My Response To Michael Gerson & The Pope On Capitalism

I wrote an op-ed for the San Antonio Express-News but it looks like it will not get printed. Here is the link to Gerson's article Worshipping at the altar of consumption. Now my response which is followed by a comment I left at this link.

I was surprised and disappointed by Michael Gerson's column calling for more government intervention into the economy ("Pope's theme hails from compassion, not Marxism," Dec. 11).

Although Gerson claims to be a defender of market economics, he (and the Pope) both seem to think that all suffering by the poor is the result of too much capitalism (or not enough government social programs).

Gerson refers to a "deified market." The reality is much different. The highest marginal tax rate in the U. S. is 35%. In 1986 it was 28%.

Spending by federal regulatory agencies is about nine times higher today than in 1970, adjusted for inflation. We add thousands of pages of new regulations every year.

Today, about 30% of jobs in the U. S. require a license. In the 1950s, it was about 5%. So the reality is that government intervenes more and more in our economy. Higher taxes and more regulations don't happen if we deify the market.

Then Gerson condemns ideologies "that would deny to governments an active role in humanizing free markets." In the U. S. we have many government programs like welfare, food stamps, unemployment insurance, social security, etc.

He also refers to the "dark side" of markets. But neither Gerson nor the Pope seem to recognize a dark side of government intervention. Research by Morris Kleiner of the University of Minnesota shows that occupational license requirements hurt employment.

Some economists, although not all, think that minimum wage laws can hurt the poor (Martin Feldstein, Christina Romer, Gary Becker, & Greg Mankiw, for example, all highly respected).

When the U. S. subsidizes our own sugar producers or puts up tariffs, this hurts poor farmers in third world countries.

Capitalism seems to serve the poor well. The poorest 10% of the population in the most capitalist countries have incomes about nine times higher than in the least capitalist countries. Life expectancy is much higher while infant mortality is much lower. Child labor rates are much lower, too.

From 1949-1961, as Charles Murray has pointed out, the poverty rate in the U. S. was cut in half, a time when we had few government programs.

Robert Rector of the Heritage Foundation reported in 2011 that 75% of poor households had air conditioning while 92% had microwave ovens. These are products that once even the rich could not buy. And it is capitalism that brought products like these, and many others, to the masses, with the ownership rates constantly increasing.

Economists Bruce Meyer and  James Sullivan showed that "median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009." They also pointed out that the quality of housing for the middle 20% greatly improved.

Economists Christian Broda, Ephraim Leibtag, and David Weinstein reported in 2009 that the "real wages of low-wage U.S. workers (the bottom 10%) have risen substantially over the last 30 years" due to corrections to the Consumer Price Index.

The eminent economic historian Deirdre McCloskey has said that what propelled the world toward more economic growth (whose importance Gerson and the Pope seem to minimize) was a new dignity accorded the entrepreneurs and innovators.

This happened, according to her, in "Holland in 1600, England in 1700, the English colonies and Scotland in 1750, and on and on." This led to increased production which greatly reduced poverty.

Now we have so many negative attitudes towards capitalism and the market. TV shows and movies rarely portray business favorably. So it was sad to see the Pope add more fuel to this fire.

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Economist Hernando de Soto shows how hard it is for the poor in third world countries to be part of capitalism and start their own businesses. The government gets in their way, big time. Maybe if markets were freer these poor people would be better off.

http://online.wsj.com/news/articles/SB10001424052748704358704576118683913032882?cb=logged0.10966325840669244

The key question to be asked is why most Egyptians choose to remain outside the legal economy? The answer is that, as in most developing countries, Egypt's legal institutions fail the majority of the people. Due to burdensome, discriminatory and just plain bad laws, it is impossible for most people to legalize their property and businesses, no matter how well intentioned they might be.

The examples are legion. To open a small bakery, our investigators found, would take more than 500 days. To get legal title to a vacant piece of land would take more than 10 years of dealing with red tape. To do business in Egypt, an aspiring poor entrepreneur would have to deal with 56 government agencies and repetitive government inspections.

All this helps explain who so many ordinary Egyptians have been "smoldering" for decades. Despite hard work and savings, they can do little to improve their lives.