Welcome to Keith's, my don't tread on anyone and the
libertarian Institute today. I am joined by dr.
Benjamin Powell. He is the executive director of
the free market Institute at Texas, Tech University and a,
professor of economics. In the brawls College of
Business, and a senior fellow with the independent Institute,
dr. Powell, thank you so much for
your time. All right, Keith happy to be
with you. You wrote a book called
wretched, refuse, the political economy of Ian and institutions.
What do people need to know about immigration?
All right, so what this does so economists, the social
scientists who study immigration, find overwhelmingly
that this massive economic gains so the immigrants but also the
societies where they arrived, the natives become a little bit
wealthier, there's a challenge to that.
That says, what if they undermine and this will be
relevant for your audience, really undermine our freedoms,
our economic freedoms, our property rights.
They break, you know, imagine socialist, immigrants from Cuba
come and recreate Socialism in Florida.
Well, that would destroy our productivity evaporate, these
economic gains and make us worse off.
Now, of course, I choose Cuban immigrants from Florida for a
reason because I can think of no better anti-socialist voting
Block in the United States then Cuban immigrants.
Well, what this book does is it takes the idea seriously that
they could undermine institutions?
And we look at it, a whole bunch of different ways across lots of
countries doing case studies and say, what happens when more
immigrants come? What does it do to the
institutions? And for the most part it Doesn't
affect a lot of them for some it makes us a little bit more free
and in some dramatic cases tends to make us a lot more free.
When it comes to social cohesion, having sort of a
center point that people can rally around, it doesn't seem
like saying, well we're all Americans really matters much.
I think the average person would say, well, America was founded
by colonialist racist slave owners.
So America is more or less nothing when it comes to
building, social cohesion between Americans plus
immigrants coming to America. Do you guys have any ideas as to
what how we can sort of lead the way in harmonizing are Well,
interest like that, yo, I think it matters about what your
social cohesion is around and if there are around the ideas of
the founding principles of the United States and individual
liberty, and freedom. And that's a good thing.
If they're to collectivist, Malik cohesive beliefs than
that's would be undermine our institutions and make us worse
off. So I think rather than some of
what's taught in American schools right now, I think would
be better to be proud of American Heritage and where we
come from and teach the ideas of individual responsibility
Liberty and the Melting Pot. The idea of America of the Ellis
Island generation of immigration.
I think the problems that we get in terms of ideology are really
more about the education here within the United States rather
than the beliefs of foreigners per se.
You wrote a book out of poverty sweatshops in the global
economy? What is it that people need to
understand about sweatshops that you discuss in this book?
Yeah, well, it's funny that you link these two together right
away because the people who read the first one, don't believe
that. I wrote the second one and vice
versa quite often. Because if you hear me talk
about immigration, they'll say, well, he's obviously a campus
liberal. And if they read the out of
poverty one, I'm obviously a corporatist capitalist shelf.
Instead there's actually something About free trade that
I think runs through both of them.
So the main argument and out of poverty is that sweat, shops,
provide, a step out of poverty. For some of the poorest people
in the world. This was true.
And in our nation's history, I grew up in Haverhill.
Massachusetts The Shoe City, my undergraduate was from
University of Massachusetts Lowell, the heart of the
Industrial Revolution and my ancestors worked in things that
would call sweatshops today. And that was part of the stage
of development as we accumulate more Capital, get better
technology wages Rose working conditions, improved and we We
moved on to a better life. That process is played out from
the United States and Great Britain.
Initially to, if we go back to Sweatshop country, circa 1960,
we're talking about South Korea, Taiwan, Singapore, Hong Kong.
And them instead of about 100 Year transformation of something
like pre-industrial, that post Sweatshop.
They're about a generation, then you look at what's going on in
Vietnam today, in places like that, where sweatshops are
Workers. Take these jobs because it's
better than their next best alternative.
Now, we can aspire to have better alternatives for them and
that's what part of the process of development does but you
don't make somebody better off by taking away their least bad
alternative, which is what these sweatshops often are.
So we could maybe see that using the legislative powers to force
people to not be able to work there.
Well maybe that's bad. But shouldn't we sort of
collectively decide to boycott these organizations to decrease
their bargaining power and maybe give them an incentive to pay
the laborers more now. So boycotts, dry up the demand
for the products, which dries up the demand for the labor, that
pushes down wages and destroys jobs and pushes people back into
subsistence agriculture. That's the Direction to go
unless it's something like what goes on in the Weger Province in
China now and what they're doing with forced internment of people
and making them produce things that slave labor and you do want
to drive up the dry up, excuse me, dry up the demand for that.
But for places where workers voluntarily take their jobs,
boycotting them ends up, throwing them back to the worse
alternatives. You go back to sweatshops from
the year, 1780 all the way up until I believe 2020.
Just amazing research in in this book at any point.
Did you sort of find there being a lot of influential politicians
or philosophers that gave us the idea that offering someone a job
as evil exploitation? But offering someone nothing no
products and no Services. Well that's great and you're a
member of the proletariat and we need to Riot together how that
seems so How did that idea ever come to so many people?
Yeah, I mean I think you find it more in philosophy than
economics baby. But the idea that there's
certain minimum standards that you must agree to interact with
somebody and it would be wrong to interact with them on any
less than that. But that's somehow it's not
wrong to ignore them at all. So, in the context of
sweatshops, the company that exclusively buys made in the
USA, Labor and benefits unionized wealthy workers in the
United States. Is somehow more moral than A
company that goes and gives a step up to poor workers in
Indonesia, that doesn't meet the threshold that the philosopher
believes is necessary but seems to be making their lives better
than someone who's ignoring them.
I've always found that to be a strange position.
When it comes to us, being able to visually see, all right,
South Korea, Singapore America, Great Britain.
They did have all these sweatshops and now, they're much
wealthier than they were previously.
But in a lot of these places you could find government
legislation or labor supported laws coming about at the same
time as we see these labor improvements.
How are we able to determine whether an increase in the
standard of living is the result of free markets or government
legislation? Yeah, I addressed exactly this.
In the book. Keith so by the way, most poor
countries today also have anti child labor laws and things like
that that just largely aren't enforced now but if you go back
and do our history, the United States first anti child, labor
law was passed in the 1840s in Massachusetts.
Here's what it said. Children under 12 years of age
can't work more than 10 hours per day in a factory so
eleven-year-old 60-hour workweek switch for the norm than of 10
hours. Monday through Saturday.
That was fine. Just no more than that.
And once you're 12, that doesn't apply and you can find these
types of restrictions and other US states, you can find them in
Great Britain, you can find them in France back when we were
poorer and less productive. The laws that they passed for
largely symbolic, they weren't binding, they didn't stop actual
child labor and the same goes for health and safety laws and
other things like that. What we find is as the economy
grew children left the workforce work for workplace safety
improved and laws continue to be passed.
The largely codified, what was already going on?
We didn't get National child, labor law and the United States
anti child, labor law, in the United States.
It's all 1938. Basically, once we were past the
stage of sweatshop development. Anyway, and economists when they
study both anti child labor laws and mandatory School, attendance
laws, they find. Once you control for economic
growth, these laws did little to change.
Been working or attending school that tells me that they're
basically trailing the market process of development and
codifying what's already happening and, you know, maybe
picking up a laggard here or there, but the thrust of the
change comes from us becoming more productive and returned.
By the way, that makes sense. Most of us don't want our kids
working, but when you're in extreme poverty, sometimes that
child labor is necessary to feed clothes shelter, the family, as
soon as you get those needs taken care of child.
Labor tends to decrease and we can see this in modern times 2.
Look, particularly at one study that was done in Vietnam,
tracking individual families and it's not just a nice linear
relationship. As economic growth is like this
on the screen as economic growth goes up.
Child, labor goes down. Know it's like jumps once you
get out of extreme poverty, like can get 2,000 calories per
family member big drop in child Labour, then around food
shelter, clothing, the official poverty line.
Boom, another big drop and that was going on during a decade of
growth in Vietnam in the 1990s, that tracked individual.
Ways and the children working. With things like inflation.
It can be very difficult to measure economic growth because
money doesn't necessarily mean. You have a ton of growth.
We've seen hyperinflation in Zimbabwe in Germany and a number
of other places. What are some reliable metrics
that we can use to judge whether an economy is growing stagnating
or shrinking, okay? I'm going to try not to get too
much of an econ, dork on your here right now.
So I mean, when a condom is talk about prices or talk about
income statistics were always Adjusting for inflation, but
inflation adjustments are not perfect.
There's lots of things that make them either under state, or over
State depending what's going on. But when we're talking about
like long-run development, if we look at things like GDP per
capita, life expectancy literacy headcount at the poverty line of
extreme poverty. All these things tend to go in
the same direction, you get some places where there's some weird
anomalies but for the most part they move together, and that's a
Sign of Economic Development and growth, an anomaly would be like
Cuba's Healthcare statistics in the life expectancy in Cuba
verse. How poor they are on other
margins and PS part of that is them cooking the books.
Well, I guess we could measure that to cuban-americans and see
if it's maybe a cultural thing as that ever been done to you
know, of any stats like that. Well, no part of what they're
doing is literally cooking the books.
They make people have forced abortions on high-risk
pregnancies and if you kill the baby before it's born, it
doesn't make it into life expectancy statistics.
If it dies shortly after birth, a one-week-old dying does a lot
to move the number when your average is 80 years old, If it
hurts your life expectancy statistics, that's part of it.
The other part is a centrally planned economy and they force a
lot of resources into Healthcare at the expense of other things.
People would like. Anyway, that's just an example
of a weird anomaly one, but for the most part these things go
together. So if I look at people in
America assume, I'm just a nationalist.
And I say, I want the working class, as if other people don't
work, I want these people to have higher incomes.
I want them to be wealthier. Why should I see Port free
markets. Well, free markets are the best
at delivering that for the working class.
The working class is going to be sensitive to the price of all of
the things that they consume if we free trip, if we trade freely
with the rest of the world and bring in more, a greater variety
of products at cheaper prices for them, that makes their real
earnings, their income go up. Now what it does is it changes
the mix of the jobs, the working class and for that matter,
everybody else in the United States is best suited to do when
we trade with people in other countries.
Trees who are more suited in econ speak, have lower
opportunity, cost of producing particular Goods.
By the way, the same game is true with immigration or with
International Trade. They're both two different ways
to do International Trade, both change, the mix of jobs, that
native-born Americans are best suited to do and both make the
pie bigger for Americans. Overall, as a result, neither
impacts the total number of jobs available for the native-born
population. It changes the mix.
And in fact all of the gains from international trade or
migration if you don't Shuffle the mix of jobs you don't get
the games. So the reshuffling that comes
with trade or migration that people bemoan is part of the
necessary process of freeing labor up from things that it's
not relatively best suited to do and reallocating it to where it
can create greater value. You wrote a book called
socialism sucks to economists drink their way through the
unfree world. Now, socialism, I guess you
could Define it, as simply helping people and making sure
that no one's in absolute poverty, what's wrong with that?
Well, that's not the definition of socialism.
If we just talked about Pleasant outcomes in, you know, milk and
honey. Everything feels nice.
So, as socialism meant something to Mark's, it meant something
to, you know, more than 100 Years of To have studied it.
And people throw this world are grounded, by the way, on both
the left and the right misrepresent.
What socialism is socialism means abolishing private
ownership of the major factors of production, your Capital,
your Machinery, your businesses and replacing them.
I'll say with some form of collective ownership.
In practice for any large Society, this means State
ownership of the, major means of production, that's what it meant
on your marks. That's what it meant in the
Soviet Union. That meant.
That's what it's meant to both Marxist and free-market
economists who have talked about this for over a century.
When it comes to the backend, the distribution of things, you
might hear a lot of Democratic. Socialist, say, you know what,
it's not the factors of production, we want to control.
Its once all that, once all those goods are produced, we
then want to be able to tax. And then redistribute those
goods is that a different sort of economic system, or is that
as other people would Define socialism the institutionalized
aggression against private property?
No, so lesson that if it is an infringement, Private property
rights but it's not the whole set sail.
Abolition of private property in the major factors of production.
Which once you do you're going to replace with some system of
command and control of how you organize economic activity.
Because some people will talk about socialism From Below or
squishy terms like this as if stuff just comes together like
no you need like prices in a market economy, coordinate
production. When you get rid of private
property, you get rid of the prices that coordinate, you got
to replace it with something that State Central.
Anning. Now, when we talk about a
welfare state, I think that's plenty of problems with the
welfare state. My guess is having a Libertarian
podcast, a lot of your viewers probably do too.
However we should not mistake them for socialism.
So Sweden, which is the first chapter of that book that we
visit, is a prime example of this sometimes.
Fox News will say that's socialist, Sweden, and same at
the same time. Bernie Sanders when you say, how
could you be elected as a socialist, just say, well, I
mean, like Sweden, both of these things are bullshit.
Sweden. Is a capitalist economy Volvo is
privately owned. Go to a restaurant or a hotel.
It's privately owned prices coordinated activity.
They have pretty close to free. International trade, strong,
private property, rights sound money.
Light regulation of business. What Sweden does have is really
high taxes and redistribution in a welfare state, and a bunch of
Labor Market race. I think that's messed up, and
when it was at its worst, it dragged down.
Swedish growth Sweden was laissez-faire from mid 19th
century to me. 20th century. They grew to be the fourth,
wealthiest nation in the world. They put in their big welfare
state and high taxes. It didn't impoverish them like
socialism, it's slowed their growth.
So they became bottom half of the oecd countries.
You know the club of rich countries from fourth in the
world down to the bottom tail. Other people group asked, I
think that's a problem but I wouldn't confuse it with
socialism. When you mention light
regulations, can you think of any regulations that America has
that they don't end Sweden? Well, these last couple years.
Yeah, that's really freaking easy.
Yeah, sweet. And in addition to doing pretty
well in the economic freedom index is over.
So there's something. By the way, your listeners
should look it up called economic freedom of the world
annual report. The website is free, the world,
got organs, the easy one to remember and you could get a
listing of countries, measured economic freedom, across five
big areas. Sweden usually falls in the top
quarter of the index, but somewhere, 25 to 35, is
something like that. So to of Norway, A and the rest
of the Nordic countries. But in these last few years of
course Sweden leg regulated covid River relatively right
lightly. And I would say you know we've
seen hygiene socialism around the world or a form of it.
These last few years of command and control bureaucrats telling
us what Market activities and social activities, we can engage
in and not and Sweden did relatively little of that and by
the way, so did the rest of the Nordic countries, they all come
out. Good on this too.
And I actually just published a new study today or released a
new study today that a The economic freedom rankings for
the covid restrictions and sure enough, Sweden pops up even
higher into the capitalist rankings and so does actually
Norway and Finland, go up really high, but all of them do very
well on that. So mandatory workplace closure
stay-at-home orders. There's nothing sweet and wasn't
getting that. We all got the last few years.
Yeah. Really.
When it comes to Swedish immigrants to America and taking
their net worth versus the net worth of the average Swede Did
you guys measure that by any chance?
No, we did it. I suspect the average.
Hmm, I don't know. Got it when it comes to.
Yes. But it would really just be
guessing When it comes to the concept of private property, you
might think that this would give some people a great amount of
institutional power, and allow them to be selfish at the
expense of the rest of us. Why is private property?
What is private property and why is it important?
Well, here's the thing with private property of capitalism,
you have competition. So the only way you get
something from somebody else, is by offering them a deal, they
accept? I offer you this.
You can take or you cannot take and it might be that, you might
not have very many other offers that look better, but you still
have the ability to say no under socialism.
There's a Monopoly called the state.
Remember State ownership of the means of production means
they're going to dictate how everything gets put together and
made. And by the way, you are part of
the means of production, labor is one of the factors of the
means of production. You can't control an economy
without controlling the laborers there.
You don't have A choice, you have command.
And by the way, you lose your other type of choice to your
political voice, your political choice.
So economists since the great Ludwig, von mises have known
that economic calculation under socialism is impossible, but
there's another type of thing that's not quite an
impossibility, but it almost is. And that's maintaining
Democratic freedoms, while having a socialist government.
So if you look around the world, economically free
democratically. Free tend to go together unfree,
unfree, too. Together the off, diagonals are
kind of rare, you get some exceptions, like Singapore.
We don't have political freedoms, but you have economic
freedoms. But what you don't see is that
other off diagonal of, oh, Democratic socialism.
We have no economic freedom. We have our Democratic freedoms
because once you centralize control over the means of
production, you've centralized the ability to punish
opposition. You can't maintain a free and
independent political voice against the regime if they
control your economic livelihood.
So the only example that I can think of in recent years that
approximated this was Venezuela and notice I said, was so
Maduro, excuse me, Chavez was democratically elected in 1998,
he democratically put in a new socialist Constitution and then
soon thereafter people lost their free democracy, their
economic freedoms, went to hell. Now for a while things look good
there. While oil prices were high
because they sit on the world's largest oil reserves.
They were basically able to export oil, use the earnings to
import Goods. For Venezuela, meanwhile, even
during the 2000s, when things seem good food production was
declining in Venezuela, but once 2013 hits an oil, prices come
down. And by the way, production came
down, because the state wasn't very good at running an oil
company, then the game was up, but like Maduro got re-elected
with something like seventy percent of the popular vote
recently, but in an economy that had hyperinflation and the
average Venezuelan losing more than 20 pounds that year.
They didn't all find Jenny Craig.
Egg usually high unemployment High inflation is a good way to
get. Voted out of office, take
hyperinflation and literal starvation, and you get over 60,
70 percent voter approval. That tells me that their
democracy is a sham I'm sending Dinesh D'Souza there to see if
there were any mules, but casting votes on behalf of the
citizens when it comes to the claim of inequality, you can
walk into places like San Francisco or New York, and you
will see literal homelessness people, starving and wearing
rags. And then you'll see, you know,
these Mansions, you'll see these skyscrapers things that are
worth billions of dollars. Probably, how can you justify
the free market system when It creates such a drastic
inequalities. Yeah.
Actually, I'd say what you're describing is not the free
market system. So, I want to be clear that when
we talk about free markets, that defending capitalism, or things
like that, that does not synonymous with the current
United States on the Spectrum. The United States is more in
that direction than some other places but that's kind of like
being the tallest dwarf. So, it's interesting that you
say San Francisco, New York City.
What's one of the big drivers? Not the only.
But one of the big drivers are homelessness is unaffordable
housing. But why do we have unaffordable?
In those places, it's because of government restrictions on
building things that prevent competition from creating more
housing and driving down its price to make it more
affordable. California has long been a
leader in doing that, with putting land off limits with
putting permit moratoria height, restrictions minimum lot size as
minimum setbacks inclusionary zoning, which is a name for
Price. Controlling, a portion of new
development California's, the worst on this New York's pretty
bad too. I remember a class, Asik
studies, maybe 20 years old now but that's before the problem
even got as bad as it is in San Francisco.
But back then they looked at the difference between the physical
construction cost of a new home and the price of a new home and
said, how much of this is intrinsically scarce land?
It was scarce land. Driving it double the lot size,
hold the rest of the house constant and you should double
that differential. Instead they find about a 10%
change. So 90% of the scarcity was
government permission to build not intrinsically, scarce land.
This homelessness crisis is in part a major part, A government
created. One of not letting capitalism
work to build or as Brian Caplan's new book.
Coming out is called build baby build.
God, does that guy ever? Stop writing.
Don't be a feminist came out two days ago and he's already coming
out with a new one. What are some examples?
Historically of deregulation? Increasing the quality of goods
and services and decreasing the price.
You mean like economy-wide? I mean we have the products or
services or countries. So I think one of the countries
that we explore in socialism socks.
That's one of the inspiring ones to look at today's, the country
of Georgia, the former Soviet Republic south of Russia, east
of the Black Sea, north of Iran, kind of a tough Geographic spot.
It in fact, partially occupied by Russian troops right now and
has been for a while but they had essentially no reform.
Fall of the Soviet Union until the mid-2000s you get the rose
Revolution. Mikhail Saakashvili goes around
handing out roses gets elected he puts kaha been ducats in as
his Finance Minister and kaha would be libertarian enough for
you to have on the show and for him to maybe call you or
somebody else's stateís. He was a hardcore like Roth
party and libertarian type had. They put him in charge as
Minister of Finance. And he did, radical
privatization of State Property going to the highest bidder, no
government Handouts know, anything else and it could even
be a foreigner, even a Russian who would buy it.
So private property funneled to those who could use it.
Most efficiently drastically cut taxes, get down to a ten percent
flat tax rate did massive layoffs of government sector.
So he spiked unemployment up to like 30 something percent is
first year. Now most people here 30%
unemployment they think? Oh my God, that's bad.
Well he was firing - productivity workers so it
actually increased the country's productivity they had to get
reallocated to the private. To where they could create
value. But in fact one of them is he in
fired the entire country's traffic police in one day and
the joke is crime went down because they were some of the
most corrupt people in the country.
So Georgia this is what had been an economic Backwater turned
around and started growing dramatically since then, you're
still relatively poor because of her starting from a very low
level, but they're about 30 percent richer than what they
would have. Been in the counterfactual of
staying, how they were in about a 10-year period of time.
And in fact, they They taught that they cracked the top 10 of
most economically free countries a couple years ago.
You look at a country like America, that's very wealthy.
That just one of the highest GDP is around.
Then you see people without access to healthcare or
education, therefore the state should step in and provide that
education at no cost to those people this way.
No one goes without Healthcare or education.
What if anything is wrong with that logic?
Well, plenty, they might be able to do it at no cost to somebody,
but there's a cost for somebody else always.
And then it's a question of, how do you rational if you're not
using prices to ration it? And, you know, I'm sure you've
talked before with other guests about the essentially death
panels and other countries that have socialist economic, excuse
me, Healthcare Systems. So this is like one area where
you think about, you can think about a socialist economy or
socialized industry. And I don't think it's an
accident that you're talking about education and health care.
One of them education K through 12 is probably 80 to 90%.
And socialized in the United States.
Government paid and provided and tremendously, inefficient, and
negligent. And on the job, especially these
last two years, when teachers unions like remote work
vacations, Healthcare isn't socialized in the United States,
but it's almost like a fascist industry where you have nominal
private ownership, but extensive mandated government command and
control over how the industry functions.
And then, when it doesn't function, Manuel, you ask
questions like how can capitalism solve that are?
Why can't capitalism solve these two problems that seem
essential? It's like, well here to areas
where we're not really doing capitalism or free markets in
the United States. When it comes to Health Care,
Paul Krugman in 2004 said that 44 percent of healthcare is paid
for and controlled by the state. He didn't also account for the
FDA that was before Medicare Part D before the Affordable
Care Act and Medicaid expansion. It's so corrupt that I'm shocked
that they use that. As an example of, when Freedom
falls short, final question in a free market, the worker goes to
his job as told, where to Sit what to do Hebe lives more or
less like a high-class slave. Therefore, what we need is for
these decisions to not be made by some Elites at the top but to
be made democratically in all working institutions.
What if anything is wrong with that idea?
I work at a university that's about as close to a worker run
firm as you get with faculty governance and the inefficiency
and waste is a parrot for out higher education, when you have
people who don't Have a stake in the outcome voting on how to
allocate resources that other people could otherwise manage,
you get all sorts of perverse outcomes.
Ultimately the recourse for workers in a free market.
If you don't like, the conditions of your job, is to
say goodbye and go get another job from another employer who
offers you better conditions Check out the books socialism
sucks out of poverty and retched.
Refuse dr. Ben Powell.
Thank you so much for your time sir.
All right, thank you. Keith.