Stern Idiocy

Stern Idiocy
By Ross Kaminsky on 12.2.11 @ 6:09AM

A leading Obamaite union man would impose the Chinese model on his own country -- and he's hardly alone.

The professional left in America and their chattering-class useful idiots have followed a consistent pattern for a century: sympathizing with tyranny in their musings over how to implement policies fueled by jealousy and an undying fear of economic liberty.

There has hardly been a better example in recent years than Andy Stern's Wall Street Journal December 1st op-ed entitled "China's Superior Economic Model." In his article, Stern approvingly quotes Intel Corporation co-founder and former CEO Andy Grove who stated in a 2010 Business Week article that there is "emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better."

Before getting to the details of why Mr. Stern, until recently the head of the Service Employees International Union -- which spent at least $27 million to help Barack Obama get elected in 2008 -- is wrong in almost every detail, can I take you back more than two decades to the "Japanese Miracle" (and American near-panic) of the 1980s?

As someone who was studying economics in college in the mid-1980s, I endured countless comments about how American corporations' narrow focus on "next quarter's earnings" (as if that were true) was congenitally inferior to the longer-term view supposedly taken by Japanese companies.

Over the next several years, the Japanese bought Rockefeller Center (from my alma mater, Columbia University), CBS Records (purchased, renamed, and still owned by Sony), and the famed Pebble Beach golf course.

Harvard professor Ezra Vogel published (actually in 1979) a book called Japan As Number One: Lessons for America, in which he argues, as a reviewer for the Economist magazine put it, "that the United States should give itself a political and cultural heart transplant. A more competitive America, he says, needs a much stronger government, an elite civil service composed of 'the ablest young people of their generation' and a White House staffed by these new mandarins." Not surprisingly, given the natural human impulse toward ego-boosting, Professor Vogel's Harvard web page (which makes no mention of his ever having studied economics) notes that the book "remains the all-time best-seller in Japan of non-fiction by a Western author." (Whether this points to Vogel's ego or the egos of Japanese readers I shall leave to your determination.)

In 1995, the Mitsubishi Group, which had purchased Rockefeller Center, forced the project into Chapter 11 bankruptcy, losing nearly two billion dollars for their efforts. And a few years later, as Golf Digest's Mark Seal put it, when Peter Ueberroth put together a group to buy Pebble Beach for less than the Japanese had paid for it, the deal "bankrupted a Japanese boom-time golden boy, and, most recently, sent an army of Japanese bankers back home with little to show for their seven years of superlative stewardship but their good names."

Since then, Japan has turned in not just one but two "lost decades" with its persistent near-zero interest rates frequently being described as "pushing on a string." According to a recent Heritage Foundation study, "In 2010, the Japanese economy looks to have been smaller than it was in 1992, an incredibly poor result. It is not just a matter of a decline in output; it is also a remarkable decline in total wealth. In 1991, excluding micro-states like Luxembourg, Japan was the fourth-richest country in the world as measured by GDP per capita. In 2010, it was no longer in the top 20, was below the OECD average, and would have likely fallen further but for Europe's own economic troubles."

So when you hear people -- especially non-economists with political agendas -- long for the statism that characterizes most of America's economic competitors, listen with great skepticism.

Now, back to the two Andys.

As you read Mr. Grove's article from which Stern gathers inspiration, it is worth noting Grove's political bent: A search of Andy Grove's political donations shows a distinct left-leaning bias. Other than small donations to the presidential campaigns of John McCain and Rudy Giuliani during the 2008 cycle , his only contribution to a Republican in the past decade was to Arlen "I lost my last election as a Democrat" Specter. (The McCain and Giuliani donations combined were less than Grove's gift to Barack Obama's presidential campaign.)

Grove argued that America is good at startups but bad at scaling up and thus bad at allowing a new technology company to jump from a few guys in a garage to something that employs hundreds or thousands of people. Yet he makes no attempt other than looking at labor costs to determine the cause of this problem and instead simply assumes that since China creates more technology manufacturing jobs than American does, it must be the fact that China's government is more involved than the U.S. government in a "strategic role setting the priorities and arraying the forces and organization (necessary for job creation)."

Could it instead be the massive regulatory burden imposed on manufacturing companies and the uncertainties created by our government, such as whether Barack Obama will get his wish and cause "electricity rates [to] necessarily skyrocket"? And if all that weren't bad enough, who would risk any business growth that might subject management to dealing with unions and the true tyrants at Obama's National Labor Relations Board? Really, if you were going to start a business that would be likely to hire a thousand or ten thousand workers, wouldn't you go out of your way to avoid people exactly like Andy Stern?

Grove, refusing to understand how the global market works rather than how he wants it to work, then turns to the left's cure-all: he calls for "an extra tax on the product of offshored labor" and adds, "If the result is a trade war, treat it like other wars -- fight to win."

But Andy Grove forgets that wars come at great cost, even to victors -- which it is far from certain we would be despite Mr. Grove's tough talk.

In a solid refutation of Grove's article that ran in the subsequent edition of Business Week, Vivek Wadwha responds to the former Intel CEO's trade militarism: "The problem is that American companies will be the first casualties in such a war, and American jobs will be lost. There is no way to win."

Andy Stern claims that "the past few weeks have proven Mr. Grove's point," but offers no further evidence than the words of Secretary of State Clinton, Mitt Romney, and President Obama, each of whom is playing a populist tune for political purposes. Stern restates the tired claim that our government needs to deal with "China's currency manipulation" even though actual economists recognize there is a legitimate case to be made that the Yuan might be overvalued rather than undervalued. Nothing like the Asian bogeyman to scare politicians into xenophobic, economically destructive, but broadly popular acts that will most hurt those in the population most likely to support them -- those with the least economic education.

Stern talks with envy about Chinese plans for a long-term seven percent growth rate. The Middle Kingdom may or may not carry that off, but when you're starting with the better part of a billion people in poverty, it shouldn't be that hard to do. What Stern neglects to mention is that the policies that have already moved out of poverty more Chinese than the entire population of the U.S. were changes directly away from the central planning that so failed under Chairman Mao yet which unions still champion -- because they know they will be able to manipulate politicians to help unions rather than workers or customers.

Stern is at his most aggressively Marxist when he says that the "free-market fundamentalist" economic system "is being town onto the trash heap of history in the 21st century." He says that capitalism is "empirically failing" simply because China and other rapidly developing nations have a higher growth rate than the U.S. does. But there are plenty of poor nations on earth to compare and the real empirical evidence is the incredible correlation between economic liberty and national prosperity. As Professor Jacques Garello explained in an excellent 2004 speech, "freer countries are always more developed" because more freedom brings more private (especially foreign) investment, more knowledge, more entrepreneurial spirit, and the development of human capital. If Stern thinks China is failing now, he should do a little studying on what it was like when it had more of his so deeply desired planning.

Andy Stern is of course not alone in his desire to be more like China -- even though others wonder whether China is the next Enron. The best known Sinophilic navel gazer is New York Times columnist Tom Friedman. In his 2008 book, Hot, Flat, and Crowded, and in subsequent interviews Friedman said he wished the U.S. could be "China for a day" so that we wouldn't have to go through the messy process of representative government. Rather he would like us to "launch a green revolution" through totalitarian fiat. Isn't that always the way of the left? The ends justify any means. Friedman is so enamored of the idea that he called it "a fantasy." And this is a thought leader of the "moderate" part of the American left?

In January, 2010, Friedman disputed Mr. Chanos(of the China-as-Enron theory), saying that he was "reluctant to sell China short" because "[a]ll the long-term investments that China has made over the last two decades are just blossoming…" In the nearly two years since then, the Shanghai Stock Exchange Composite Index has fallen 25 percent. (The U.S. market is up about 10 percent during that time.) When "deep thinkers" start talking markets, hold on to your wallets.

Andy Stern believes that "it is troubling that we [the United States] have no plan…for growth and innovation." If the disastrous first three years of the Obama Presidency have proven anything (although FDR and Europe proved it first), it's that there are few things more dangerous than a politician with a plan.

Mr. Grove should know better than to cheer for a trade war, but seems not to. Tom Friedman's elitist cocktail party bubble prevents his approving of any system that doesn't put our betters in charge of our lives. Andy Stern may know that he is spouting economic nonsense, but he doesn't care; his motivation is purely to bolster union coffers and Democrat politicians, if you will permit my redundancy.

As Vivek Wadhwa put it so well in refuting Andy Grove's ill-conceived call for tariffs, "There is no doubt that the U.S. has reason to worry about its competitiveness. China, India, and many other countries have learned the secrets of America's success -- its open economy and capitalist ways. They are trying very hard to become like us. Let's not become like they used to be."
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