Industry, Energy, and the Moral High Ground

Originally published in Flourishing Mar Apr 2013

I was watching television last night (March 26), when I was disturbed by a news item scrolling across the bottom of the screen.  Paraphrasing, the message was that the U.S. State Department will open new hearings on the Keystone XL pipeline project on April 18.  Huh?  I thought Hilary’s State Department had given President Obama clear passage to a decision on Keystone XL way back in 2012, long before the election.   And, I thought I’d read not long ago that the EPA Administrator was planning to resign, because she thought the President was going to approve the Keystone XL project.  So I checked, and my memory was correct.

This is why central planning and heavy-handed regulation don’t work; or perhaps I should say they don’t work for the American people or for economic progress.  We all know intuitively, I think, that political calculations in Washington more or less continuously trump reason and reality.  So, I’ve never understood how we get suckered into the belief that patently demagogic politicians and their swarm of camp followers can make better economic, environmental, and public safety decisions than the often brilliant and generally hard-working people who strive every day to offer life-enhancing products to increasingly discerning customers for a profit.  The historical evidence and our own life experience is virtually all to the contrary.  

We in the western world are the beneficiaries of the greatest development in human history—the Industrial Revolution—which enabled higher human productivity, more leisure time, faster and safer transportation, more complex scientific discoveries, safer and more comfortable places to live, and longer lives, to name just a few of its benefits; and left in its wake the Information Revolution and the emerging Biological Revolution. 

So, instead of trusting everything to the posers in Washington, I think we might want to once again embrace the free market principles that gave us that Industrial Revolution.  We could start, for example, by stopping the endlessly redundant nit-picking of every industrial project for the remote, one-in-a billion chance that somewhere, sometime, somehow, a pipeline will rupture and leave a temporary stain the size of a football field in some farmer’s patch of corn.  I mean no offense to the farmers, but do we think that the aggrieved farmer—who does retain his property rights—will not be recompensed, contractually or through the courts?

But wait, didn’t I also hear on the news yesterday that a Canadian freight train had derailed in Minnesota, spilling oil in a farm field?  Maybe we should weigh that all but trivial event—which I’m sure captured the President’s attention—against the incalculable human benefits of petroleum-based energy.  And, if you please, I’ll include nuclear and coal-based energy in my argument, too.

Really, it should be a moral embarrassment to us that in today’s world, millions of people die every year due to a lack of dependable energy supplies.  Isn’t it amazing that we environmentally aware, creature-sensitive Americans have cordoned off centuries worth of potential energy supplies in the form of natural gas, nuclear power, oil, and coal in the name of  “saving the planet”.  Rather than promote a better quality of life for desperate human beings throughout the rest of the world—which we could readily do at great economic, cultural, and moral benefit to ourselves—we instead celebrate, as  moral idealism, battery-powered cars with a driving range rivaling the distance of Tiger Woods’ 6 iron; and sorting through trash to put everything in its proper bin.  That’s a pitifully vapid—not to say inverted—path to moral self-esteem, don’t you think?

I’ve been watching this nonsense and remaining mostly silent for upwards of forty years.  But, yesterday I read something that was said by the greatest cultural icon of the 20th century in America:  Our lives begin to end the day we remain silent about the things that matter.   So—not to offend or debate, but to educate—my self-imposed muzzle has been removed.  (I know that you know that I write to you out of love; and if you’re not convinced by my argument, that’s ok.  I won’t hold it against you, and I’d appreciate the same consideration.)

We Americans have taken industrial and material progress for granted, and we’ve carelessly embraced “going green” as a moral ideal–expecting that the unprecedented standard of living we’ve enjoyed would continue.  For forty years, we’ve permitted relatively small, but politically connected and well-funded, groups of anti-industrial environmentalists to roadblock new energy production and industrial development at nearly every turn.  Some call them “tree-huggers”; but since I love trees—just as I value the clean air and clean water,  which are available only in the most energy–intense industrial economies—I just say they’re wrong.   Since policies have consequences, we’re paying the price for the government’s stifling of innovation, productivity, and growth in the energy industry with nearly nationwide economic stagnation and fruitless “green energy” cronyism.   “Going green” is doing more damage to our moral and economic future with every day that passes. 

If we freedom-loving, prosperity-seeking people continue to grant the anti-industrialists the moral high ground they claim to represent with their “green energy” agenda, they may continue to inspire support for their “green economy” suicide pact.  But, don’t miss my main point:  To sacrifice the modern human environment we enjoy here in America—fueled by petroleum, nuclear, and coal-based energy—to the non-human environment, as the anti-industrialists insist we do, is not just bad economic policy, it is immoral.  A mere moment’s reflection on the living conditions that exist in the non-industrialized world is evidence enough of that fact.  So, do we want to live like they do?  Or do we want to help them live like us?  Because those are our choices. 

The anti-industrialists like to talk about “industrial policy” by which they mean the obstruction of private industry initiatives and the demise of the large-scale energy production our modern economy requires.  The only industrial policy we really need to assure ourselves of a healthy environment, and to restore prosperity and abundance, is one which respects private property rights and individual self-determination.  As the history of western civilization since the beginning of the Industrial Revolution has demonstrated, human ingenuity and the natural human desire to create better lives for ourselves and our families will take care of the rest. mh

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Hercules vs. the Hydra

Originally published in Flourishing November/December 2012

In the June 2012 issue of this newsletter, I asked you to think about the reasons for America’s high unemployment rate.  Then in the next two issues, I wrote that government interference in the form of minimum wage laws have helped raise the unemployment rate among black inner city youth to nearly 40%; and that laws favoring union bosses over non-union workers have in many states forced wages to uneconomic levels. 

The important thing to keep in mind is that for most businesses, wages are their most significant cost.  So, when the price of labor is forced to uneconomic levels by government interference, unemployment and business failures are certain to be the result.  The principle also applies to government mandated, one-size-fits-all, health insurance benefits. All labor costs—however necessary or desirable they may seem—consume capital that might otherwise be deployed in new business investment and in creating new jobs. 

Now, as an exemplar of government overreach in other areas, let’s consider the national 55 miles-per-hour speed limit.  Passed by Congress in 1974 with the intention of reducing fuel consumption, that law—when it was obeyed—increased labor costs for the obvious reason that it required at least twenty percent more time for shippers to deliver the goods.  Because it was virtually unenforceable and widely ignored, the 55 miles-per-hour speed limit was ultimately repealed in 1995.  That alone tells you just how economically silly the law was. 

Then consider that from January 1, 2009 through December 31, 2011, the Code of Federal Regulations has increased by 11,327 pages.  According to the Office of Management and Budget, that brings the total register of federal regulations to 169,301 pages.  That’s a stack of paper 32 feet high.  I’m not sure I can throw a football that high.  Common sense tells me that every one of those pages adds to the cost of doing business.  And, what are the odds that in 169,301 pages of regulations there will be contradictory and ambiguous rules? The probability must be pushing 100%.  If I’m right, a regulatory violation is virtually guaranteed for every business in America.  That makes me suspect that the real purpose of our government is not to catch criminals, but to create them. I have to ask, “How many productive jobs could be created with the dollars it takes to pay and entertain the little Caesars who dream up 11,327 pages of regulations in just three years?”

Taxes come at businesses from virtually every legislative body, and for an unending variety of “needs”.  These costs—with the exception of most sales taxes—are not generally passed along to consumers, as is frequently claimed. It’s a myth; like labor costs, they’re usually paid out of capital.  Virtually every dollar taken out of the private economy by taxes is consumed; either by the government directly—where waste, fraud, and abuse are notoriously rampant—or by those who are the beneficiaries of government largess.  These are all dollars that won’t be voluntarily invested in the expansion of existing businesses, the launching of new enterprises, or the creation of new jobs.  Higher business taxes mean fewer jobs. 

Contrary to another myth, most entrepreneurs and business managers aren’t keen to take unnecessary risks.  In recent years, though, they’ve faced bellicose, irresponsible, and undeserved taunts and vague economic threats; all for the purpose of media attention and/or political expediency.  When the most productive people in America are collectively demonized by politicians and pundits for allegedly being selfish, predatory, unpatriotic, and unnecessary—as if every successful business in America is run by Bernie Madoff or Vito Corleone—is it any great surprise that many companies, especially relatively small businesses with 50 to 500 employees and limited legal budgets, are reluctant to expand and hire new workers?  I think not.

Finally, if this discussion wore you out or made you angry—as it just did me—I’m sorry.  But, just imagine how a business executive or small business owner must feel.  Concerned for the welfare of her employees and their families, responsible to her bankers and her investors, trying desperately to provide quality products and services to her customers—all the while dealing with government’s taxes, rules, mandates, and threats—she  must feel as Hercules felt in his battle with the Hydra.  She is my hero. mh

The Unemployment Question (Part I)

Originally published in Flourishing July/August 2012

In the June edition of this newsletter I asked, “If things are so good, why is unemployment so stubbornly high?” I promised to give you my answer this month, but in fact, it will take me three months:

Human desires are unlimited.  At least mine seem to be.  I live at a substantially different level today than I did in my youth, or even as I did twenty years ago.  If you look at your own lifestyle today, I’m sure you’ll find things that you can’t live without, that twenty years ago either didn’t exist or you thought you couldn’t afford.

Not only are my desires virtually unlimited, there are very few things I really like to do—or can do—myself.  I’d prefer to hire other people to do them.  I’d like to have a full-time gardener, for example. 

It gets worse.  I’m reasonably satisfied with the things I own now, but if I could afford them, I’d like to have a Rolls Royce and a chauffer to drive it for me, while I read Victor Hugo novels and sip fine French wines.

I once saw a beautiful teakwood sailboat with two diesel back-up engines.  Sea-worthy, to say the least.  Linda created a beautiful watercolor painting of it that now hangs in her home office.  That boat would be really cool to own—if the price was right. 

The only thing that prevents me from owning and doing these things is the price of the labor involved.  If people would work for free, or almost free, I’d have all these things and more; virtually all my desires could be fulfilled.  I could even (someday) fly to the moon on one of Richard Branson’s space ships. Weightlessness—I could handle that, I think.

But, even if I had unlimited wealth and/or people would work for nothing, I could still find many more things that need to be done than I could find people to do them.  I think that’s true for most people and most businesses, too.  Especially, businesses. 

The point—to this point in my answer—is that there is always plenty of work to do, so a lack of work to do can never be the cause of unemployment.  The cause of unemployment must be something else.  But what?

The first and most obvious answer is that people sometimes voluntarily quit their jobs, and they may experience a delay before taking a new job.

That kind of unemployment is voluntary, and is perhaps the most common type of unemployment.  Similarly, people retire from working altogether, but we usually don’t call that “unemployment”; we call it “retirement”.

The most common type of involuntary unemployment is that caused by minimum wage legislation.  When I was about twelve years old, my dad “hired” me to “whip” weeds around sand piles and stacks of cinder blocks.  At twenty-five cents an hour, I could earn two dollars a day1, and he didn’t have to pay his truck drivers to cut weeds.  Delivering lumber, sand, and cinder blocks was worth more to him than weed-cutting.  Anyway, at twelve years of age, he wasn’t about to put me behind the wheel of a fully-loaded REO Speedwagon. 

Was he taking advantage of me?  The correct answer, of course, is, “Who cares?”  I had my two bucks – a lot of money for a twelve year old kid.  I had to pick up nasty cups and cans at the Yankee Dollar Drive Inn for seven days to make that much money.  But, that weed-cutting job – even with the latest string trimmer technology – couldn’t exist today; nor could the Yankee Dollar parking lot job; even allowing for child labor laws.  Minimum wage legislation explains why teenage unemployment now hovers around 25% nationally; and even more sadly, for black inner-city teens it’s much higher, 39.3%2.

Minimum wage legislation also helps to explain self-service gas stations.  Attendants—even teen-age attendants—can’t compete on price. Some people blame technology and our fast-paced lifestyles for the loss of these and other personal service jobs; but the real culprit is minimum wage legislation, which makes technological solutions comparatively more affordable than unskilled or low-skilled human labor.  Who – but for the vast cost differences – would not rather be greeted by a smiling service station attendant than by a dirty LED screen? 

I know some people won’t work for $2 a day—or even $7.25 an hour, the current minimum wage in Kansas—but some will, and in the process they’ll develop habits and skills that can help propel them toward higher paying jobs. (Did I mention that my girls paid for their college degrees by working in Dairy Queens and truck stops.)  I have to ask:  What are the values of personal independence, self-confidence, and pride worth?   mh

(To be continued next month.)

1    In the late 1920’s, my dad performed the same work for his father (my grandfather) at seventy-five cents per day.