French Leadership

Since the French Constitutional Council ruled the Contrat de Premier Embauche (CPE) was constitutional, it's now time to see how much of a leader Chirac is. He's going to do a television address tonight to discuss the unrest and hopefully outline his reasons for signing the bill. Of course the Socialists and students aren't behind CPE.

"You can be both legally right and politically wrong," Jean-Christophe Cambadelis, a Socialist Party member of parliament, said on the French television network, LCI. The Socialists had appealed the law to the constitutional court.

"It is the responsibility of the head of state to hear the growing exasperation of the country," said Bruno Julliard, head of the national student union, which has been at the forefront of the protests. "The president has the opportunity to put an end to a very damaging crisis. If he enacts the law rapidly, it will both be a sign of disdain and an irresponsible attitude."

If Chirac signs the law, the labor unions will strike again next Tuesday. Chirac must balance the short-term harm of signing the law with the long-term benefit his country will receive. Hopefully it will be a first step for more free market reforms.

Update: Chirac is going to sign the contract but weaken it with future amendments.

Chirac said the amendments would shorten to one year the period in which youths could be fired and require employers to give a reason for dismissing them.

Hey France!

Hey France, they're looking at you.

Virginia Toll Roads

Count Governor Tim Kaine as one who is against leasing toll roads to private enterprises, like Macquarie Bank. A familiar refrain:

"We're cutting out the middleman," Reiley said, noting that companies would build a margin of profit into their operation of the toll road. "The millions they would be making will [now] be going directly for rail to Dulles."

I think it would be reasonable to expect the state to see more money from the lease of the road than through their operation of it.

The private-sector offers carried the promise of cash payments of several hundred million dollars, immediate fixes to the highway and, in at least one case, building high-occupancy toll, or HOT, lanes.

I really think Governor Tim Kaine is missing the boat on this deal.

I'm Horrified

I actually shuddered when I read this sentence:

"I would get cards back from him with just his signature - 'Randy,' " said Heather Renee Roszell, 16, who bears a striking resemblance to her "Big Unit" father.

It's bad enough that her father won't pony up the cash to support her and refuses to be a part of her life, but it's absolutely horrific that she has to go through life resembling the Unit. I hope that Willie McGee and Ron Karkovice don't have similar situations.

Kleenex Revolution

I am completely amazed at the situation in France. I was looking through the pictures from the WaPo, one of them of many protesters holding a sign that read "We will never surrender", and was shocked at the sheer numbers of people. The whole thing is funny on one level, but deeply disturbing on another. France has real fiscal problems that aren't going to be solved without some GDP growth, the 1.5% a year they currently put up isn't going to cut it. There aren't enough jobs for the young as evidenced by the unemployment rate for those under age 26 being above 20%. Unemployment simply cannot be that high. Guaranteeing job contracts for those under 26 is not going to create jobs.

I'd simply like to hear a coherent argument from the protesters about why they are entitled to a job guarantee. I'm not sure I have the capability to understand their concerns. I've worked for 15 years in at-will employment as have almost all Americans, we simply can't understand guaranteed employment. Have these young people not understood economic history, their economic beliefs have never worked. I just don't get it.

France is quickly becoming irrelevant. The fact that France is in the EU could be enough to cause the Euro to fail as well as the EU. France simply will not survive without free market reform. The more socialist and protectionist they become the quicker their demise will be. It's a shame to see, I can't believe it will happen that way. But millions of people on French streets burning cars leads me to believe they don't have the capacity to instill free market reforms.

I know I have readers in France, please comment on your feelings towards these protests and your reasons for opposing the CPE. I've read explanations in the mainstream media, but, I still don't understand how the CPE can draw so much ire that the French would burn cars. It makes no sense.

The French in Denial

Robert Samuelson hits on an interesting nugget in today's takedown of the French anti-work riots.

The dilemma of advanced democracies, including the United States, is that they've made more promises than they can keep. Their political commitments outstrip the economy's capacity to deliver. Sometimes the commitments were made dishonestly. Sometimes they were made sincerely based on foolish assumptions. Sometimes they've been overtaken by new circumstances. No matter. The dilemma is the same. To disavow past promises incites public furor; not to disavow them worsens the country's future problems.

Samuelson hits on the key to government programs; they never die. Government programs create constituencies of people reliant on them. After these programs have served their purpose, they're still around and no one steps up and says we don't need this program any more. The furor over that would be extreme. Worthless programs like public broadcasting, Bureau of Indian Affairs and Tennessee Valley Authority won't die even though they serve no purpose (or no purpose that the government should be obligated to pay for them). The path of least resistance for politicians is to introduce new programs that will never go away. Who's going to repeal the prescription drug benefit? Look what happened when Bush tried to change Social Security (whether he was right or wrong, the vitriol the political establishment threw up in resistance was impressive).

Speaking of obsolete, France is coming up on some difficult problems financing their welfare state.

In a recent study, the Organization for Economic Cooperation and Development (OECD) in Paris reported:

· From 1994 to 2003 unemployment among prime-age adults, from 25 to 54, averaged 9.9 percent; for those 15 to 25, the average was 24 percent.

· In 2003 French workers spent an average of 1,431 hours on the job, the third-lowest among 26 advanced countries. Italy (1,591 hours) was 11 percent higher; the United States (1,822 hours), 27 percent; and South Korea (2,390 hours, the highest), 67 percent.

· Among those 60 to 64, only about one in six have jobs. In the United States, the comparable figure is about one in two.

This cannot continue. In 2005 France's labor force was 2.7 times as large as its 65-and-over population; by 2020 it's projected to be only twice as large. A shrinking share of France's population -- already working short hours -- would pay an increasing share of the country's rising pension and health costs. In 2004 the average retirement age was 59. Average taxes are already about 50 percent of national income; effective marginal rates (the rates on additional income) can hit 60 percent. How much higher could these go without crushing work incentives? Sooner or later France will have to adopt policies that lower unemployment, lengthen work hours, raise retirement ages and cut promised benefits.

Remember these riots are about taking a guarantee from workers in their first 2 years of work. Think of the French young people as the Major League Baseball Players Association (MLBPA), because the MLBPA is the only organization in America that would strike because their contracts aren't guaranteed. Except they allow their employer several years to decide to extend a guaranteed contract. The MLBPA is the most restrictive labor union in America and they allow this sort of treatment for their workers. In short, France's work rules are more restrictive than Major League Baseball's. France Fever. Catch it!

Why U.S. Business Is Winning

Sebastian Mallaby hits one out of the park this morning. He actually wrote an article praising U.S. business and got it published in a newspaper. This is almost unprecedented.

Despite all the nostalgia for the era when GM dominated the world's car industry, the heyday of American business may actually be now.

The dawn of this heyday came in 1995. In the two preceding decades, the productivity of American workers had grown more slowly than that of Japanese and European competitors. But in the decade since 1995, U.S. labor productivity growth has outstripped foreign rivals'. Meanwhile U.S. firms' return on equity -- that is, the efficiency with which they manage the capital entrusted to them -- has pulled away from that of Japan, France and Germany, according to data provided by Standard & Poor's Compustat.

Other measures tell a similar story. Up until the 1990s, management books were crammed with Japanese buzzwords, and the early Clinton administration was in awe of Germany's apprenticeship system. But today the United States provides most of the business role models, from Starbucks to Procter & Gamble, from Apple to Cisco. The (British) Financial Times publishes an annual list of the world's most respected companies. In 2004 and again in 2005, no fewer than 12 of the top 15 slots were occupied by American firms.

Or consider the database on management quality constructed by Nick Bloom and John Van Reenen of Stanford University and the London School of Economics. This duo organized a survey of 732 medium-sized American and European companies and measured their management procedures against benchmarks of best practice. The result: American firms, including the subsidiaries of American firms in Europe, are simply better managed than European rivals. In fact, superior American management accounts for more than half of the productivity gap between American and European firms.

Now comes the tribute to free and open markets one rarely sees in the mainstream media.

Whence this American superiority? The first answer is that competition is fiercer. The United States has relatively few trade and regulatory barriers for firms to hide behind, so bad companies either shape up quickly or go bust. In retailing, for example, firms such as Wal-Mart and Target have been able to spread their super-efficient logistics systems all across the country -- at least until lately, when a perverse anti-Wal-Mart campaign has sprung up. In Europe and Japan, by contrast, a web of zoning laws entangles efficient retailers, sheltering unproductive companies that overcharge consumers.

The next explanation for American superiority is a healthy indifference to first sons. Bloom and Van Reenen report that the practice of handing a family firm down from father to oldest son is five times more common in France and Britain than in the United States. Not surprisingly, this anti-meritocratic practice does not always produce good managers. So even though the best European companies are managed roughly as well as the best American ones, there's a fat tail of second-rate firms in Europe that's absent in the United States.

Competition and meritocracy cannot explain all of America's superiority, however. The U.S. economy has always had these advantages but hasn't always trounced overseas rivals. Nor is it enough to say that Americans work harder than Europeans, since the productivity numbers show that Americans are boosting what they achieve per hour. And anyone who explains America's superiority by saying that the country is more "dynamic" or "creative" is merely relabeling the mystery we're trying to solve.

The best guess about the "X factor" is that America's business culture is peculiarly well-suited to contemporary challenges. American business is not especially good at coaxing productivity out of factory workers: The era when this was all-important was the heyday of Germany and Japan. But American business excels at managing service workers and knowledge workers: at equipping these people with technology, empowering them with the right level of independence and paying for performance. So the era of decentralized "network" businesses is the American era.

Whence this American superiority? The first answer is that competition is fiercer. The United States has relatively few trade and regulatory barriers for firms to hide behind, so bad companies either shape up quickly or go bust. In retailing, for example, firms such as Wal-Mart and Target have been able to spread their super-efficient logistics systems all across the country -- at least until lately, when a perverse anti-Wal-Mart campaign has sprung up. In Europe and Japan, by contrast, a web of zoning laws entangles efficient retailers, sheltering unproductive companies that overcharge consumers.

The next explanation for American superiority is a healthy indifference to first sons. Bloom and Van Reenen report that the practice of handing a family firm down from father to oldest son is five times more common in France and Britain than in the United States. Not surprisingly, this anti-meritocratic practice does not always produce good managers. So even though the best European companies are managed roughly as well as the best American ones, there's a fat tail of second-rate firms in Europe that's absent in the United States.

Competition and meritocracy cannot explain all of America's superiority, however. The U.S. economy has always had these advantages but hasn't always trounced overseas rivals. Nor is it enough to say that Americans work harder than Europeans, since the productivity numbers show that Americans are boosting what they achieve per hour. And anyone who explains America's superiority by saying that the country is more "dynamic" or "creative" is merely relabeling the mystery we're trying to solve.

The best guess about the "X factor" is that America's business culture is peculiarly well-suited to contemporary challenges. American business is not especially good at coaxing productivity out of factory workers: The era when this was all-important was the heyday of Germany and Japan. But American business excels at managing service workers and knowledge workers: at equipping these people with technology, empowering them with the right level of independence and paying for performance. So the era of decentralized "network" businesses is the American era.

This column is so good I can forgive the one bad thought included:

And in the midst of American prosperity, rising inequality has prevented American workers from sharing in the success of American firms.

The American worker shares in the success of American firms, of course. I think the editors may have slipped that one in. Also, isn't this plagiarism? I've read this in every article about the economy since Bush took over.

Competition, meritocracy and specialization have made the U.S. the strongest business economy in the world (dare I say it, the history of the world). It's about time someone recognizes that fact.

Macquarie Bank

I'm a bit of a fan of Macquarie Bank based in Australia. Bloomberg has a nice story about how Macquarie's success has spawned some competition.

``The Skyway deal has helped focus attention on the opportunities for municipalities to realize underperforming assets,'' Moss says.

Moore, 47, says competition from Wall Street firms may even help his 500-strong public works team. ``When Goldman and the other major players now go out to sell an infrastructure fund, it validates our story,'' he says. ``It makes it a lot more credible from the point of view of investors.''

Macquarie is an unusual amalgam. While it contains elements of a conventional investment bank, it also acts like a private equity operator, venture capitalist, hedge fund, mutual fund and exchange-traded fund.

``They are like an incubator; their wheelers and dealers go look for projects, then they take them on the balance sheet,'' says Jason Teh, 32, who helps manages A$5.5 billion in Australian stocks at Sydney-based Investors Mutual Ltd. ``They then consolidate all those assets and try to lift them off into a vehicle in the market.'' Investors Mutual owns no Macquarie shares.

French Road Deal

One secret of Macquarie's success was Moss's idea that he could take public works and make them profitable private companies. Macquarie's first such venture came in 1996, when the New South Wales state government called for bids to operate a new toll road.

Moss, who had been named Macquarie CEO three years earlier, and his team came up with the idea of financing the road through an initial public offering on the Australian Stock Exchange. Later that year, Macquarie set up what's now known as Macquarie Infrastructure Group, the bank's largest listed fund, with a market value of A$8.7 billion.

Macquarie has made one acquisition after another since then. The biggest: the 7.1 billion-euro ($8.4 billion) purchase of Europe's third-biggest toll road operator, Societe des Autoroutes Paris-Rhin-Rhone SA, in partnership with French construction company Eiffage SA, a deal that was cleared by the European Commission on Feb 16.

I think these deals are win-win situations. Municipalities win because they make money selling items off their balance sheet and Macquarie wins by being able to turn a profit on those assets. Clearing the balance sheet is a great unexplored, for the most part, opportunity for governments to generate revenue. Generating revenue by selling things means the government doesn't have to raise taxes. Unfortunately, governments typically increase their balance sheet assets with revenue and are not able to operate them at a profit (profit = bad , in government speak). But the absence of that profit means the investment in the asset is basically worthless.

Unfortunately also, with the new economic patriotism (see the Dubai Ports World controversy), it may be harder for Macquarie to buy U.S. assets. There was some controversy on the Indiana toll road, but in the light of the Ports deal, that controversy in the future will be about foreign ownership of infrastructure.

Immigration and Citizenship

Wow, a lot of media bandwidth this week has been focusing on immigration, illegal and otherwise. Tamar Jacoby writes in today's WaPo what's needed is a path to citizenship for immigrants.

The conventional wisdom is all but unanimous, so much so that even those who hold the opposing view pay homage to it. Sure, some people dispute even the notion that we need foreign workers to keep the U.S. economy growing. But among those who recognize the necessity of a continued flow of immigrants to do dirty, unskilled jobs that educated Americans increasingly no longer want to do, the mantra goes unquestioned: What's needed is a guest worker program to deliver this labor in a timely, efficient way.

But the conventional wisdom is wrong, and as the Senate debates immigration in the weeks to come, members would do well to reexamine the assumption. The last thing the United States needs is an inflexible guest worker plan.

Count me as one who believes that a guest worker program perpetuates the problems we have with illegal immigrants; undergound economies.

The problem with the guest worker idea starts with practicality: Appealing as it sounds to some, a time-limited program will not work. The adage is true: There is nothing more permanent than a temporary worker. Many of those who come to the United States for short stints will want to stay on when their visas expire, perpetuating the underground economy that the program is supposed to eliminate.

This isn't just speculation -- look at the reality today. True enough, many young foreign workers initially come to the United States for what they think will be a short visit, and many do go home after a few years. But unlike past such workers, an increasing number are now staying on. This is partly a result of U.S. policy: Our efforts to fortify the border have made it harder for people to travel back and forth. But other, deeper forces are at work. The traditional flow of migrant farmworkers -- truly seasonal laborers, usually single men -- is giving way to a more diverse stream: both men and women, often with families, less rooted at home and more open to the lure of life in America.

Meanwhile, growing immigrant communities have made settling here a more attractive choice. Of some 11 million illegal immigrants in the United States, only 2.4 million are single men, while nearly half are couples and many have children. Legal migrants are even more rooted.

The bottom line: It won't help to bring our quotas more into line with the size of the immigrant flow if we don't also craft a policy in keeping with the way these workers behave -- and today that means accepting the reality that many will want to settle permanently in the United States.

What we want instead is immigrants who want to assimilate into U.S. society and stay in the U.S. to work. Our greatest resource is the people in this country. To boot, a diverse workforce allows us to capitalize on many opportunities because of the meshing of cultures. The melting pot aspect of America is something not found in too many countries. The melting pot comes about because of open citizenship.

But that's not all. Admitting foreign workers on a strictly temporary basis would also violate American traditions -- our democratic values and our history as a nation of immigrants -- and it would be deeply unpopular with the voting public.

The Manhattan Institute and the National Immigration Forum recently conducted a series of focus groups testing two contrasting options: a guest worker program or a more traditional immigration plan based on the idea of citizenship. The results ran sharply counter to the expectations of policymakers in Washington. Democrats and Republicans alike overwhelmingly preferred the citizenship model for reasons of both principle and practicality. It might make sense initially, these voters said, to admit workers on a provisional basis. It might also make sense to create incentives for the more transient to go home at the end of their work stints. But if they worked hard, put down roots and invested in their communities, wouldn't we want to encourage them to stay? Don't we want immigrants to assimilate? Don't we want to attract the kind of hard-working, committed folks who plan for the future and invest?

The answer is, of course, that we do. This isn't just the American way, it's also the antidote to many of our worst fears about immigration: Sojourners with no stake in the future are going to be much less likely to learn English or buy their own homes or make an effort to move up on the job.

Sure, a citizenship plan looks like a bigger gamble; like the workers, the changes that come with it will be permanent. But surely it would be better to face up to that change and shape it in a way consistent with our values. Rather than a one-size-fits-all guest worker program, we need a system that leaves room for workers to choose, welcoming those who feel they belong and who work their way up and make our country stronger as they do.

The competitive advantage of America is our ability to accept those of a different race, culture and religion. Sure we have some problems along the way, but we have mastered the melting pot better than any other country in the history of the world. Closing our borders and closing citizenship opportunities only will harm us.

Immigration and Wages

Emily Messner takes up the issue of illegal immigrants depressing wages. She points to an Op-ed from last year by Sebastian Mallaby taking up the issue.

Start by knocking down the dumb arguments on both sides. It's implausible to claim that poor immigrants generally do jobs that Americans won't do. Mexicans mow all the lawns in Southern California, but it doesn't follow that largely immigrant-free suburbs in Pennsylvania are choked with waist-high grass. According to the 2000 Census, 82 percent of New York taxi drivers are foreign-born. But there are still cabs to be hailed in Detroit and Cincinnati, where more than 90 percent of taxi drivers are U.S.-born.


Then there's the opposite dumb argument: that immigrants push unemployment up. Setting aside swings in the business cycle, the level of unemployment in an economy is determined by the flexibility of the labor force, not by how many people are in it and certainly not by what passports they hold. Every economy has something called the NAIRU -- the non-accelerating-inflation rate of unemployment -- and the central bank's job is to keep the monetary taps open until the jobless rate falls to that level. If the rate falls below the NAIRU, the shortage of workers will push wages up faster than output. The resulting inflation will force the central bank to jack up interest rates, slowing the economy and halting job growth.

So if you're worried about unemployment, you have to worry about the NAIRU -- about how you create a workforce that's flexible and motivated, so companies can find people to hire at sustainable wages even when unemployment is quite low. A willingness to relocate, retrain and reinvent oneself makes for a lower NAIRU; the growth of temp agencies, which give firms an efficient way of finding workers, has reduced the NAIRU, too. Immigrants, who tend to be extremely motivated, probably drive down the overall sustainable unemployment rate. In theory, if their presence somehow renders native-born workers less motivated, immigrants could simultaneously increase unemployment in the native-born section of the workforce. But attempts to measure this demoralization suggest that it is minimal.

The serious economic question is not what immigration does to unemployment but what it does to wages, particularly for poor workers. According to the census of 1970, 63 percent of immigrants in the United States had been born in Europe or Canada and were generally well educated. By 2000, however, 48 percent had been born in Mexico, Central America or the Caribbean, and more than one-third of all immigrants had less than a high school education. While immigrants counted for only 13 percent of the working-age population in 2000, they made up over half of those with less than eight years of schooling.

Logic suggests that if you increase the supply of certain workers, their wages will go down. Harvard's George Borjas, one of the nation's top immigration economists, has found that this logic holds in practice. By grouping workers according to education and experience and measuring rates of immigration and wage trends in each category, he concludes that between 1980 and 2000 immigration reduced the average annual earnings of U.S.-born college graduates by 3.6 percent and high school graduates by 2 percent. But natives without high school education were hit harder: Their wages were reduced 7.4 percent compared to what they would have been without immigration.

That's not the end of the story, however. Berkeley's David Card, another top authority, employs a different statistical technique and gets the opposite result. He starts from the fact that different cities experience different rates of immigration, and then he looks to see whether cities with lots of low-skilled immigrants have lower wages for laborers. He finds no wage effect whatsoever. This could be because demand for these workers increases with the supply of them: A gardening company with five Mexican workers armed with fancy electric hedge-trimmers would just as soon hire eight workers and give them manual shears if eight workers were available.

This academic debate is not conclusive. Borjas argues that Card's method is flawed because an influx of immigrants into one city drives U.S.-born workers to move elsewhere, so the downward pressure on wages can be captured only in nationwide numbers. This may be right for college graduates, who operate in a national labor market. But Card may have the upper hand when it comes to understanding low-wage workers. His latest paper shows that cities with high rates of unskilled immigration have reported no offsetting shrinkage in the number of native-born laborers.

What to conclude from this? Immigration does not cause unemployment; the wage effects may well be small. And if anyone can make a conclusive argument about some other consequence of immigration, Congress might as well listen. The debate over wages is not a slam-dunk for either side. It should not determine this issue.

Immigration's effect on unemployment is negligible, immigration's effect on wages is negligible. What's the fuss about? It's an election year and it's good election politics to pick on brown people. The best thing to do is close your ears and hope the elected idiots don't pass any legislation "fixing" immigration.

Congrats to GMU

I've said it many times since Bracketbusters, George Mason is the best team the Shockers have played this season,including Illinois and Michigan State. The Patriots proved it last night in a truly impressive performance (and a wretched shooting performance by the Shocks). Congratulations to George Mason, I hope you can knock off UConn and get to the Final Four.

Liberty Lost

The New Hampshire Union Leader says New Hampshire is no longer the "Live free or die" state, they're the "Live free unless legislators disapprove of your behavior" state.

On Wednesday the House voted 189-154 to ban smoking in all bars and restaurants. The state already bans smoking in restaurants with 50 or more seats. But that wasn’t good enough for representatives who felt compelled to protect citizens from their own choices.

This session House members had already voted to force all pharmacists to dispense emergency contraception and to deny parents the ability to choose where their children go to school. Last year legislators required children to wear helmets while riding bicycles (the bill originated in the House). Every year legislators, usually beginning with House members, try to erode a few more of our liberties.

Tolerant Left

The left appears upset about the WaPo's decision to hire a social conservative blogger. They don't believe that he should be given a voice by a prestigious newspaper. I'm sure I would disagree with quite a bit of what Domenech will write, but I don't think he should be silenced. The WaPo still will have a fairly liberal editorial page, what's the harm? The left is just a big a fan of stifling dissent as the right is.

McCarthy Center

It's sad but this story almost seems plausible.

Due to a recent rash of satirical, anti-tax web sites, the state of Missouri has rushed to open a new, state-of-the-art opinion monitoring center. “It’s important that everyone who publicly expresses an opinion, especially a political opinion, disclose their name, address, telephone number, and employer to the government. We can’t have people out there saying things we don’t like unless we know who they are,” commented Missouri governor Matt Blunt.

It's too bad this stadium proposal is going to pass. While SaveOurOwners.com is good fun, I don't think many people know about it and it's very little competition for the Don't Stop Thinking About Tomorrow commercial.

Shocker Pride

Wichita has gone ga-ga over it's hometown team.

Suddenly, we have something to brag about, something to look forward to, something to talk about with strangers.

We're making plans to pack ourselves into sports bars on Friday night. We're mounting flags on our porches and cars. We're fielding congratulatory calls from friends and family all over the country -- as though we had anything to do with the Shockers' success.

And those among us who two months ago couldn't have named a single member of the basketball team are surprising even ourselves with our excitement.

"I just think it's great to have something to celebrate about our city instead of the BTK thing and everyone arguing about casinos and the downtown arena," said Suzanne Drazil, a football fanatic who's never been remotely interested in basketball.

Until now.

More signs of city unity are showing up every day.

At El Patio, a Mexican restaurant at 424 E. Central, owners posted a hand-scrawled sign on a sheet of yellow construction paper.

"Go Shockers!"

At Tuesday's City Council meeting, council members dressed in WSU T-shirts and listened as spokesman Van Williams opened the meeting.

"Good morning, and go Shockers."

A portable sign outside the Centerworks Pilates Studio at First and Washington reads "Go Shocks Go."

And a giant, shockingly bright billboard above the Starbucks at Central and Rock Road congratulates the team on making the Sweet 16.

Jay Banasiak is noticing the city's collective enthusiasm.

As general manager of Wichita Transit, he decided last week to add the phrase "Go Shockers" to the LED screens mounted on the front of the city's buses.

The excitement Wichita is feeling reminds me of 2003 when the Royals got off to a great start and everyone was suddenly a fan. I could go to the mall and see Royals gear being worn by a majority of people when, normally, you rarely see someone wearing Royals gear.

I hope this becomes an annual tradition.

Hayek

In honor of F.A. Hayek's death on this day 14 years ago I give youThe Road to Serfdom in cartoon form. Enjoy.

Uniformity Over Quality

The Florida Supreme Court recently ruled that where the state constitution says, "uniform, efficient, safe, secure, and high quality system of free public schools that allows students to obtain a high quality education", the key word is uniform. I guess uniform is listed first.

The effect of this ruling is to send 733 children from quality private schools to failing public shools (in most cases). George Will takes this ruling down here.

The title of this post, I believe, is really well put. Striving for uniformity is not what this country should be about. However, all of us being taught the same things in public schools is exactly what we seem to be doing. At least there are 50 different state education systems. But, with the Federal government increasingly getting involved with education, those 50 systems will get increasingly similar. Then we will have uniformity, but, probably not quality. This is a case of misplaced priorities; uniformity over quality.

Globalization Woes

Harold Meyerson tackles the woes of globalization in today's WP. As expected, he comes down on the protectionist side of the debate.

"The total number of current U.S. service-sector jobs that will be susceptible to offshoring in the electronic future is two to three times the total number of current manufacturing jobs (which is about 14 million)." As Blinder believes that all those manufacturing jobs are offshorable, too, the grand total of American jobs that could be bound for Bangalore or Bangladesh is somewhere between 42 million and 56 million. That doesn't mean all those jobs are going to be exported. It does mean that the Americans performing them will be in competition with people who will do the same work for a whole lot less.

The threat of globalization and the reality of de-unionization have combined to make the raise, for most Americans, a thing of the past. Between 2001 and 2004, median household income inched up by a meager 1.6 percent, even as productivity was expanding at a robust 11.7 percent. The broadly shared prosperity that characterized our economy in the three decades following World War II is now dead as a dodo.

Of course there's no discussion of the benefits; lower prices of consumer goods, increased wealth around the world etc., only discussion of the perceived bad. The New York Times recently wrote:

While 2 to 3 percent of American jobs in the field migrate to other nations each year, new jobs have thus far more than made up for the loss.

When you read an article like Meyerson's today, it's easy to be alarmed, and many people are. However, there is never any discussion of the jobs created because of globalization.

I do believe, however, that globalization has brought labor costs down in the United States. The increased competition and supply of labor drives US wages down. But, increasing labor unions will only hasten the pace of jobs leaving the country. Why would a company choose less flexibility and higher labor costs when they can choose to be flexible? Why would the US government see that as a benefit? For evidence of this decreased flexibility look at the news from GM today. Quite simply GM got bloated because of negotiations with the UAW over the years and has to cut deals to pay off the union so it can compete. Never mind GM's underfunded pensions and healthcare, they simply can't afford to pay all these benefits to their workers and the union only stifles their ability to be flexible.

More Fair Trade Coffee

The New York Times piles on on Fair Trade goods.

TransFair USA and 19 similar nonprofit agencies in other countries collect licensing fees on each product that uses the Fair Trade label. All of them answer to an umbrella group, the Fairtrade Labelling Organizations International, based in Bonn, which also monitors the farmers and assesses fees for fair trade participation.

TransFair describes its logo fees as amounting to just pennies on the pound. The pennies add up. Last year, it generated $1.89 million in licensing fees from companies that used the logo. It also spent $1.7 million on salaries, travel, conferences and publications for the 40-employee organization.

Some critics find such expenses excessive. "Farmers often receive very little," said Lawrence Solomon, managing director of the Energy Probe Research Foundation, a Canadian firm that analyzes trade and consumer issues. "Often fair trade is sold at a premium, but the entire premium goes to the middlemen."
...
The coffee farmer who produced the one-pound bag of coffee purchased by Mr. Terman received $1.26, higher than the commodity rate of $1.10. But whether Mr. Terman paid $10 or $6 for that fair trade coffee, the farmer gets the same $1.26.

"There is no reason why fair trade should cost astronomically more than traditional products," Nicole Chettero, a spokeswoman for TransFair USA, said. "We truly believe that the market will work itself out as Fair Trade certified products move from being a niche market to a mainstream option. As the demand and volume of Fair Trade certified products increase, retailers will naturally start to drop prices to remain competitive."
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Each fair trade commodity has its own fair trade price, or the lowest price farmers will receive even if conventional commodity prices fall. That price is meant to allow them to cover their cost of production and improve their lives — by, for instance, providing money to be invested in their farms and in schools.

Yet a price that is fair in one country may not be in another. In Brazil, "$1.26 per pound for coffee is a fortune," said Kevin Knox, a coffee consultant in Boulder, Colo. "In the forest in the mountains of Mexico, the money barely is enough to justify doing it. Their yields are small, and the costs of production are higher."

In some cases, the individual farmers may receive less than fair trade rules require because the money goes to cooperatives, which have their own directors who decide how much to pass on to farmers.

"We did a breakdown and saw that sometimes, what they're paying farmers is only 70 cents to 80 cents a pound" for coffee instead of the entire fair trade price of $1.26, said Christy Thorns, a buyer at Allegro Coffee, a roaster in Thornton, Colo., that is owned by Whole Foods. "There are so many layers involved."

Transfair, she said, doesn't "clearly communicate that to consumers."

I've pointed out the unfairness of Transfair's licensing system and the uncompetitive prices of Fair Trade. Now the NYT points out that the farmers don't necessarily get the higher commodity price the Fair Trade certification supposedly guarantees them. The profits still go mostly to the middlemen. So what makes Fair Trade different or better than other coffees? Nothing.

Hat Tip to Cafe Hayek which has more Fair Trade analysis.

Argentinian beef

I read about this economically unsound (Cafe Hayek has the economics) idea put forth by the leftist Argentinian President last week. Eat less beef to curb inflation. It reminds me of Fidel Castro calling for Cubans to spend their vacation time chopping sugar cane. Leftist economics always turns out this way; rationing to keep the economy in check.

Anyway, this struck me as funny because my old business partner spent a summer in Argentina a couple of years ago. When he got back reported to me about how much beef they ate in Argentina. Beef for breakfast, lunch and dinner. Now the President wants Argentinians to eat less beef. I just don't think that will work.