The Liberal Order

Wal-Mart and the Working Conditions In Bangladesh

Mario Rizzo offers insight into the unintended consequences of forcing clothing manufacturers to incur costs improving worker safety standards in their factories in Bangladesh. 

Wal-Mart is refusing to sign on to a plan devised by labor safety groups (many supported by labor unions who simply seek to raise the cost of operating overseas) that other garment manufacturers have already signed that threatens to cease their operations in Bangladesh unless specific worker safety initiatives are taken. Wal-Mart has stated publicly that it will monitor safety conditions in Bangladesh itself, knowing full well that it can do a better job of doing this consistent with the interests of both the workers and its customers. Of course Wal-Mart is being berated for this move.

Why do I trust Wal-Mart on this? First, the overzealous reach of the labor groups will prove detrimental to Bangladeshi workers, the point made by Rizzo.

More importantly, I had a student once who worked at a major cereal manufacturer that will remain nameless to protect her. She told me, and I have no reason to doubt her statement, that their cereal plant was shut down every year by one entity and one entity only, and it wasn't government inspectors. It was Wal-Mart. She said that no matter what they did, and they knew when Wal-Mart was coming, Wal-Mart would inspect their plant ever year and every year the retailer would find something wrong, forcing the company to shut that plant down until Wal-Mart's concerns were rectified. The cereal manufacturer had every reason to comply with Wal-Mart's demands given that it's the world's largest retailer, and Wal-Mart had stricter cleanliness and safety requirements than any other entity inspecting these plants, including government regulators.

Wal-Mart has every incentive to protect both its workers and its customers. Yes, there are shortcuts firms and people make when they believe they are not being watched, but it cannot be said that nobody is watching the factory conditions in Bangladesh. Wal-Mart will spend money guaranteeing worker safety to the point that the last dollar spent improves both its customers' and its workers' interests.

If I really cared about the workers in Bangladesh—and I do—and not just my own selfish interests, I would welcome Wal-Mart's plan to do its own inspections of these plants. Labor groups' overriding interest is to shutter these factories, destroying any opportuntities, no matter how arcane and poor the conditions seem to us in developed countries, in an attempt to protect the jobs of union workers in developed countries. And would anyone really trust government inspectors in Bangladesh to serve and protect the interests of low-skilled workers? 

Maybe Steve Pearlstein Needs to Quit His Job

Watch the video below and listen to Steven Pearlstein argue that Charles and David Koch are too ideologically driven to own a newspaper. His concern is that their ideology will cause them to influence the reporting of news at the eight affiliated newspapers of the Tribune Company if they succeed at buying the media conglomerate.

You can read Pearlstein's article that is the topic of the video discussion here, where he encourages the writers and editors and other staff of the LA Times (and also the other seven affiliated Tribune newspapers) to threaten to quit en masse if the hedge funds and asset management companies that currently own the Tribune Company agree to sell it to the Kochs. In doing so, his theory goes, the Kochs will be deterred from even making an offer and the world will be spared these two undeserving potential newspaper owners having a venue to espouse their ideological drivel. 

Now, I don't know if the Koch brothers are too ideologically driven to own a newspaper or not. I do know that many, many writers have complained that the Kochs have too much influence in higher education, with all that money they donate to universities, including George Mason University. Oh, and by the way, GMU just happens to be the university where Steven Pearlstein teaches.

If Pearlstein is truly concerned about the ideological influence of the Kochs on news reporting should they succeed in buying the Tribune Company, then certainly he must be equally concerned—even moreso from my perspective—about their undue influence on the faculty and administration at universities that accept their money and what is taught at these universities. If so, if any university accepts Koch money, including GMU, doesn't Pearlstein's principle dictate that the faculty and adminstrators at these universities should quit (preferrably en-masse) in order to preserve ideological independence and purity. I truly believe Pearlstein to be a man of noble character who holds fast to his principles, so shouldn't he abide by that same advice he offered to reporters, photographers, editors and other staff at newspapers? 

  

The Causes of the Wealth of Nations

 

The Perverse Effects of Federal Reserve Policy

It is amazing how cheaply Apple is able to borrow money. Its 10-year bonds issued this week yielded 2.415 percent at a time 10-year U.S. Treasury yielded 1.61 percent. Apple 30-year bonds yielded 3.883 percent, while 30-year Treasuries were at 2.811 percent.

Investors are willing to lend Apple money for three decades for only about a percentage point more in interest than if they lent the same money to the U.S. government.

Story here.

So despite sitting on tens of billions of dollars, Apple is issuing bonds — you know, borrowing money, to the tune of $170 billions of it. 

Well, because the Fed is so busy buying up U.S. government debt and mortgage-backed securities, investors are being squeezed out of these markets and are willing to invest in corporate bonds. That sounds great in that this should spur increased investment, therefore creating jobs and improving economic growth. Or so the story goes.

But for the economy to take off, businesses need to take advantage of those low rates to invest—to invent new products, build new factories, hire new workers. Instead, what Apple is doing is all too typical. It is taking advantage of low rates to funnel money to shareholders in a bit of financial engineering, rather than triggering new investment. And as such, it is a powerful reminder of the limited ability of the Fed’s bond buying to create rip-roaring growth.

Ben Bernanke will turn out to be the greatest genius ever to run the Fed, or its biggest putz. Time will tell. 

Comparing Technology from 1993 to 2013

A very clever comparison of the technology available in 1993 to the technology available today, though I don't think I'd include the laptop as a direct comparision. But everything else surely fits, if only the cost comparisons were included.

HT: Newmark's Door

A $2,600 Sucker?

A New Hampshire man who thought he had a decent ball toss says he lost his life savings—or about $2,600—playing a carnival game he claims was rigged.

Really? Was there any doubt about the chance and how these game operators make their money? Unfortunately, this is not uncommon and is an example of sunk costs and why they should be ignored. There are only two other games that have lower odds of winning and are therefore more corrupt.

The stupid and evil parties demonstrate the harm arising from bipartisanship.

Remember, in politics there's the stupid party and there's the evil party. Sometimes they join together and do something that is both stupid and evil—we call it bipartisanship.

It's the inverse of the federal budget world these days, in which automatic spending cuts are leaving sought-after pet programs struggling or unpaid altogether. Republicans and Democrats for years have fought so bitterly that lawmaking in Washington ground to a near-halt.

Yet in the case of the Abrams tank, there's a bipartisan push to spend an extra $436 million on a weapon the experts explicitly say is not needed.

"If we had our choice, we would use that money in a different way," Gen. Ray Odierno, the Army's chief of staff, told The Associated Press this past week.

Of course, the jobs argument has to come into play here:

Pete Keating, a General Dynamics spokesman, said the money from Congress is allowing for a stable base of production for the Army, which receives about four tanks a month. With the line open, Lima also can fill international orders, bringing more work to Lima and preserving American jobs, he said.

Hmmm?!? Let's ignore opportunity cost, which is the true cost of government. That $436 million could indeed be spent elsewhere, possibly improving social welfare far more than it is by spending it on tanks. Yes, politics gets in the way, which is all the more reason to limit what we do through the political process. If this type of waste prevails in what most people would truly characterize as legitimate functions of government, there's no telling how much waste is encountered in those areas in which government is hardly likely to create any true social value.

 

Don Boudreaux Critiques Cass Sunstein's New Book

In his review of Cass Sunstein's new book, Simpler, Don Boudreaux notes:

But his faith in government combines with a scanty appreciation of the creative and disciplining powers of markets to render his case for active regulation, whether imposed through nudges or commands, less than persuasive. The pages of "Simpler" bubble over with examples of adults' weak capacity to choose wisely, which, in Mr. Sunstein's view, calls for more expansive government.

The author boasts, for example, that "to save consumers money, we required refrigerators, small motors, and clothes washers to be more energy-efficient." Apparently producers are too benighted to compete for customers by offering such money-saving products. And consumers are too distracted by their own weaknesses to choose such offerings. Similarly, Mr. Sunstein believes that huge numbers of people really want to be organ donors but are prevented from agreeing to donate their organs simply by inertia.

I am reminded of this great quote by Adam Smith from An Inquiry Into the Nature and Causes of the Wealth of Nations.

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with most unnecessary attention, but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous in the hands of man who fave folly and presumption enough to fancy himself to exercise it.

Larry Summers On Why Gridlock Is Good and the Fallacy To Think That Washington Was Ever Anything Different

Anyone who has worked in a political position in Washington has had ample experience with great frustration. Almost everyone in U.S. politics feels that much is essential yet infeasible in the current environment. Many yearn for a return to an imagined era when centrists in both parties negotiated bipartisan compromises that moved the country forward. Yet fears about the functioning of the federal government have been a recurring feature of the political landscape since Patrick Henry’s assertion in 1788 that the spirit of the revolution had been lost.

Story here. Here's a post of mine from last December on exactly this.

Although we always bemoan bureaucracy, it has its purposes. With regards to government, rapid and inconsistent fluctuations create too much uncertainty, making life worse, not better. In addition, I believe the worst legislation is passed under the guise of bipartisanship, a common response to crisis (PDF).

What about the jobs?

Stephen Colbert interviews libertarian and Reason.com's editor-in-chief Nick Gillespie on efforts to legalize marijuana use. At about the 3:50 mark Colbert comments (yes, in jest):

If we stop making it illegal, what happens to our private prison industry? Because those prisons are filled with pot users and those are good incarceration jobs.

Enough to make a good Keynesian proud.

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