naturally. Only shortages are noticeable.

The third exception to the principle of overstaffing keeps sticking in my mind because it does not make obvious sense in spite of my best efforts.The flight deck crewmen often complained of overwork. Their jobs were both essential (obviously, we were on an aircraft carrier) and as minutely divided and routinized as anything, anywhere on earth. So, if the principle of overstaffing did not apply to them, it was not because their work relied on tacit knowledge that was hard to find. Neither were they expendable like the potato jockeys I evoked earlier. I just don't know for sure why they said they were overworked. This want of an explanation mars my nice analysis, but I must almost leave it at that. I say “almost,” because I sometimes had the thought that being overworked — or proclaiming oneself overworked — was cool for flight deck personnel but not for other crewmen.

They, the flight deck crewmen, had to work day in and day out with pilots whose own exalted status was likely to create different emotions around them. Come to think of it, I had an intuition about that cultural proximity factor right then. I spent much time observing landing and takeoff maneuvers on the flight deck from a safe spot. And I was well aware of aviation crewmen’s complaints about overwork. Nevertheless, their complaints never troubled my own sense of comfort, although my tiny office, with me inside, bent over my typewriter, could have easily been wiped out by a single misdirected landing.

I hope the reader understands that the few preceding paragraphs constitute a kind of regrettable but real declaration of faith in well-designed bureaucracy. Of course no one asked that particular bureaucracy to be efficient. It was expected only to be effective, to get the job done, almost irrespective of cost.


Editor's Note: This essay is adapted from Delacroix's as-yet-unpublished memoir, “I Used to Be French: An Immature Autobiography.”



Share This


Negative Externalities

 | 




Share This


The New Shape of Immigration

 | 

There has been a veritable blizzard of major news stories lately. Between the continuing crisis of the European Union, the spate of major rulings from the Supreme Court, and the continuing presidential election campaign, we’re all a bit overwhelmed.

But a recent report from the Pew Research Center bears immigration news worth noting and commenting upon.

The report, aptly called “The Rise of Asian Americans,” is a hefty tome indeed, at 215 pages chock full of data. It reveals that for the first time in history, the plurality of all new American immigrants now hails from Asia — primarily China (23.2% of all Asian Americans), India (18.4%), Japan (7.5%), Korea (9.9%), the Philippines (19.7%), and Vietnam (10.0%).

As recently as 2007, the plurality of immigrants was Hispanic, primarily from Mexico. That year, 540,000 immigrants were Hispanic, compared to 390,000 Asians. But in 2010, Asians were 36% of new immigrants, while Hispanics dropped to 31%.

This culminates the decade-long, precipitous slide in Hispanic immigration, which was at 1.2 million in 2000, fell to about half that in 2002, went up to about 800,000 in 2005, and has dropped steadily since, to less than 400,000 in 2010.

By contrast, the number of Asian Americans quadrupled between 1980 and 2010, and now stands at 18.2 million, counting native- and foreign-born, adults and children. (The Pew Center’s count is slightly higher than the Census Bureau’s, with the difference being that Pew counts people with only one Asian parent as Asian. That is nearly 6% of the population, quite a rise from the 1% it was back in 1965. (By comparison, non-Hispanic whites are 63.3%, Hispanics are 16.7% and blacks 12.3%). The report projects that by mid-century, the number of Asian Americans will hit 41 million.

Of course, this is just a projection by the Pew Center, which is certainly reputable, but obviously fallible. Still, these figures are suggestive.

The reasons for this shift are varied. There are relevant demographic shifts abroad, such as the drop in the birth rate in Mexico, which as recently as the 1960s was one of the highest on the planet, with the average woman having nearly seven children — higher even than Indian and Chinese women — but now is roughly the same as the US rate (a little over two children per average woman).

But the report mentions what is clearly the major factor: our nation’s continuing shift from a manufacturing to an epistemic or knowledge-based economy. Blue-collar jobs, especially the low-skilled ones, simply have been increasingly less in demand over the past quarter-century. And a prolonged recession and slow recovery such as the one we are enduring only increases the gap in employment levels between blue- and white-collar workers.

So the disappearance of a lot of blue-collar jobs, especially in construction, has meant that more opportunities have opened for Asian immigrants, who tend to have higher educational attainment than recent Hispanic immigrants.

Add to this another factor: we have tightened the southern border, which means that Asians, who tend to get more student and high-tech (H1-B) work visas, are now in a better position to come here.

A major factor in their success is the fact that Asian Americans have a lower rate of single-parent households than does the population as a whole (20% versus 37%). They are more likely to be married than is average for Americans (59% versus 51%), and have fewer births to single mothers (16% versus 41%).

However, of paramount importance is the level of higher education. Nearly half (49%) of all Asian American workers have a bachelor’s degree, which is more than half again as many as the average — 28% — for all American workers. For non-Hispanic whites, it is 31%, for blacks 18%, and for Hispanics 13%.

Asian students — both American-born and foreign — tend disproportionately to choose more technical college majors, which is no doubt another factor in their success. In 2010, they received 45% of all engineering doctorates awarded at American universities, 38% of all computer and math doctorates, 33% of all physical sciences doctorates, 25% of all life sciences doctorates, and 19% of all social science doctorates.

Since Asians are culturally very inclined to pursue higher education, and since the US has an extensive but still relatively inexpensive source of higher education, and again since our economy is increasingly knowledge-based, it is no surprise that as a group Asian-Americans are moving sharply upward economically.

That rise has been as dramatic as it has been rapid. Asian Americans now have the highest median household income of any broad American ethnic group — European Americans included. Asian-American households average $66,000 a year, nearly a third higher than the median of all American households (which is $49,800). Whites average $54,000, Hispanics $40,000, and blacks $33,300.

Among Asian Americans, median annual family income varies. Indians average $88,000, Filipinos $75,000, Japanese $65,390, Chinese $65,050, Vietnamese $53,400, and Koreans $50,000. But all this is quite remarkable, considering that according to Pew’s figures, nearly three-fourths (74%) of Asian American adults were born abroad.




Share This


The Student Loan Bubble

 | 

The left-leaning web site ProPublica specializes in long-form journalism — labor-intensive, 3,000-plus-word articles dedicated to serious treatments of big subjects. Think of the long pieces that appeared in The New Yorker during the 1970s and early 1980s and you get the idea. While I find ProPublica’s reflexive and unexamined bias in favor of statist schemes irritating, I do read its articles. They are usually earnest and sometimes worthy efforts.

Lately, a ProPublica article about a semiliterate gardener’s struggles to manage his dead son’s unpaid college loans got some traction in the mainstream media. (While I don’t understand ProPublica’s business model completely, it seems to involve licensing its long stories to other news organizations.)

This gardener’s woes fit neatly into the mainstream media’s narrative that student loans are an evil, evil thing about which Good King Barack needs to do something. And, by “do something,” moronic opinion-shapers mean without saying: subsidize borrowers’ bad choices with capital redistributed from taxpayers.

This proposition is wrong on many levels. It also reflects faulty assumptions and bits of specious logic that are worth some examination — because they explain many of the problems that plague America today.

First, a quick review of ProPublica’s telling of the gardener’s tale.

Francisco Reynoso lives in Palmdale, California — a dusty far suburb, north of Los Angeles. He doesn’t speak much English (though he is a naturalized citizen) and earns about $20,000 a year from his labors. While the story doesn’t offer many details about Reynoso’s work, in southern California “gardener” is often a euphemistic way to describe a causal day laborer — the kind of guys you see milling around Home Depots and such outlets, looking for work.

On this meager income, Reynoso supports his wife and daughter. He used to support a son, too. But, in a tragic turn, that son — Freddy — died in a one-car accident in September 2008.

Freddy had recently graduated from Berklee College of Music, a school in Boston that combines elements of a conservatory with the rigors of a traditional four-year college.

It was a bit strange that a gardener’s son had matriculated to a place like Berklee. It’s no community college . . . or even a state university. Rather, its reputation has long been as a pricey second-tier Julliard. The school’s comprehensive fee is nearly $50,000 each academic year.

A lazy person might describe Freddy’s enrollment at Berklee as a version of “the American Dream.” The son of a laborer enters a world traditionally reserved for the elite, etc. But it sounds like Freddy never really entered that world. In 2005, after he’d been admitted to Berklee, the young man needed to borrow significantly to enroll. Reynoso cosigned on a series of student loans that allowed Freddy to attend. By 2008, when Freddy was finished at Berklee, he moved back to Palmdale and was driving into Los Angeles most days. Trying to find work. According to his family, Freddy was driving back from the city on the night that he ran off the highway, rolled the car, and died.

As a father, perhaps Reynoso should have told Freddy that borrowing hundreds of thousands of dollars to get a degree in music was a bad financial decision.

The principal amount of the money Freddy and his father had borrowed was nearly $170,000. With interest and fees added, the amount they’d have to repay would be closer to $300,000. The lenders didn’t mind much that Reynoso didn’t have the means to repay those amounts because, as we’ll see in more detail later, various government subsidies that support the student-loan market make rigorous underwriting unnecessary.

So, lenders lend. But why do borrowers borrow? Why did a gardener making little more than minimum wage agree to guarantee so much in college loans? His answer: “As a father, you’ll do anything for your child.”

It may not seem sporting to criticize a simple man’s devotion to his son . . . but what if that devotion is ignorant and misguided? According to a survey of music industry salaries produced by Berklee itself (and based — tellingly — in the “Parent Questions” section of its web site), most of the jobs its graduates pursue offer starting pay of less than $25,000 a year. That’s not enough income to support the debt service on nearly $200,000 in student loans.

As a father, perhaps Reynoso should have told Freddy that borrowing hundreds of thousands of dollars to get a degree in music was a bad financial decision. Some people are poor because they make bad financial choices. An unintended consequence of government programs that give material support to such poor people is that they’re free to make more bad choices. In the hands of Francisco Reynoso, Freddy’s government-subsidized student loans were a loaded gun . . . or a hangman’s rope.

A few months after Freddy’s fatal accident, collectors started calling Reynoso to demand payment on the student loans for which he’d cosigned.

The loans that allowed Freddy to attend Berklee fell into several categories — as they do for most borrowing students. There were some direct government loans, which carry the lowest interest rates and most favorable terms for the borrower. In most situations, they don’t require parents to cosign. But there are limits to the amounts available on these favorable terms; in most cases, a student can only get a few thousand dollars each academic year in this “cheap” money.

After that, a borrowing student needs to go to so-called “private” lenders. These are banks and specialized finance companies that offer loans with higher interest rates and less-favorable terms for borrowers. But the “private” loans are still subsidized heavily by the government and share unique traits with the direct government loans — most importantly, the loans cannot be discharged in bankruptcy.

(A personal aside: When my oldest child was getting ready to leave for college, we reviewed her finances and found we were a little short on the cash she would need for her comprehensive fee. She shook off the shortfall as no big deal; the college was happy to help her apply for student loans. I advised her only to borrow as much as was available in direct government loans and to avoid the higher-interest private loans at all costs. She rightly noted this advice was ironic, coming from someone who advocates against such government programs; but she heeded the irony and will graduate next year with a nominal amount of relatively cheap debt to repay.)

This is the major reason why the “private” student-loan lenders don’t bother with rigorous underwriting. Since the loans can’t be discharged in bankruptcy, the lenders or their agents can hound borrowers and cosigners for repayment endlessly.

In Freddy’s case, he borrowed about $8,000 in private money from Bank of America and about $160,000 from a company called Education Finance Partners. Neither lender kept the loans for long; as is typical in the market, the “loan originators” sold Freddy’s paper to other firms that focus on servicing debt or bundling it with other student loans and “securitizing” those bundles.

According to ProPublica, Bank of America sold the loan it made to Freddy to a student-loan financing specialist called First Marblehead Corp.; Education Finance Partners, which has since declared bankruptcy, sold the loans it made to Freddy to a unit of the Swiss banking giant UBS.

The loans purchased by UBS may have been sold, in turn, to the Swiss National Bank (analogous to the U.S. Federal Reserve) when the National Bank made a Fed-style bailout of UBS in 2009. Details are sketchy because of Swiss privacy laws.

So, if the ownership of the debt was unclear, who were the collectors calling Reynoso for repayment? A separate company, called ACS Education Services, which owns some student debt and contracts with other lenders to manage and collect on their loans for a fee. ACS is a unit of Xerox Corp. and one of the bigger players in the student-loan servicing market.

But Freddy was dead — and one might think that that fact would have an effect on the lenders’ collection efforts. Some student loan companies have a policy of canceling loan balances when a borrower dies. (Direct student loans from the government are generally cancelled if the borrower dies.) But, since Reynoso had cosigned for his son’s “private” loans, the lenders have the legal right to pursue payment from him.

A fundamental fraud lies beneath all this do-gooder claptrap. And that fraud may eventually destroy the foundations of many schools.

It’s easy — and emotionally satisfying, perhaps — to focus outrage at lenders like Bank of America and Education Finance Partners, or behind-the-scenes operators like First Marblehead or ACS Education Services. The establishment Left and media outlets like ProPublica certainly focus on them.

But these lenders and finance outfits are really just service providers, working the levers of government to find ways to make a few points here or there while helping to facilitate state-sponsored transactions.

The core transaction in the ProPublica story was between Freddy Reynoso and the Berklee College of Music. Freddy was pursuing a dream of being a professional musician and Berklee was selling an expensive credential that might help in that pursuit.

Freddy died. But Berklee is doing well. It has an endowment of nearly $200 million and is in the midst of an ambitious expansion of its campus — which at present comprises of some 21 buildings in the Back Bay area of Boston. The College’s website described the opening of one new building in this way:

Adorned with bright colors, the unique and hip space has an industrial feel, in step with Berklee’s cutting-edge sensibility. The building also houses the Berklee Writing Center, Berklee’s English as a Second Language Program, an Africana Studies Room, conference and seminar rooms, and a café.

More hip space in the Back Bay is in development. And Berklee has recently opened a satellite campus in Valencia, Spain.

According to a September 2011 report from the Center for Social Philanthropy and the Tellus Institute, Berklee President Roger H. Brown makes more than $550,000 a year. And five other senior administrators make more than $300,000 a year. It’s good money — although, by elite college standards, it’s not that much.

President Brown’s official biography recounts sanctimoniously the work that he’s done in places like Thailand and the Sudan for various humanitarian outfits (some connected with United Nations). It boasts about the big child-daycare company he started with his wife, but it doesn’t mention the years he spent working for Bain & Co.

I’m sure Mitt Romney will understand.

Of course, the bio focuses on the efforts Brown has made to move Berklee closer to the first-tier of private colleges:

In 2007, Brown launched the college’s first capital campaign with a goal of raising $50 million. He has initiated Berklee’s Presidential Scholars and Africa Scholars programs that provide full-ride scholarships to give top musicians around the globe a Berklee education. He has overseen the expansion of the City Music Program beyond Boston in an effort to provide educational opportunities for talented but economically disadvantaged urban youth. . . . Brown worked with the city of Valencia, Spain, and the Generalitat Valenciana to create a Berklee campus in Valencia.

He’s the very model of a modern major-general. Working the levers of government in Spain to set up a ritzy international campus. Overseeing the expansion of programs to provide for the disadvantaged. Initiating programs to give scholarships to top musicians around the globe.

But a fundamental fraud lies beneath all this do-gooder claptrap. And that fraud may eventually destroy the foundations of schools like Berklee College of Music.

For decades, striving institutions of higher education have been working the levers of government — and, specifically, the student loan market — to redistribute capital from the lower and middle classes into their self-styled “elite” pockets. A regressive racket if ever there was one.

The pieces are all present in Freddy Reynoso’s story. Nearly $200,000 was taken from people who can’t afford it, facilitated by banks and the federal government, and transferred into the coffers of a music college already sitting on an endowment of several hundred million. If the sanctimonious Roger H. Brown really wanted to help disadvantaged youth, he should have given Freddy Reynoso a free ride. But why should he do that? Uncle Sam is willing to arrange for Berklee the pretense of high-minded altruism and the profit margins of a payday lender.

Roger H. Brown won’t stop this deal. So Uncle Sam needs to.




Share This


It’s a Gas

 | 

The massive growth in the production of natural gas, the result of using unconventional sources and methods (mainly the fracking of shale deposits) continues to demonstrate how free markets can transform the world, even in the face of statist oppression.

Two recent Wall Street Journal pieces illustrate this anew. The first reports that another industry is now converting its vehicles from diesel to natural gas — an industry you might not think of offhand. Ferryboat fleets, both here and in Canada, are making the switch because of the continuing (shale-)rock-bottom prices of natural gas.

From Staten Island to Washington State and British Columbia, ferry fleets are following the lead of Norway, which a decade ago started fueling ferries with liquefied natural gas (LNG).

One attraction of natural gas is, again, its pricing. Natural gas at the Henry Hub distribution center (a standard benchmark for natural gas pricing) hit a low of $1.95 per million BTUs this year, the lowest price in 13 years. This, while diesel skyrocketed by 140% from 2004 to 2011.

A second attraction is that, if spilled, LNG doesn’t form a toxic slick that requires costly cleanup, even as it should be so unfortunate as to kill off wildlife, or tourists, or both.

Third, LNG is actually less likely to be unfortunate, because it is less inflammable than diesel.

Of course, the switch will take time and upfront investment — as for instance, to build plants to chill and compress the gas, and new holding tanks for the ships. But the cost savings make the decision obvious, even if the timing isn’t.

The second WSJ piece is of more — shall I say — global importance. It reports that more and more US utility plants are switching from dirty coal to clean natural gas, not because of EPA coercion, but because of the coercion of free-market pricing.

Coal consumption by American power companies dropped by 18.8% in the fourth quarter of last year, compared to the previous quarter, and 9.4% compared to the fourth quarter of the year before. Again, the switch was driven by the drop in natural gas prices.

Peabody Energy, one of the biggest coal producers in the world, now estimates that American coal demand will drop by 10% this year, or 100 million tons.

The free market is helping to reduce air pollution. Obama, are you paying attention?




Share This


The Anthem Film Festival — A Report from the Scene

 | 

This month in Las Vegas, The Afghan Nightmare took the FreedomFest Grand Prize at the annual Anthem Libertarian Film Festival. The film is remarkable for its stunning cinematography, dramatic story arc, and powerful message. Director Klaus Erik Okstad spent four months embedded with the Norwegian army as they labored to prepare Afghan forces for NATO troop withdrawal in 2014. This intense, eye-opening documentary demonstrates the futility of modern "nation-building" warfare. We see how ill prepared the Afghans are to defend their own people after more than a decade of someone else’s doing it for them. In one telling example, the Afghan soldiers refuse to walk from the main headquarters to an outpost just one kilometer — barely more than half a mile! — away, and demand that the Norwegian soldiers build them a road and give them a Jeep. It's the welfare principle in practice, destroying courage, skill, and self-reliance.

Documentaries stood out at Anthem this year. Films took viewers around the world as they explored issues of freedom, choice, self-reliance, and accountability. In addition to "visiting" Afghanistan, attendees met seven unlikely Detroit entrepreneurs in Men at Work. Entered the fascinating world of business in Ayn Rand & The Prophecy of Atlas Shrugged. Visited four continents with best-selling author Dinesh D'Souza in his pursuit of Obama's past. Explored the facts surrounding global warming in An Inconsistent Truth. Debated the risks and rewards of vaccinations in The Greater Good. Learned more about states' rights and the constitution in Nullification: The Rightful Remedy. And visited a tiny village in Honduras where a disabled man has been building a helicopter for the past 50 years. In his shed.

Anthem is in its second year as part of FreedomFest, "the world's largest gathering of free minds," where over 2,000 attendees and 150 speakers gather each year to discuss politics and economics, science and healthy living, arts and history — and now, movies.

Anthem's goal is to give libertarian filmmakers a venue and a community. Janek Ambros came last year as an attendee and went home with the determination to make a film that would be accepted for screening at Anthem. This year he submitted his short narrative Closing Bell, which takes viewers inside the mind of a stockbroker in the final four minutes of trading as the market was collapsing in 2008. Closing Bell was not only accepted; it won the award for excellence in filmmaking in that category. Others attending Anthem and FreedomFest this year expressed a similar determination to make worthwhile films with self-reliant protagonists and libertarian values. They also networked with seasoned film makers and producers.

Husband and wife film makers Ted and Courtney Balaker each submitted films, albeit in noncompeting categories. Courtney's short narrative The Conversation, about a likable college couple discussing libertarian principles over coffee and tea, won the award for Best Libertarian Ideals. Not to be outdone, Ted won the same award for his short documentary Don't Mess with Firefly, about a professor at the University of Wisconsin who was forced to remove a poster of the cult classic TV show Firefly from his office door because it posed a threat of violence. Yes, the poster was considered armed and dangerous. FIRE (Foundation for Individual Rights in Education) stepped in to safeguard the professor's right to free speech, with a little Twitter help from the TV show's stars, Adam Baldwin and Nathan Fillion, and bestselling writer Neil Gaiman.

Harmon Kaslow and John Aglialoro, producers of the Atlas Shrugged movies, closed the festival with a preview of Part 2, which will open in theaters October 12 of this year. Part 2 has a new cast, new director, new scriptwriter, and even a modern setting, "the day after tomorrow," as Rand wrote in the book. They also updated the cast to include ethnic diversity that would be more reflective of a modern near future. How might Ayn Rand, who demanded (but was never granted) script approval in her lifetime, feel about this change in her characters? "Rand's all-Caucasian cast was realistic in the 1950s," Kaslow explained, "but it would not be realistic for the day after our tomorrow." Part 2 will be screened at Anthem next year.

The Anthem Film Festival was one of the most popular events at FreedomFest. Films were screened to SRO crowds who lined the walls and sat on the floor, even after additional seating was provided. It is providing a venue for libertarian filmmakers and film lovers alike. What will next year bring? We can't wait to see.




Share This

© Copyright 2013 Liberty Foundation. All rights reserved.



Opinions expressed in Liberty are those of the authors and not necessarily those of the Liberty Foundation.

All letters to the editor are assumed to be for publication unless otherwise indicated.