for economic freedom
Updates from the Prairie Centre Policy Institute from Regina, Saskatchewan.
Hot off the press! Don Baron's Jailhouse Justice
web posted June 24, 2002
Progress requires change
By Kevin Avram
We like progress. And because we do, there arent very many of us who would give up flush toilets, penicillin, or automatic washing machines. One organized movement that didnt like progress were the Ludites.
Supposedly led by the mysterious Ned Ludd, Ludites claimed that mechanized production machinery would put everyone out of work, destroy peoples lives, and ultimately ruin the world. Originating in the early part of the 1800s, the Ludites were especially opposed to the industrial revolution.
To show their opposition, large gangs of Ludites would break into factories to smash power looms and automated weaving machines. In Yorkshire, three of them were executed for the murder of a mill owner. Fourteen were hung for arson and the destruction of property. Similar events took place in other parts of the country with many more being executed. A good number of Ludites ended up on prison ships and were sent off to the British penal colony of Australia.
Although they were likely sincere, the Ludites had it wrong. Rather than causing unemployment mechanization brought vast numbers of new jobs into existence. By the end of the 19th century the British stocking industry was employing roughly 100 men for every individual it had employed prior to mechanization.* Mechanization slashed production costs resulting in reduced selling prices. That meant it was no longer just the elite who could afford to own many pairs of stockings.
There were fewer than 10,000 people at work in the British cotton industry when it was mechanized. Three decades later a Parliamentary inquiry found that the industry employed more than 200,000 people.* The reduced selling prices brought about by mechanization meant those who would never have been able to afford finished cotton products could purchase an abundant supply at low prices. To meet that demand thousands of workers were needed.
New wealth, new jobs, and improved living standards demonstrated beyond any shadow of a doubt that the Ludites shouldnt have feared change because change facilitates progress.
Change as a prerequisite to progress also applies to Canada. Most Canadians would never claim to oppose progress, not realizing that resistance to change amounts to the same thing. In some parts of the country people are waiting a year or more for medical treatment. Despite this, many are dug-in in their opposition to healthcare reform, incorrectly assuming that a lack of change reflects stability or reliability. In fact, an unwillingness to change represents a lack of vision for the future and an inordinate preoccupation with the past.
Those who resist change to the Canadian Wheat Board (CWB) are much the same. Established as a temporary measure to hold down the price of wheat and control national wheat stocks during WWII, the CWB was turned into a permanent fixture. Its ironclad monopoly and complete dominance of the wheat trade ensures that the incentives for the export and domestic processing of wheat and durum are as restrictive in the 21st century as they were during WWII. Many rural regions of the prairies are desperate for economic development, yet because the CWB monopoly prohibits change, including allowing a farmer or group of farmers to process and export their own wheat, new investment and the innovative ideas that are rolling around in the minds of investors and young agricultural entrepreneurs will never see the light of day. The inability to change stops progress.
The truth is that we live in an age that has seen so much progress that progress has come to be taken for granted. Yet it cant be, because progress always has and always will hinge on ones willingness is accept change.**
Whether in healthcare delivery, wheat processing, or 19th century cotton spinning, for there to be progress, there must be the freedom to try new approaches.
Kevin Avram sits on the Prairie Centres Board of Trustees.
* Economics in One Easy Lesson by Henry Hazlitt. See: www.hazlitt.org/e-texts/wisdom/
** Stated by Economist George Leef in "Progress is Difference",
published in Ideas on Liberty. See: www.fee.org
web posted June 17, 2002
Living on borrowed time
By Craig Docksteader
No sooner had the House of Commons Standing Committee on Agriculture recommended a trial implementation of a voluntary Canadian Wheat Board, than the misinformation began. Pro-monopoly groups and CWB spokepeople jumped to media microphones to wail that the end of the world was near. God help us if prairie farmers were actually given the opportunity to market their own wheat and barley outside the CWB. The arguments against a free wheat and barley market are old and tired.
Nonetheless, each time they arise they should be refuted, lest some unsuspecting soul thinks they are fact and believes them. Although space does not permit a full and merciless slaying of all the conspiracy theories, economic fallacies, and downright nonsense that surround the issue, a few of the more popular ones are addressed below:
Myth #1: The majority of prairie farmers support the CWB monopoly.
Whether this classifies as a myth or a lie is difficult to determine. Either way, it's blatantly false. What Ken Ritter, chairman of the CWB's board of directors, would like us to believe, is that the results of the CWB director elections are an accurate representation of producers' support for the CWB monopoly. In actual fact, even he knows it's not true. The CWB's own polling has shown that support for the monopoly is now down to about 20 per cent of prairie farmers.
Myth #2: Farmers get a better price for their grain by marketing through a single-desk agency.
The CWB has spent hundreds of thousands of farmers' dollars attempting to justify this myth. Despite their best efforts, however, they've never factored in the lost opportunity costs, the cost of failing to develop niche markets, the cost of inefficiencies in grain transportation and handling stemming from a bureaucratic system which stamps out market signals, the cost of defending the CWB monopoly in international trade disputes, the cost of endless commissions, hearings, studies, and panels on the issue, and the exorbitant cost paid by many farmers to fight the for the basic economic right to sell their own property outside the CWB monopoly.
Besides, if the CWB monopoly is supposed to protect prairie farmers from low prices, it certainly isn't doing a very good job.
Myth #3: The CWB would not survive in a dual-marketing environment.
Just watch, this familiar tune will immediately and abruptly change when dual-marketing is finally announced. Before the ink is dry on the press release declaring the CWB a voluntary agency, the CWB will scramble to assure farmers that it wants and deserves their business because it can compete with the best of them and is here to stay.
In the meantime, however, consider the history of the prairie Wheat Pools:
The prairie Wheat Pools successfully operated like a voluntary wheat board in the 1920's, marketing more than 50 per cent of the prairie wheat crop. It was only when the Pools started speculating in the market place and gave cash advances on unhedged wheat that they went bankrupt.
The Wheat Pools' voluntary wheat board originally operated without owning a single elevator. They simply contracted with the existing companies who were only too happy to ensure that Pool wheat moved through their facilities. There is no reason why the CWB couldn't successfully operate in the same manner.
The CWB monopoly is living on borrowed time. Its base of support has been dwindling for decades and it left its majority behind in the last century. Like most prairie producers, the House of Commons Standing Committee on Agriculture has recognized that it's time to put the matter to rest.
The report of the House of Commons Standing Committee on Agriculture is available here: http://www.parl.gc.ca/InfoCom/CommitteeDocument.asp?DocumentID=30703&Language=E
Craig Docksteader is Coordinator with the Prairie Centre Policy Institute.
web posted June 10, 2002
High taxes result in lower economic growth
In a recent speech to the International Taxpayers Conference in Kiev, Ukraine, Dr. Richard Vedder noted there is ample evidence demonstrating that high taxes result in lower economic growth. Following are some excerpts from his comments:
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There are many examples that demonstrate the basic point: high taxes mean low growth.
Two small states in the northeastern part of the country are New Hampshire and Vermont. They are very similar to each other in terms of geographic features and climate, and are adjacent to each other. In 1929, the total income of citizens of New Hampshire, the larger state, was 43 percent above that in Vermont. By 2000, it was 149 percent larger.
Part of that growing difference is explained by the fact that population grew more in New Hampshire, but the income per person, which was 9 percent lower in Vermont than New Hampshire in 1929, was more than 18 percent lower in Vermont in 2000. Why? New Hampshire is one of Americas lowest tax states, the only state without levies on income or general sales. Vermont, by contrast, has high taxes, particularly on income.
Another two states that are neighbours are Kentucky and Tennessee. Both are hilly states, both make whiskey and many other similar things. In 1929, both total income and income per person were lower in Tennessee than in Kentucky. Today, Tennessee has 51 percent higher total income, and eight percent higher per capita income compared with its neighbour to the North.
Why? Tennessee has no tax on income, while Kentucky has a fairly high tax. Moreover, Tennessees tax burden has actually fallen in the last two decades, while Kentuckys has risen rapidly.
My last example uses two of Americas largest states, California and Florida. Both are in the Sun Belt, areas popular with older Americans after retirement. Both attract immigrants from nations to the South, such as Mexico and Cuba. Both have famous tourist attractions, including Disney resorts. Yet Florida has gained consistently on California economically.
In 1929, total income in Florida was only 14 percent as large as in California; today, it is nearly 41 percent as large. In 1929, the average resident of Florida had less than 53 percent as much income as the citizen of California. Now that average resident has more than 86 percent as much income. Florida has grown faster economically, because it does not tax income, and it does not tax people when they die, while California does both. In all of these examples, high taxes mean lower growth.
The experience in the United States has been duplicated throughout the world. In Western Europe, Ireland has the lowest overall tax burden of any major country, and the highest rate of economic growth over the past decade. Great Britain had the lowest growth rate of major European countries in the 1950s and 1960s, yet by the 1980s and 1990s it was growing faster than most of the major continental nations. Why? After 1970, the tax burden rose sharply in Western Europe, but much less so in Great Britain.
By 1990, taxes on average were significantly lower in England than in such major continental nations as France, Germany or Italy. Lower taxes meant more capital formation, more entrepreneurship, more output. London has again become clearly the leading commercial city of Europe.
Sweden, by contrast, has declined in a relative economic sense. By virtually every indicator, Sweden was one of the worlds three or four richest countries in 1970. Today, it is not in the top 15 countries by any measure, and per capita income is actually falling below the average of the European OECD countries. A crushing tax burden has led to a reduction in capital formation, a decline in hours worked, and general stagnation.
High taxes, low growth.
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Excerpted from "Prosperity or Stagnation? Remarks to the International Taxpayers Conference", by Dr. Richard Vedder, February 9, 2002. Dr. Vedder is Professor of Economics at Ohio University. This article first appeared in the Frontier Centre for Public Policys "Perspectives from the Frontier" (www.fcpp.org).
web posted June 3, 2002
Be thankful for the rich *
By Kevin Avram
Have you ever considered what life would be like if for the past 500 years it had been against the law to get rich? It's worth thinking about, because even those of us who are not so rich owe a debt of gratitude to rich people. They make our lives better and easier. They do so because rather than consuming their money, they save and invest. Their investment brings new wealth into being, which means new jobs, new services or products, and a higher living standard for all.
Investors provide products and services that we all want and need. Any supermarket in any North American city is packed to the gills with food products and other delicacies that were unseen in the courts of history's most famous kings. Supermarkets exist because groups of investors who already have quite a bit of money are doing their darnedest to get even more.
By doing so, they serve us all. They're not robbing anyone or stealing from people. They invest their money, fully realizing that in order to get a return on their investment they have to provide large numbers of people with the products and services they want at prices they're prepared to pay. If rich people were unable to accumulate money in their bank accounts and assets in their stock portfolios, or were restricted in their capacity to do so, new supermarkets, factories, mines, and thousands of other facilities that employ people and create new wealth would never be built. We'd all be poorer.**
Canadians live in homes that are overflowing with handy gadgets, conveniences, and labour saving devices for the simple reason that somebody had capital to invest and wanted to prosper financially. Automatic washing machines, vacuum cleaners, forced air furnaces, microwave ovens, and innovative new pharmaceuticals wouldn't be around if it weren't for rich people. They're the ones with the money to invest in the research, development, and manufacture of new products. Farmers and ranchers have workshops that are overflowing with sophisticated power tools and other labour saving devices for the same reason. John Deere tractors and Ford pickups wouldn't be around if people couldn't get rich and stay rich. The amount of capital required to build the facilities and employ the masses that churn out such products is absolutely staggering.
Rich people serve all of us because every investment they make is an investment in the social and economic well being of others. And the rate at which they increase their wealth benefits all of us, because accumulated wealth is always reflected in the rate at which new investment takes place. As such, the more wealth a rich person accumulates, the better off we all will be.
To prove the point, just imagine what the prairie region would look like and how many new jobs there would be if half a dozen billionaires and fifty or sixty multimillionaires decided to relocate to places like Swift Current, Medicine Hat, and Yorkton. The investment made by those who are rich would employ many and bring blessing and prosperity to thousands. Construction would be booming. Restaurants would be busy. Car dealerships would be doing a landmark business.
So the next time you hear someone thoughtlessly say that there are too many rich people, or that the taxman should sock it to the rich, why not ask him where he thinks the investment dollars come from that permit him to drive a new pickup, use newly developed medicines, or purchase some kind of new fangled gadget at Canadian Tire.
Kevin Avram sits on the Prairie Centre's Board of Trustees.
* See: Inequality of Wealth and Incomes, Ideas on Liberty, by Ludwig Von Mises.
** Von Mises stated that: "The much greater part of the rich men's
income is not spent for consumption, but saved and invested. It is precisely
this that accounts for their great fortunes. If the funds which the successful
businessmen would have plowed back into productive employments are used
by the state for current expenditure or given to people who consume them,
the further accumulation of capital is slowed down or entirely stopped.
Then there is no longer any question of economic improvement, technological
progress and a trend toward higher average standards of living."
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Write the following and demand free market rights for Western Canadian farmers!
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