Wednesday, January 27, 2010

"Free Market Makes a Lot of Sense" Redux

In November I posted an excerpt and a link to a guest column I had in the Cedar Rapids Gazette. Since I'm not sure how long the Gazette will maintain that link on their website, I present the original unedited version of that article below:

By now it’s well-known that the Obama Administration’s “Manufacturing Czar” Ron Bloom raised a few eyebrows when he stated that “the free market is nonsense.” If the waning months of the Bush Administration are any indication, the leaders of both major parties now basically share this philosophy. That’s a pity.

Our “nonsensical” free (though increasingly regulated) market has given America one of the highest standards of living in the world. Even our poor people could have it much worse. According to the Heritage Foundation, of poor households in the United States: 46% own their own homes, 76% have air conditioning, nearly 75% own a vehicle (30% own two), 97% own a color television, 62% have cable or satellite television. 89% of poor families say they have enough to eat, while only 2% say they "often" do not have enough to eat. Imperfect, but not bad.

If we don’t have a free market economy, then we have a command economy wherein government regulators control wages, prices and production rates. (Sure, it’s a sliding scale between the two, but an administration that views one end as “nonsense” will obviously only let us slide one way.)

When I was young, the Soviet Union was the ultimate embodiment of a command economy. I spent some time there in the summer of 1991 as a “student ambassador.” A group of American students and I toured the country, seeing Moscow, Leningrad (now St. Petersburg) and the Estonian countryside. We stayed with some nice Russian families. Although my three weeks there certainly doesn’t make me an expert on all things Soviet, it was an eye-opening trip for a sixteen year old Iowa farm boy nonetheless.

I saw the blocks-long lines of people waiting for bread and other necessities. I toured GUM department store in Moscow. A great Soviet achievement, we were told it was the largest department store in the world. It’s shelves were bare.

Somewhere I got a small toy Soviet army tank. The price was stamped right into the steel bottom of it at the time of manufacture. (I forget what the price was. Let’s say two rubles.) That price, as well as the number to be produced, presumably, had been set by some panel of government planners months before the toy tank rolled off the production line.

What would the price have been if the toy tank had become the “must-have” toy for Russian kids, with demand quickly outstripping production? Two rubles, get in line! What would the price have been if it was sold in a store on the far side of Siberia, burning up 4,000 miles worth of fuel resources to get there? Two rubles. And if Russian kids hated the new toy and would rather play with a broken piece of cobblestone? Then they would gather dust on store shelves, available for the low, low price of… two rubles.

It’s easy to see that a market system based upon the logical decisions of bureaucrats a month or a week ago quickly becomes a system based upon no logic at all. This is the “sensible” system that the Manufacturing Czar and, by extension, his boss President Obama advocate?

Although I hope that we don’t follow the Soviet economic model, there’s at least one thing that the Soviets got right. They got rid of their czars.

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