Saturday, December 13, 2014

The West from 1830-1900 was not a place of great chaos

From Don Boudreaux of Cafe Hayek.
"from page 10 of Terry Anderson’s and P.J. Hill’s superb and pioneering 1981 Journal of Libertarian Studies article, “An American Experiment in Anarcho-Capitalism: The Not So Wild, Wild West“:
The West during this time [1830-1900] often is perceived as a place of great chaos, with little respect for property or life.  Our research indicates that this was not the case; property rights were protected and civil order prevailed.  Private agencies provided the necessary basis for an orderly society in which property was protected and conflicts were resolved.  These agencies often did not qualify as governments because they did not have a legal monopoly on “keeping order.”  They soon discovered that “warfare” was a costly way of resolving disputes and lower cost methods of settlement (arbitration, courts, etc.) resulted.
See also this more recent essay by P.J."

Piketty is almost certainly incorrect to suggest that wealth, once accumulated, perpetuates itself to the advantage chiefly of its owners

From Don Boudreaux of Cafe Hayek.
"Thomas Piketty writes as if accumulated wealth perpetuates itself, growing inevitably over time and yielding to its owners streams of unearned returns that are unconnected with any productive contributions that these owners might make with their wealth to the economy.  Thomas Piketty writes also that very rich people have advantages over only moderately rich people because very rich people can hire better financial advisors than can people of more modest means.

These two propositions of Piketty sit uneasily with each other.  If (as is unquestionably true) not all financial advisors are equally talented, then not only does wealth not grow ineluctably or without human effort and risks to its owners, but the more talented the financial advisor the better he or she is in a market-oriented economy at investing wealth in ways that generate attractive products for the masses – that is, at investing wealth in ways that cause the economic pie to grow.  And there’s no reason to believe that competition among top-flight financial advisors – each one seeking energetically and brilliantly to serve as faithfully and as successfully as possible his or her plutocratic clients – does not help promote economic growth that raises the living standards of even the poor at a pace equal to, or even greater, than the rise in the living standards of the super rich.

In short, if Piketty is correct that people differ in their talents at investing wealth to yield consistently high returns, then Piketty is almost certainly incorrect to suggest that wealth, once accumulated, perpetuates itself to the advantage chiefly of its owners."

Friday, December 12, 2014

New Study Finds Minimum Wage Increases Hurt Low-Skilled Workers

From Charles Hughes of Cato.
"A new working paper from the National Bureau of Economic Research finds that significant minimum wage increases can hurt the very people they are intended to help. Authors Jeffrey Clemens and Michael Wither find that significant minimum wage increases can negatively affect employment, average income, and the economic mobility of low-skilled workers. The authors find that significant “minimum wage increases reduced the employment, average income, and income growth of low-skilled workers over short and medium-run time horizons.”  Most troublingly, these low-skilled workers saw “significant declines in economic mobility,” as these workers were 5 percentage points less likely to reach lower middle-class earnings in the medium-term. The authors provide a possible explanation: the minimum wage increases reduced these workers’ “short-run access to opportunities for accumulating experience and developing skills.” Many of the people affected by minimum wage increases are on one of the first rungs of the economic ladder, low on marketable skills and experience. Working in these entry level jobs will eventually allow them to move up the economic ladder. By making it harder for these low-skilled workers to get on the first rung of the ladder, minimum wage increases could actually lower their chances of reaching the middle class. 
Most of the debate over a minimum wage increase centers on the effects of an increase on aggregate employment, or the total number of jobs and hours worked that would be lost. A consensus remains elusive, but the Congressional Budget Office recently weighed in, estimating that a three year phase in of a $10.10 federal minimum wage option would reduce total employment by about 500,000 workers by the time it was fully implemented. Taken with the findings of the Clemens and Wither study, not only can minimum wage increases have negative effects for the economy as a whole, they can also harm the economic prospects of  low-skilled workers at the individual level.

Four states approved minimum wage increases through ballot initiatives in the recent midterm, and the Obama administration has proposed a significant increase at the federal level. This study should give them a reason to reconsider.

Recent Cato work on this topic can be found here and here."

Thursday, December 11, 2014

"None of us, not even the most wise and visionary entrepreneurs, can imagine the full panoply of goods and services and life’s options that will be created through the different ideas of countless entrepreneurs competing in free markets"

From Don Boudreaux of Cafe Hayek.
"Californian Charley Hooper, after reading this letter, sent the following splendid observation to me by e-mail:
California has 3,754 wineries and they provide good wines for customers, jobs for employees, profits for owners, and fun places to visit. Imagine if Prohibition had never ended or if regulations were such that a mere five wineries produced all the wine for the entire country. Who would have known what we would have been missing?
Who would have know that there would have been a winery, Solune, that I could walk to from my house, talk directly to the interesting wine maker, taste his delicious and varied wines, and purchase a few bottles for a reasonable price? Few people have such an imagination of what could be and those who do are often discounted by others
I think this is further evidence of the awesomeness of the free market. When it is hindered, we don’t know what we’re missing. When it’s present, we get to use amazing things we never dreamed of.
Indeed so.  The invisible – what Bastiat called “the unseen” – includes more than the outputs forgone by using resources in some ways (say, to repair broken windows) rather than in other ways.  The unseen includes also, and more importantly, the greater and better and completely different goods and services, the newer and safer and less-resource-intensive ways of production, and the more full prospects for human flourishing and the heightened hopes and the improved and expanded life-style options that human creativity – unleashed by free markets and governed by open competition and private property rights – makes possible.

Each of us can imagine marginal economic improvements given our knowledge of the existing economy – improvements imaginable today such as faster Internet speed, more options for pizza toppings, continued falling prices for clothing, homes with ceilings more vaulted and dishwashers more quiet, and even driverless cars and pills that cure cancer.  Yet none of us, not even the most wise and visionary entrepreneurs, can imagine the full panoply of goods and services and life’s options that will be created through the different ideas of countless entrepreneurs competing in free markets, with each consumer having the right to choose how to spend his or her money.  The world of 2014 was totally unimaginable to the likes of Josiah Wedgwood, J.D. Rockefeller, Alfred Sloan, and David Sarnoff.  If markets remain reasonably free, the world of 2114 – even of 2034 – is totally unimaginable to anyone of us today.  And whatever is not created because of government interventions is and will forever be unknown and unquantifiable in any detail.  But regardless of what those things are, they will nevertheless be losses for humanity."

Wednesday, December 10, 2014

New BLS report on women’s earnings: Most of the 17.9% gender pay gap in 2013 is explained by age, marriage, hours worked

From Mark Perry.
"
bls

According to a TV election ad in 2012, “President Obama knows that women being paid 77 cents on the dollar for doing the same work as men isn’t just unfair, it hurts families.” Do the data support the president’s claim? Not at all.

For example, the Bureau of Labor Statistics (BLS) releases an annual report on the “Highlights of Women’s Earnings” (since the BLS report actually looks equally at data for both men’s and women’s earnings, one might ask why the report isn’t simply titled “Highlights of Earnings in America?”, but maybe that’s a politically incorrect question). Here’s the opening paragraph from the most recent BLS report “Highlights of Women’s Earnings in 2013” that was released this week:
 In 2013, women who were full-time wage and salary workers had median usual weekly earnings of $706. On average in 2013, women made 82.1 percent of the median weekly earnings of male full-time wage and salary workers ($860). In 1979, the first year for which comparable earnings data are available, women earned 62 percent of what men earned.
How do we explain the 23% gender pay gap claimed by Obama, or the fact that women working full-time earned only 82.1 cents for every dollar men earned in 2013 according to the BLS? Here’s how the National Committee on Pay Equity explains it:
The wage gap exists, in part, because many women and people of color are still segregated into a few low-paying occupations. Part of the wage gap results from differences in education, experience or time in the workforce. But a significant portion cannot be explained by any of those factors; it is attributable to discrimination. In other words, certain jobs pay less because they are held by women and people of color.
Let’s investigate the claim that the gender pay gap is a result of discrimination by looking at some of the wage data by gender in the BLS report for 2013:

1. Among full-time workers (those working 35 hours or more per week), men were more likely than women to work a greater number of hours (see Table 5). For example, 25.5% of men working full-time worked 41 or more hours per week in 2013, compared with only 14.3% of women who worked those hours, meaning that men working full-time last year were almost twice as likely as women to work 41 hours per work or more. Further, men working full-time were also more than twice as likely as women to work 60-hour weeks: 6.3% of men worked 60 hours per week in 2013 compared to only 2.7% of women working full-time who worked those hours.

Also, women were more than twice as likely as men to work shorter full-time workweeks of 35 to 39 hours per week: 12.2% of women worked those hours in 2013, compared to only 5% of men who did so.  Although not reported by the BLS, I estimate using their data that the average workweek for full-time workers last year was 41.4 hours for women and 43.4 hour for men; therefore, the average man working full-time worked 2 more hours per week in 2013 compared to the average woman.
Comment: Because men work more hours on average than women, some of the raw wage gap naturally disappears just by simply controlling for the number of hours worked per week, an important factor not even mentioned by groups like the National Committee on Pay Equity. For example, women earned 82.5% of median male earnings for all workers working 35 hours per week or more, for a raw, unadjusted pay gap of 17.5% for full-time workers (Table 5). But for those workers with a 40-hour workweek, women earned 89.6% of median male earnings, for a pay gap of only 10.4%. Therefore, once we control only for one variable – hours worked – and compare men and women both working 40-hours per week in 2013, almost half of the raw 17.5% pay gap reported by the BLS disappears.

2. The BLS reports that for full-time single workers who have never married, women earned 95.2% of men’s earnings in 2013, which is a wage gap of only 4.8% (see Table 1 and chart above), compared to an overall unadjusted pay gap of 17.9% for workers in that group. When controlling for marital status and comparing the earnings of unmarried men and unmarried women, almost 75% of the unadjusted 17.9% wage gap is explained by just one variable (among many): marital status.
3. Also from Table 1 in the BLS report, we find that for married workers with a spouse present, women earned only 78.0% of what married men with a spouse present earned in 2013 (see chart). Therefore, BLS data show that marriage has a significant and negative effect on women’s earnings relative to men’s, but we can realistically assume that marriage is a voluntary lifestyle decision, and it’s that personal choice, not necessarily labor market discrimination, that contributes to much of the gender wage gap for married workers.

4. Also in Table 1, the BLS reports that for young workers ages 25-34 years, women earned 89.4% of the median earnings of male full-time workers for that age cohort in 2013. Once again, controlling for just a single important variable – age – we find that almost half of the overall unadjusted raw wage gap for all workers (17.9%) disappears for young workers.

5. In Table 7, the BLS reports that for full-time single workers with no children under 18 years old at home (single workers includes never married, divorced, separated and widowed), women’s median weekly earnings were 96.1% of their male counterparts (see chart).  For this group, once you control for marital status and children, you automatically explain almost 80% of the unadjusted gender earnings gap.

6. Also in Table 7, the BLS reports that married women (spouse present) working full-time with children under 18 years at home earned 78.9% of what married men (spouse present) earned working full-time with children under 18 years (see chart). Once again, we find that marriage and motherhood have a significantly negative effect on women’s earnings; but those lower earnings don’t necessarily result from labor market discrimination, they more likely result from personal family choices about careers, workplace flexibility, child care, and hours worked, etc.

7. If we look at median hourly earnings, instead of median weekly earnings, the BLS reports in Table 8 that women earned 86.6% of what men earned in 2013, which accounts for about 25% of the raw 17.9% gender earnings gap that exists for weekly earnings. And when we look at young workers, women ages 16 to 19 years earned 96.7% of the hourly wage of their male counterparts in 2013, and for the 20-24 year old group, women earned 94.0% of what men earned per hour. Also in Table 8, we see that for never married hourly workers of all ages, women earned 92.7% of the hourly earnings of their male counterparts in 2013, which explains almost half of the unadjusted 13.4% gender difference in hourly earnings.

Bottom Line: When the BLS reports that women working full-time in 2013 earned 82.1% of what men earned working full-time, that is very much different than saying that women earned 82.1% of what men earned for doing exactly the same work while working the exact same number of hours in the same occupation, with exactly the same educational background and exactly the same years of continuous, uninterrupted work experience. As shown above, once we start controlling individually for the many relevant factors that affect earnings, e.g. hours worked, age, marital status and having children, most of the raw earnings differential disappears. In a more comprehensive study that controlled for all of the relevant variables simultaneously, we would likely find that those variables would account for almost 100% of the unadjusted, raw earnings differential of 17.9% lower earnings for women reported by the BLS. Discrimination, to the extent that it does exist, would likely account for a very small portion of the raw gender pay gap.

For example, in a 2005 NBER working paper “What Do Wage Differentials Tell Us about Labor Market Discrimination?” by June O’Neill (Professor of economics at Baruch College CUNY, and former Director of the Congressional Budget Office), she conducts an empirical investigation using Census data and concludes that:
There is no gender gap in wages among men and women with similar family roles. Comparing the wage gap between women and men ages 35-43 who have never married and never had a child, we find a small observed gap in favor of women, which becomes insignificant after accounting for differences in skills and job and workplace characteristics.
This observation is an important one because it suggests that the factors underlying the gender gap in pay primarily reflect choices made by men and women given their different societal roles, rather than labor market discrimination against women due to their sex.
To claim that a significant portion of the raw wage gap can only be explained by discrimination is intellectually dishonest and completely unsupported by the empirical evidence. And yet we hear all the time from groups like the National Committee on Pay Equity, the American Association of University Women, the Institute for Women’s Policy Research, and President Obama, President Jimmy Carter and Virginia governor Terry McAuliffe that “women are paid 77 cents on the dollar for doing the same work as men.” And in most cases when that claim is made, there is almost no attention paid to the reality that almost all of the raw, unadjusted pay differentials can be explained by everything except discrimination – hours worked, age, marital status, children, years of continuous experience, workplace conditions, etc. In other words, once you impose the important ceteris paribus condition of “all other things being equal or held constant,” the gender pay gap that we hear so much about doesn’t really exist at all.

But we know by now that logic, economic theory and empirical evidence won’t matter to gender activists, progressives, and most Democrats, and all we’ll hear about regarding the new BLS report will be that women earned only 82.1 cents for every dollar earned by men last year…. for doing the same work, and how unfair that is……

Related: The “Discriminator-in-Chief” Obama has his own gender pay gap at the White House that exposes his hypocrisy on this issue – while lecturing everybody about the unfairness of the gender pay gap nationally using aggregate salary data, an analysis of White House salaries shows that he pays his own female staffers 13.3% less on average than his male employees. Alternatively, if the 13.3% gender pay gap at the White House can be explained by factors other than discrimination (like experience, age and education), Obama should then stop using unadjusted, aggregate salary statistics to lecture the country about a gender pay gap crisis at the national level."

Starting this year, the United States’ working population will face three major employment disincentives resulting from the very benefits the Affordable Care Act (ACA) provides

The Affordable Care Act and the New Economics of Part-Time Work Casey B. Mulligan.
"Starting this year, the United States’ working population will face three major employment disincentives resulting from the very benefits the Affordable Care Act (ACA) provides: (1) an explicit tax on full-time work, (2) an implicit tax on full-time work for those who are ineligible for the ACA’s health insurance subsidies, and (3) an implicit tax that links the amount of available subsidies to workers’ incomes.

A new study published by the Mercatus Center at George Mason University advances the understanding of how much these ACA taxes will reduce overall employment, and why. It concludes that the reduction will be nearly double that projected by previous analyses. Labor markets ultimately will reduce weekly employment per person by about 3 percent—translating to roughly 4 million fewer full-time-equivalent workers.

Below is a brief summary of this important update. Please see “The Affordable Care Act and the New Economics of Part-Time Work” to read the entire study and to learn more about author Casey B. Mulligan, a professor of economics at the University of Chicago.

_________  Key Findings____________
Much of the ACA’s tax effect resembles unemployment insurance: both encourage layoffs and discourage people from returning to work. The ACA’s overall impact on employment, however, will arguably be larger than that of any single piece of legislation since World War II.
  • The ACA’s employment taxes create strong incentives to work less. The health subsidies’ structure will put millions in a position in which working part time (29 hours or fewer, as defined by the ACA) will yield more disposable income than working their normal full-time schedule.
  • The reduction in weekly employment due to these ACA disincentives is estimated to be about 3 percent, or about 4 million fewer full-time-equivalent workers. This is the aggregate result of the law’s employment disincentives, and is nearly double the impact most recently estimated by the Congressional Budget Office.
  • Nearly half of American workers will be affected by at least one of the ACA’s employment taxes—and this does not account for the indirect effect on others as the labor market adjusts.
  • The ACA will push more women than men into part-time work. Because a greater percentage of women work just above 30 hours per week, it is women who will be more likely to drop to part-time work as defined by the ACA.
____________  Summary  ___________

DISTORTING THE WORKWEEK
The ACA’s subsidies create disincentives to work that act as taxes on employment.
ACA Provisions Creating the Largest Disincentives to Work
  • The ACA imposes a $2,000 penalty for each full-time employee imposed on large employers (generally those with 50 or more workers) that do not offer health insurance. Due to this penalty’s unfavorable tax treatment, it is effectively a $3,000 employment tax and can be expected to reduce full-time employment.
  • The ACA denies health insurance subsidies to full-time workers and their families unless their employer fails to offer “affordable” coverage. Because these workers would qualify for insurance subsidies by cutting their weekly work hours to part time, this provision creates an implicit tax that reduces the benefit of working full time.
  • The ACA phases out health insurance subsidies as workers’ income increases. This compounds the escalated federal and state tax liabilities workers already face for earning more income.
Incentives to Reduce Work Hours Below Full Time
  • The ACA may put millions of Americans in a position in which working part time yields more disposable income than working full time.
  • This occurs when the ACA’s generous assistance to part-time workers for health insurance premiums and out-of-pocket expenses offsets much of the income they forgo by working fewer hours. The lack of this insurance assistance for full-time workers amounts to a tax on full-time work.
  • A comparison of two hypothetical workers illustrates this effect. Each worker represents the same hourly cost to the employer, but one works full time (in this case, 40 hours per week) and one part time (29 hours per week). In addition to salary, the full-time worker receives a partial employer subsidy for health insurance. The part-time worker has lower total compensation, mainly due to fewer hours worked, and no employer-sponsored health insurance, but is eligible for government-subsidized health insurance through the ACA’s exchange. After accounting for taxes, health expenses, and work expenses (e.g., child care and commuting), this part-time worker actually nets more per year than the full-time worker.
Prevalence and Magnitude of the ACA’s New Taxes
  • Nearly half of the workforce will experience significant changes in work incentives due to the ACA.
  • For 20 percent of the labor force—some 33 million workers—their family’s eligibility for exchange subsidies hinges entirely on their employment status. In any month they work part time or not at all, they can obtain subsidized coverage; in any month they work full time, they do not qualify for these subsidies. Members of this group would, on average, have to work an additional 5.5 hours per week to make up for the subsidies they forgo by working full time.
  • Because of the penalty on employers who do not offer health insurance, 5 percent of the workforce faces a new implicit income tax. These workers, who are left to obtain coverage from the ACA exchanges, would have to work at least four hours a week for free if they were to compensate their employer for the $2,000-per-employee penalty the ACA imposes.
  • An additional 21 percent who work for employers not offering coverage will find that their employers are less willing or able to pay their workers because of the ACA’s employer penalty. These workers, on average, would have to work four hours a week for free if they were to compensate their employers for the non-coverage penalty.
PUSHING WORKERS TOWARD FEWER WORK HOURS
The magnitude of the ACA effects will vary with the magnitude of the taxes. Still, the ACA’s benefits to part-time workers will push many to reduce their work hours to 29 per week or fewer. The effect can be summarized as follows:
  • Those who would otherwise work just above 30 hours per week will be induced to cut their weekly work hours to part-time. This effect will be especially pronounced for those working 30–35 hours per week; for them, dropping to 29 hours a week is a relatively small adjustment.
  • Those who continue to work full-time despite the taxes will tend to reduce the number of weeks they work per year (because in those periods they can obtain subsidized coverage) by more than they will increase their weekly work hours. In other words, some of those who continue to work full time will work for fewer weeks per year, and be unemployed for more weeks, than they otherwise would.
  • Income taxes reduce weekly hours worked and weekly employment rates.
PREDICTIONS FOR WORK SCHEDULES AND EMPLOYMENT UNDER THE ACA
This analysis, combined with lessons from labor market history, leads to an estimate that the ACA will reduce employment and aggregate hours by slightly more than 3 percent, or about 4 million full-time-equivalent workers. This is nearly double the contraction indicated in prior studies, mainly because some previous work underestimated the size of the ACA’s employer penalty and did not consider the full range of tax effects.
  • The ACA adds an average of 1.9 percentage points to the marginal earnings tax rates. It also adds a full-time-employment tax equivalent of 2.2 hours per week, or almost 6 percent of a full-time schedule. This is on top of non-ACA taxes, and is akin to doubling the employee Social Security payroll tax. It is the main driver of the 3 percent labor market contraction.
  • Roughly 3.6 percentage points more of the workforce will drop to 26–29 hours per week than would do so in the absence of the ACA.
  • The elderly’s labor is much less affected by the law, because the Medicare program makes them ineligible for the new exchange subsidies, so that they are not subject to the implicit income and full-time-employment taxes that go with the subsidies.
  • Women (regardless of marital status) are especially likely to reduce their hours to below 30 per week because they represent a greater percentage of those currently working 30 to 35 hours, and thus can drop to 29 hours with comparatively little cost.
  • The study does not assume or predict that employment and work schedules are especially sensitive to taxes. Rather, the study’s results derive from the sheer size of the taxes that the ACA has created."

Tuesday, December 9, 2014

Greedy Corporations Save Lives: Prosperity’s conquest of disease offers lessons for global change

From FEE.
"With Ebola wreaking havoc across West Africa, news that a private company has virtually eradicated the disease on its extensive property invites sighs of relief.

Yet Firestone’s actions were not unique: private industry has a long history of saving lives when disease threatens.

As recent history demonstrates, to face the prospect of a rapidly changing world over the next century, the best we can do to help the world’s poorest is to pursue a strategy of resiliency. And that strategy includes rich multinational corporations.

Firestone
Firestone, one of the world’s leading tire producers, needs vast amounts of rubber and owns a huge rubber plantation in Liberia. The property encompasses 185 square miles, employs 8,000 people directly, and indirectly supports 72,000 more people who live either on the property or in surrounding communities.

When the first case of Ebola appeared on the property, the company initially attempted to place the victim in a hospital in the country’s capital, Monrovia. Company officials quickly realized that the facilities there were inadequate, so Firestone set up its own Ebola ward in the company hospital. By mid-September, the facility was full. But through careful management, the disease was contained. A few weeks later, the facility was almost empty.

Firestone was able to do this because it had wealth, valued its employees and their families, and recognized the importance of stopping the disease. This is not an isolated example of a private company acting this way.

Debswana
In the 1990s, when HIV/AIDS threatened to devastate Botswana, the mining firm Debswana worked to address the threat the disease posed to its facilities there and began what the United Nations called a “benchmark” program to keep its workers healthy.

Debswana raised awareness among its employees of the HIV/AIDS threat and how the disease spread. The company funded 100 percent of the cost of retroviral drugs to employees with the disease and their spouses, and it provided counseling and monitoring programs. The company called the fight against the disease its “highest corporate priority,” saying,

The Company’s commitment to the fight against HIV and AIDS is captured in its philosophy to minimize the impact of HIV/AIDS on employees, their families and the Company through prevention of new infections, care and support of those infected with HIV and containment of costs.

While some might call this “corporate social responsibility,” it is also, in fact, a product of enlightened self-interest and a recognition of the interconnectedness of people in the modern world.
That is why measures that promote these two aspects of today’s economy are the poor’s best bet in surviving anything a changing world throws at them. Whether it be disease, extreme weather events, or the postulated effects of global warming such as sea-level rise, greedy corporations are saving lives worldwide, every day.

Enlightened self-interest and the interconnectedness of global supply chains combine to promote health and welfare everywhere. Business builds wealth not just in local communities, but in communities far away that connect with it. Bridgestone, Firestone’s parent, is based in Ohio, yet its regard for its own well-being led it to save lives in Liberia.

BHP Billiton
Another example, courtesy of my friend Andrew McLeod, might help to underline this point:

BHP Billiton, the world’s largest mining company, runs one of the world’s most effective anti-malaria programs in Mozal, Mozambique, not because it is nice, but because it increases value.
 
The company’s program has reduced adult malaria infection from above 90% of the adult population to below 10%. The improved community health has lowered absenteeism in the work force and that has increased the productivity of their operation by a measurable amount higher than the cost of the program itself. When measured well, one can demonstrate that the anti-malaria program is directly, measurably profitable.

Wealthier is healthier. Nigeria, being a richer country than Liberia, was able to keep Ebola at bay. As Indur Goklany and others have shown, wealth is vital for societal resiliency in the face of such risks.

Wealthier is healthier: get with the program
Bearing that in mind, this is what a strategy for reducing the impact of such risks might look like:
  • Promote true free trade by tearing down tariff and nontariff barriers with the developing world, such as the EU’s Common Agricultural Policy.
  • Promote affordable energy and distribution networks for it in the developing world.
  • Reduce regulatory burdens that divert talent toward developing accounting tricks or derivative products, rather than dreaming up genuine innovations.
  • End America’s extraterritorial tax system, which discourages private investment abroad.
  • Liberalize global payment systems to allow the free movement of remittances from immigrants to their home countries.
This program would not only lead to more Firestones around the world but also to more resilience at the national level.

However, such a program is bound to meet with opposition from the “global salvationist” establishment, whose conventional wisdom centers around inhibiting trade, banning effective but politically incorrect technologies such as DDT and coal, and reducing private profit. It may therefore be a while before it can be adopted.

Resiliency today
In the meantime, people in poor countries like Liberia will have to continue to hope that companies like Firestone can be encouraged to invest there. They can best do this by establishing the rule of law and secure property rights. A true resiliency strategy begins at home."