Category Archive 'Capitalism'

12 Apr 2017

“United is Why People Hate Capitalism”

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United Airlines CEO Oscar Munoz.

Kevin D. Williamson explains that the big ugly corporations that we particularly hate, by some curious coincidence, really tend to be exactly the ones which are most in bed with the regulatory state.

Capitalism is unpopular for four reasons: banks, health-insurance companies, cable providers, and airlines. These all have something in common.

Airlines are in the wringer this week, with United shaming itself in spectacular fashion: Having overbooked a flight and seated the passengers, the company found itself needing four seats—not for paying customers but for airline employees who needed to be moved to another airport. When they did not find any takers for their paltry travel-voucher offers, they simply dispatched armed men to the airplane to force paying customers off, in a now-famous case, literally dragging one of them away. …

The FAA Consortium in Aviation Operations Research estimated a few years back that the inability of U.S. airlines to deliver the services they have been paid for and that they agreed to deliver costs businesses something like $17 billion. But that does not really capture the expense. A conference I attended not long ago was scheduled to get under way in the afternoon, but all of those who were speaking or who had other formal roles at the event were contractually required to arrive the evening before. There was plenty of time to fly in on the morning of the conference and arrive well before the opening of the conference, assuming the airlines kept to their schedule — but the organizers, who are not fools, were not willing to bet on that happening. I did a little back-of-the-envelope English-major math and concluded that the extra hotel rooms alone must have added a six-figure sum to the organizers’ expenses; if a significant number of the guests followed suit and decided not to bet on the airlines’ keeping their schedules, then the extra expenditure would have easily exceeded $1 million. There are thousands of events like that around the country every day. …

The airlines are terrible, of course, and every time one of them goes kaput, I do a little happy dance . . . until I remember that all that means is that the equally terrible remaining airlines have less competition. …

Airlines are like banks, health-insurance companies, and cable providers in that they work in very heavily regulated industries with relatively low profit margins, which creates enormous pressure for consolidation. (Notice how many health-insurance companies ditched markets they had previously served after the grievously misnamed Affordable Care Act was passed.) Those industries also are alike in that the relatively few players who remain in the market are heavily constrained by public-sector actors with powers that no private-sector monopoly would ever dare to dream of: the Federal Reserve, Medicare, the FCC, and the motley gangs of bureaucrats that have a hand in the airline business.

n the United States, it is regulation, not deregulation, that prevents foreign carriers from competing in the domestic market, which is not the case in New Zealand, which entered into a number of open-skies agreements to increase domestic competition, something our dinosaur airlines have fought against tooth and talon. And in New Zealand, airlines are obliged to compensate passengers if they bump them—up to ten times the cost of the ticket. No so in the United States.

And that points to one of the biggest reasons people hate banks, cable companies, health-insurance companies, and airlines: There is an in-your-face asymmetry of power. If the airline says your flight is going to be delayed by two hours — not because of a hurricane or unforeseeable events but because of straightforward managerial incompetence — then you basically have to live with it. You don’t get to say: “Okay, but I’m taking $50 off the airfare.” Your bank expects you to accept screw-ups on its part that might cost you hundreds or thousands of dollars if the mistake was yours. (My bank just spent 46 cents to send me a check for . . . 47 cents . . . because apparently I bank with people who cannot quite manage to calculate interest correctly.) Your cable service may go out for hours at a time, but if you’re one minute late with your payment, expect penalties.

That is one major problem with heavily regulated industries in which there is insufficient competition: The managers act as though the business were organized for their benefit rather than for the customers, and that attitude seeps down to front-line workers. The typical airline employee treats the typical traveler as though he simply is in the way. I once was introduced to an executive who informed me that he was in charge of “strategic planning” for a large municipal utility company. I asked him whether his strategic plan was to keep being a monopoly. “I’d really be exploring that angle, strategic-planning-wise,” I advised. He did not seem to appreciate my counsel.

If I were a better sort of person, I’d have a little sympathy for the senior executives at United, who must be having a hell of a week. I am not a better sort of person, and I’d be content to see them flogged in the streets. But that’s no way to make policy.

19 Apr 2016

Tweet of the Week

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Tweet124

22 Jul 2012

The Worst System Except For All the Others

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Hat tip to Jose Guardia.

23 Dec 2011

Defending Scrooge

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E. Scrooge, CEO of Scrooge & Marley, LLC with his ne’er-do-well nephew Fred.


Jim Lacy
, at National Review On-Line, has a spirited defense of one of the first of the 1%-ers.

I contend that Scrooge, before he became “enlightened,” was already doing more to help his fellow man than any of the other main characters we meet in A Christmas Carol. Moreover, by giving away a substantial portion of his accumulated fortune, he drastically reduced his ability to do even more good in the world.

Scrooge was a “man of business” and evidently a shrewd and successful one. Although Dickens fails to tell us exactly what line of business Scrooge is in, a typical 19th-century “man of business” could be expected to involve himself in many endeavors — what investment advisers today refer to as diversifying one’s risk. One can infer from A Christmas Carol that Scrooge was a financier, who lent money to both businesses and individuals. He also spent long hours at the Exchange, probably speculating on commodities, buying and selling government debt, and purchasing and selling shares in various joint stock companies.

We can also infer some things about Scrooge that Dickens does not tell us directly. He left boarding school early, supposedly because his father had a change of heart toward him and wanted him home. A lack of finances may also have had something to do with it, as Scrooge’s formal education ended early and he was apprenticed as a low-level clerk to a tradesman — Mr. Fezziwig. From this low start, Scrooge exhibited a relentless drive that eventually made him rich. Along the way, his business had to survive the Napoleonic Wars, adapt to the Industrial Revolution, and fight its way through several severe economic depressions. In fact, in the year A Christmas Carol was written (1843), Britain was just coming out of a five-year economic slowdown in which only the most nimble and carefully managed enterprises survived. During Scrooge’s business life, upwards of 100 businesses failed for every one that succeeded. Scrooge must have been a very good businessman indeed.

There is no hint that, as Scrooge went about making his fortune, he was ever tainted with any scandal. He appears to be a well-respected, if not overly liked, member of the Exchange. This speaks well for his probity and recommends him as man with a reputation for fair and honest dealing with other businessmen. He probably drove a hard bargain, but that is the nature of business, and his firm’s survival as a going concern depended on it. As Scrooge is trying to keep his doors open in the midst of a great economic downturn, one should not be surprised that he is cutting firm expenses by reducing coal usage. Still, he is not being overly stingy by paying his clerk, Bob Cratchit, 15 shillings a week. According to British Historical Statistics, 15 shillings a week was about the average for a clerk at the time, and nearly double what a general laborer earned. While Cratchit may have to skimp to make ends meet, he is paid enough to own a house and provide for a rather large family. Cratchit is not rich, but by the standards of the time he is doing well. Besides, given the hard economic times, he is lucky to have any job at all. If Scrooge had not been careful with his money, his firm would have folded, and then where would Cratchit be? We may of course also infer something about Cratchit that goes unstated in Dickens’s work. His inability over perhaps two decades to advance himself or secure a better position with a more benevolent boss betrays a singular lack of ambition on his part.

Read the whole thing.

26 Nov 2009

The Meaning of Thanksgiving

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Mike Franc, at Human Events in 2005, identified the real reason for celebration at the first Thanksgiving.

Writing in his diary of the dire economic straits and self-destructive behavior that consumed his fellow Puritans shortly after their arrival, Governor William Bradford painted a picture of destitute settlers selling their clothes and bed coverings for food while others “became servants to the Indians,” cutting wood and fetching water in exchange for “a capful of corn.” The most desperate among them starved, with Bradford recounting how one settler, in gathering shellfish along the shore, “was so weak … he stuck fast in the mud and was found dead in the place.”

The colony’s leaders identified the source of their problem as a particularly vile form of what Bradford called “communism.” Property in Plymouth Colony, he observed, was communally owned and cultivated. This system (“taking away of property and bringing [it] into a commonwealth”) bred “confusion and discontent” and “retarded much employment that would have been to [the settlers’] benefit and comfort.”

Just how did the Pilgrims solve the problem of famine? In addition to receiving help from the local Indians in farming, they decided allow the private ownership of individual plots of land.

On the brink of extermination, the Colony’s leaders changed course and allotted a parcel of land to each settler, hoping the private ownership of farmland would encourage self-sufficiency and lead to the cultivation of more corn and other foodstuffs.

As Adam Smith would have predicted, this new system worked famously. “This had very good success,” Bradford reported, “for it made all hands very industrious.” In fact, “much more corn was planted than otherwise would have been” and productivity increased. “Women,” for example, “went willingly into the field, and took their little ones with them to set corn.”

The famine that nearly wiped out the Pilgrims in 1623 gave way to a period of agricultural abundance that enabled the Massachusetts settlers to set down permanent roots in the New World, prosper, and play an indispensable role in the ultimate success of the American experiment.

A profoundly religious man, Bradford saw the hand of God in the Pilgrims’ economic recovery. Their success, he observed, “may well evince the vanity of that conceit…that the taking away of property… would make [men] happy and flourishing; as if they were wiser than God.” Bradford surmised, “God in his wisdom saw another course fitter for them.”

The real story of Thanksgiving is the triumph of capitalism and individualism over collectivism and socialism, which is the summation of the story of America.

And it looks like we’re about to receive another lesson of the same kind. For what we are about to receive, may we be truly thankful.

19 Mar 2009

No Better Alternative to the Free Market

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Milton Friedman, 1912-2006

What a pity he’s not here to comment on the follies of the Bush and Obama administrations.

2:24 video

01 Jul 2008

People Used to Eat Loons

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Loon Decoy, Nova Scotia

One of my liberal college classmates was recently ranting about the terrible growth of Inequality over the whole post-Reagan period of the ascendancy of Conservatism in American politics, which roughly coincided, interestingly enough, with most of our own real, post-age-30, adulthoods.

Another classmate effectively rebutted those assertions of declining middle-class economic well-being by pointing out how much had changed with respect to lifestyle and expectations in America during that time, as well as over our own lifetimes. We approaching-age-60 adults can remember not only a world with no personal computers, no cell phones, and no multiple family automobiles. We can remember the time of no televisions, no air conditioners, party-line telephones, and a lot of people owning no automobile at all.

One can see the dramatic impact on human life of the economic growth produced by the free economy just by looking at antique artifacts of everyday life. Those charming collectible pieces of folk art being sold at auction for high prices to serve in future as decorative art not so terribly long ago were practical tools.

Take the charming, somewhat primitive, stark and streamlined decoy above, found in Nova Scotia, going on the block at a Guyette & Schmidt Auction later this month. Someone will be proudly displaying it soon in his living room or den but, less than a century ago, it was bobbing in some cove or inlet along the shore as a hunter was trying to shoot… a loon.

The common loon, Gavia immer, is protected today, and most people would find the idea of shooting one of these iconic symbols of the Northern wilderness sacrilegious and the idea of cooking and eating one even less appealing.

Loons are pretty much the lowest evolutionary form of waterfowl, the most primitive and the boniest, featuring the toughest flesh and the fishiest taste. No one would eat loon if he could get coot or even merganser.

Loons were so renowned for their lack of gustatory appeal that a whole genre of loon recipes taking roughly the following form are traditional jokes.

PLANKED LOON
Catch a Loon Duck. (Black Lake Loon’s are best). Pluck and clean. Boil well. With sharp knife, split duck down the belly. Splay it on a well soaked hardwood plank. Nail it good and wire it securely. Place upright on plank in front of hot coals on outdoor fireplace. Cook well for about two hours. When done, throw that fishy duck away, and eat the plank!

But, in the old days, people really did hunt loons in order to eat them. There would be periods of the year when the more migratory waterfowl were not present and available in the North Country. Ducks and geese would have flown South, but you could still find loons.

Even in Nova Scotia, I expect it’s been a long, long time since anybody was reduced to dining on loon.


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