04 June 2015

Only the market can give life to the Living Wage

Boris Johnson, Mayor of London and now Member of Parliament for Uxbridge and South Ruislip, created a stir at his May social media Q&A when, responding to a query about the living wage, replied:

The Living Wage should be massively expanded & be 1 of the great national ambitions with increasing productivity...

Desiring a living wage for all is not shocking. But how to arrive at such economic well-being does set the stage for a row — and this is why the progressive left has taken such interest in Johnson’s remark.

The rationale for the Living Wage

The idea of a ‘living wage’ is not in itself controversial; with roots in Catholic Social Thinking, Leo XIII wrote in his 1891 encyclical Rerum Novarum that ‘a workman’s wages [should] be sufficient to enable him comfortably to support himself, his wife, and his children’,1 a position endorsed in 1931 in Pius XI’s Quadragesimo Anno: ‘the worker must be paid a wage sufficient to support him and his family’2 — and subsequently in succeeding papal social encyclicals.3

In contemporary political discourse, a living wage is deemed a supplement to the state-mandated minimum wage for recipients residing in areas where the cost of living is particularly high. Controversy wages about how to achieve a living wage: whether by voluntary market co-operation or by coercive state redistribution.

Market forces favour sustainable wages…

For a living wage to be enjoyed by the greatest number of people, the free market is by far the better route. Goods and services are freely exchanged, with avenues open for entrepreneurship, competition, and new business ventures. Employers advertise job openings and prospective applicants offer their talents for whatever the market deems they are worth. When prices are high, new suppliers are attracted to the market (as well as new jobs) and prices drop, becoming more affordable. (And, where employment is at a premium, this shortage puts natural upward pressure on salaries.)

Employment is subject to the same market dynamic of supply and demand, with value-added skills commanding higher wages. Those with very little skills may not earn much, but they do acquire the talents and work habits to progress to better paying jobs in the future. In this scenario, unemployment will be naturally low.

…Whereas state intervention stifles sustainability.

Using the state to attain the living wage, however, is far less satisfactory and ultimately counter-productive. The basic mechanism of the minimum wage has negative consequences that far outweigh the illusion of immediate benefits. Employers will not hire staff whose low skill-sets are deemed not cost-effective — usually the young and school-leavers who would gain most for the work routines employment promises.

Henry Hazlitt summarised the position of the most vulnerable in his brilliant primer, Economics in One Lesson:

You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation. […] We have deprived society of the value of his services. We have deprived the man of the independence and self-respect that come from self-support, even at a low level, and from performing wanted work, at the same time as we have lowered what the man could have received by his own efforts.4

Moreover, the minimum wage hinders employment overall and acts as an artificial brake on economic growth. (According to ONS figures for May 2015, of the 1.83 million unemployed actively seeking work, an additional 42,000 were ‘discouraged’ workers who had given up looking altogether. Minimum wage requirements are among the many factors holding down employment numbers.)

In this regard, the campaign for a living wage is another example of the Keynesian fallacy of trying to raise aggregate demand: the true response lies on the supply side where, in J.B. Say’s classical liberal formulation, demand is constituted by supply. Increased production will lower prices and raise employment prospects, both in the form of jobs and increased real wages; the living wage is a tax on job creation and an impediment to growth.

The Prime Minister acknowledged that ‘the best way out of poverty is work — and the dignity that brings’, in his 2013 Conference speech:

We know that profit, wealth creation, tax cuts, enterprise — these are not dirty, elitist words — they’re not the problem, they really are the solution because it’s not government that creates jobs, it’s businesses. It’s businesses that get wages in people’s pockets, food on their tables, hope for their families and success for our country.

It has already been reported that Oliver Letwin, minister with responsibility for government policy, ‘spent the campaign in Whitehall drawing up proposals to merge quangos and slash Government regulation’.

And speaking in Bristol, Business Secretary Sajid Javid announced an upcoming Enterprise Bill with further reductions in red tape. ‘For the first time, the actions of regulators will be counted towards achieving the overall £10 billion in cuts … the first time in modern history that government has successively reduced red tape and continued with reductions in the next parliament.’ The harmful effects of government interference will be fact-based, as ‘business will be our partner, giving us the evidence we need to roll back the state.’

Opportunities for success trump rhetorical good intentions.

Yet the idea that a benevolent state can impose high wage rates persists by the progressive élite, who care more for the rhetorical generosity of their intentions than with the outcome of their policies; who argue theirs is the charitable choice, when in reality charity is a matter of individual choice, not government fiat.

Frédéric Bastiat noted the hypocrisy, and wrote that proponents of state activism confuse ‘the distinction between government and society. As a result of this, every time we object to a think being done by government, the socialists conclude that we object to its being done at all.’5

State action to raise up the poor when others (so it is believed) refuse to help is not benign, but a zero-sum game. Left to their own devices, businesses would offer employment opportunities for all seeking work, and prices for life’s necessaries would settle at attainable levels. Regulation and government diktat impede this natural market phenomenon and, most damning, hurt the intended beneficiaries.

One of the reasons areas are designated for living wage programmes — think of London and New York — is that state intervention impedes market forces from addressing the underlying problems, stymied by rent controls, subsidised housing, zoning restrictions, and other barriers. Dwight Lee and Richard McKenzie, authors of Failure and Progress, examined the many ways in which government missteps persist when market challenges find their own way toward resolution, and came to this conclusion:

The single most effective government poverty program consists of government doing nothing more than establishing an environment that facilitates market exchanges. Nothing else that can be done by government comes even remotely close to reducing poverty as much, especially over the long run.6

It is one thing for the free market to aim for the living wage, quite another to provide for it through the state. If Boris Johnson understands this distinction, then may his advocacy for sustainable incomes have every success in Parliament.

For, in the end, it is all the difference between market success and government failure. The latter makes the progressive élites feel good about themselves; only market freedom will bring the living wage to those who want to move from poverty to economic prosperity.

ENDNOTES

1. Pope Leo XIII, Rerum Novarum, 15 May (Vatican City: Libreria Editrice Vaticana, 1891), §46.

2. Pope Pius XI, Quadragesimo Anno, 15 May (Vatican City, Libreria Editrice Vaticana, 1931), §71.

3. Why any given wage is not a ‘living’ wage was raised by Pope Leo in Rerum Novarum: ‘Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages; nevertheless, there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner. If through necessity or fear of a worse evil the workman accept harder conditions because an employer or contractor will afford him no better, he is made the victim of force and injustice (§45).’ Of course, just why an employee’s wage insufficiency becomes the sole responsibility of the employer is raised by Thomas E. Woods, Jr in his essay ‘The Unanswered Question of the Just Wage’, in Catholic Social Teaching and the Market Economy, Rev. 2nd ed., Philip Booth, ed. (London: Institute of Economic Affairs and St Paul’s Publishing, 2014), 162.

4. Henry Hazlitt, Economics in One Lesson (New York and London: Harper & Brothers, 1946), 138; 140.

5. Frédéric Bastiat, The Law [1850], Dean Russell, trans. (London: Institute of Economic Affairs, 2001), 46.

6. Dwight R. Lee and Richard B. McKenzie, Failure and Progress: The Bright Side of the Dismal Science (Washington, DC: Cato Institute, 1993), 106.

31 December 2014

Year-End Update

Before sending 2014 on its way and welcoming with hopeful anticipation the new year, here is a round-up of some essays posted in recent months:

  • Will America follow Canada’s economic fight against impertinent obstructions? — on the lessons Canada (and other Commonwealth countries) can teach the United States on the inverse relationship between economic growth and state interventions, whether in the form of taxation policy, regulations, or government debt;
  • Market independence or business as usual? — following Republican gains in the November U.S. mid-term elections, will the GOP adhere to constitutionally limited government of enumerated powers or will Washington politics be ‘business as usual’, pursuing bureaucratic aggrandisement, crony capitalism, and fiat money policies? This essay was published courtesy of the Institute of Economic Affairs;
  • Ethan Frome’s winter of discontent — on the role of winter in Edith Wharton’s novella, infusing the family of one Massachusetts community with physical and spiritual bleakness; and
  • Scrooge: a Christmas capitalist-icon — why the skinflint is the hero of Charles Dickens’s A Christmas Carol, illustrating the sources of wealth for community well-being and the distinctions between public welfare and private charity.

If any of these essays catch your fancy, please share them with your friends and colleagues. DMI needs encouragement to flourish and seek out new research and publishing opportunities!

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#DMI_Reads Update — Reading has been sporadic since the last update; but apart from dipping into the works of William Graham Sumner (Yale sociologist from the early 1900s, who wrote on politics and economics), and the fictional works of Edith Wharton and Charles Dickens (mentioned above), I began the autumn with a Downeast classic and ushered in the winter months with three fine works in political economy:

  • Sarah Orne Jewett’s The Country of the Pointed Firs (Boston and New York: Houghton Mifflin, 1896) — a lovely summer sojourn in a Maine coastal community. Curiously, Edith Wharton found Jewett’s perspective unrealistically pleasant and an incentive to write Ethan Frome;
  • Roger Koppl’s From Crisis to Confidence: Macroeconomics after the Crash (London: Institute of Economic Affairs, 2014) — an analysis of why Western growth continues to lag, despite many countries’ recovery from recessionary woes;

  • Dwight Lee and Richard McKenzie’s Failure and Progress: The Bright Side of the Dismal Science (Washington, DC: Cato Institute, 1993) — a contemporary classic in public choice economics and capitalist theory, important for its examination of the role of present failure for future success and of the dynamic nature of the marketplace, influenced by market competition and political competition; and
  • Christopher Snowdon’s Selfishness, Greed and Capitalism: Debunking Myths about the Free Market (London: Institute of Economic Affairs, 2014) — a marvellous debunking of progressive liberal myths concerning self-interest, ‘perfect knowledge’, GDP, and levels of poverty.

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It only remains to remind you to follow DMI on Twitter and on Facebook, and to wish all my readers good health and good fortune in 2015!

25 December 2014

Scrooge: a Christmas capitalist-icon

Ebenezer Scrooge has been appropriated by the political left as the poster-child of all that is wrong with capitalist society;1 he is, in the words of an employee’s wife, ‘an odious, stingy, hard, unfeeling man (91)’.

Yet we should read him as the hero — for such he is — of Charles Dickens’s A Christmas Carol, a capitalist icon worthy of emulation. His one moral failing is no fault of capitalism and, true enough, the path toward his redemption lies through it.

As the vehicle of Scrooge’s transformation is fueled by ghosts of Christmases past, present, and future, so does the chronology of capitalism — where the satisfaction of present wants depends on past economic decisions — lead to future prosperity and well-being.

Self-interest

Scrooge’s behaviour in his personal affairs has become the literary personification of greed and selfishness; yet in his public affairs, where self-interest motivates his actions, Scrooge is a benefactor of the common good. Scrooge would not succeed unless he served a public need; his wealth is proof that others benefit from his attention to business. ‘His wealth is of no use to him,’ his nephew Fred mistakenly believes; ‘He don’t do any good with it (98).’ For, if he failed to take an interest in the needs of others — hardly a definition of selfishness — Scrooge would be among the poor who seek aid and comfort.

Nevertheless, the ghost of Jacob Marley, Scrooge’s sometime associate, damns their all-consuming entrepreneurial zeal: ‘Mankind was my business. The common welfare was my business (30)’. But their money-lending venture, far from being an impediment to societal improvement, was an aid to prosperity and well-being, enabling others their own ‘self-interested’ opportunity to offer their goods and services in the marketplace, and themselves prosper in the bargain.

The establishment of Scrooge & Marley, like every profitable enterprise patronised by consumers (whose wants and needs are satisfied), promoted the interests of mankind. Michael Levin, CUNY professor of philosophy, limns the any number of ways Scrooge’s self-interest is a boon to his community and its present and future desires. It (along with voluntary exchange and the division of labour) was among the hallmarks of capitalist culture wherein Western civilisation blossomed, according to Adam Smith’s creed. ‘But man has almost constant occasion for the help of his brethren,’ he wrote, ‘and it is in vain for him to expect it from their benevolence only.’

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely.2

No less than Scrooge’s final reformation is the outcome of self-interest. Before, its negative effects are directed solely against him, as his nephew witnesses:

‘I am sorry for him; I couldn’t be angry with him if I tried. Who suffers by his ill whims? Himself always. Here he takes it into his head to dislike us, and he won’t come and dine with us.’ (98)

Afterwards, shown by the Christmas ghosts how he disavowed the bonds of friendship he once cherished in his youth, and the bitter end to which his obsessions, unaltered, will lead him, Scrooge vows to alter his life and ‘honour Christmas in my heart, and try to keep it all the year (134).’ His alteration enriches his own life and the lives around him.

‘Why, bless my soul!’ cried Fred, ‘who’s that?’

‘It’s I. Your uncle Scrooge. I have come to dinner. Will you let me in, Fred?’

Let him in! It is a mercy he didn’t shake his arm off. He was at home in five minutes. Nothing could be heartier… Wonderful party, wonderful games, wonderful unanimity, won-der-ful happiness! (144-45)

‘Failure and Progress’

Indeed, it may be said that in employing the ghosts of Christmas past, present, and future, Dickens unknowingly evoked the importance of time to capitalism, of present investment for future gain, distinguishing long-term consequences from short-term expediency, good or ill.3

Scrooge earns his living as a money-lender; from the state of his enterprise we can surmise that many to whom he lends succeed and profit. Yet it must no doubt also be the case that others fail and thus face unpleasant financial repercussions. Dickens insinuates that such hard practice is among Scrooge’s sins, but this confuses the ethical underpinning of capitalism with private morals.

Resources are scarce, whether they be in the form of equipment, skilled labour, or capital investment. Businesses that succeed by satisfying society’s needs turn these scarce resources to good use; those that succumb, waste them and deprive society of material gain. Turning a blind eye to this inescapable reality results in society’s loss, even for those who fail in the marketplace. Success for one group enables succour and the promise of future success for the less fortunate. As Dwight Lee and Richard McKenzie write in Failure and Progress:

The pervasive failures of many people could be more than balanced by pervasive successes of other people who produce better products at lower costs and prices. Individuals who fail are at the same time gaining from the system that induces people to compete and therefore to fail as well as succeed. In practical terms, that means that the business people who fail may actually be experiencing a higher level of well-being because of the economic system that permits their failure.4

(In the 1951 film starring Alastair Sim, Scrooge conducts an hostile take-over of his employer’s firm; yet if old Mr Fezziwig cannot compete in a progressive world, Scrooge’s management will ensure that scarce resources are not wasted but put to more effective use as directed by consumers, promising employment and success instead of a shuttered shop. The film also illustrates the many debtors who rejoice at Scrooge’s passing, yet this only means that the limited funds available for enterprise are not put to the disposal of more promising business ventures.)

Charity

In his neglect of private charity, Scrooge may fairly be the object of opprobrium. Like many to-day, he relies on the government’s public welfare, ‘the workhouses’ and ‘the prisons’, ‘the Treadmill and the Poor Law’ (13), to alleviate the suffering of the poor. Government welfare is conflated with ‘charity’, a linguistic error that confuses private and public roles, subjecting one to undeserved commendation and the other to shameful neglect.

Scrooge mistakes the welfare provisions he supported through taxation as effective means of assisting the poor. Public Choice economics demonstrates that the political arm of redistribution often has ulterior and self-serving motives; while Lee and McKenzie argue convincingly that we should not expect the poor to exploit political competition any better than market competition. Moreover, the investment of time and care exemplifying the ‘personal touch’ translates into charity having a greater chance of changing lives for the better than impersonal, bureaucratic welfare schemes.

Proponents of welfare, meanwhile, compound the problem with their naïve faith in state-run philanthropy. ‘Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society’, wrote Frédéric Bastiat in The Law. ‘As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all.’5

It is worth noting that the solicitors for the poor who approach Scrooge for assistance are in full knowledge of the limitations of state institutions, confessing that ‘they scarcely furnish Christian cheer of mind or body to the multitude,’ in avoidance of which ‘many would rather die (14).’ It is Scrooge’s capitalist acumen that will permit him to be, not a scourge to society and its destitute, but their patron.

But there is something more profound at work than Scrooge learning that public welfare is no match for private charity. The lesson that the Christmas ghosts impress upon him is that, while business has its proper sphere, man does not live by commerce alone — his acquaintances (such as they are) merely cultivated for their business connexions.

Scrooge’s cramped existence can only be alleviated by rediscovering his lost humanity — ‘he had been revolving in his mind a change of life … and hoped he saw his new-born resolutions carried out (116)’ — abandoned when he forgot that capitalism was the means for happiness, not its realisation. Scrooge’s dilemma of self-interest is well-summarised by Howard Baetjer:

…the opportunity cost of his ceaseless accumulation of assets is the far greater wealth in “psychic income”—pleasure—that he forgoes. No doubt Scrooge is doing what he perceives to be in his self-interest—each of us is homo economicus to that extent—but as the ghosts show Scrooge, he is making catastrophic mistakes.6

For although Scrooge will rise to be a great benefactor of his community, the greatest beneficiary will be Scrooge himself.

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So, it is well-nigh time for defenders of free markets and true economic progress to claim Ebenezer Scrooge as one of their own, rescuing him from progressive liberals who denigrate his services on behalf of the common good. They are the heirs of the children ‘Ignorance’ and ‘Want’ (see 107), whose sentimental obfuscation of capitalism’s mixture of failure and progress result in material deprivation when there could be plenty.

Both should remember Margaret Thatcher’s justly famous maxim, ‘No-one would remember the good Samaritan if he'd only had good intentions; he had money as well.’ And, along with nephew Fred, we should toast his accomplishments as an icon of capitalist bounty:

A merry Christmas and a happy New Year to the old man, whatever he is! Uncle Scrooge! (104)

ENDNOTES

1. Charles Dickens, A Christmas Carol [1843], Arthur Rackham, illus. (Philadelphia: J.B. Lippincott, 1915). All quotations in the essay are taken from this edition.

2. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations [1776], R.H. Campbell and A.S. Skinner, eds., Glasgow Edition of the Works and Correspondence of Adam Smith, Vol. 2a (Indianapolis: LibertyClassics, 1981), I.ii.2.

3. See Henry Hazlitt, Economics in One Lesson [1946] (Auburn, AL: Ludwig von Mises Institute, 2008), 5: ‘…the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

4. Dwight R. Lee and Richard B. McKenzie, Failure and Progress: The Bright Side of the Dismal Science (Washington, DC: Cato Institute, 1993), 27.

5. Frédéric Bastiat, The Law [1850], Dean Russell, trans. (London: Institute of Economic Affairs, 2001), 46.

6. Howard Baetjer Jr., ‘Ebenezer Scrooge and the Free Society’, The Freeman, 38:12 (December 1988): 470.

08 December 2014

Ethan Frome’s winter of discontent

Fascinated as I am by the writing career of Edith Wharton, when The Austin Chronicle announced that her novel, Ethan Frome, was to be its book club’s December pick, it seemed an ideal opportunity to read it. This short essay records some of my first impressions.

Ethan Frome is a sad tale;1 and yet, if we read ‘to know that we are not alone’, we finish the novel with a deeper awareness of life’s sublime vicissitudes and are grateful its troubles belong to another. From the beginning, the ‘starkness’ of Ethan’s existence is laid bare.

I had come in the degenerate day of trolley, bicycle and rural delivery, when communication was easy between the scattered mountain villages, and the bigger towns in the valleys, such as Bettsbridge and Shadd’s Falls, had libraries, theatres and Y.M.C.A. halls to which the youth of the hills could descend for recreation. But when winter shut down on Starkfield, and the village lay under a sheet of snow perpetually renewed from the pale skies, I began to see what life there—or rather its negation—must have been in Ethan Frome’s young manhood (7-8).

The frigid landscape of Ethan Frome is far more than a backdrop against which events unfold. It is a major player in its own right; harsh, daunting, unforgiving — and compelling. ‘Why now?’ asks The Austen Chronicle about taking up Ethan Frome. ‘Because the recent cold snap got us thinking about our favorite freezing-temp love stories.’

But unlike the world of Nancy Mitford, love does not thrive in the cold climate of Starkfield for the Frome clan.2 Indeed, if their frustrated emotional lives were to be represented by any season of the year, it is winter at its worst, when it portrays life’s termination in death — especially when that death is the loss of hope. The desolateness of winter pervades Ethan Frome.

Day by day, after the December snows were over, a blazing blue sky poured down torrents of light and air on the white landscape, which gave them back in an intenser glitter. One would have supposed that such an atmosphere must quicken the emotions as well as the blood; but it seemed to produce no change except that of retarding still more the sluggish pulse of Starkfield. When I had been there a little longer, and had seen this phase of crystal clearness followed by long stretches of sunless cold; when the storms of February had pitched their white tents about the devoted village, and the wild cavalry of March winds had charged down to their support; I began to understand why Starkfield emerged from its six months’ siege like a starved garrison capitulating without quarter. Twenty years earlier the means of resistance must have been far fewer, and the enemy in command of almost all the lines of access between the beleaguered villages; and, considering these things, I felt the sinister force of [the] phrase: “Most of the smart ones get away.” But if that were the case, how could any combination of obstacles have hindered the flight of a man like Ethan Frome? (8-9)

For Ethan’s obstacles were many, a legion of soul-destroying disappointments: a promising engineering career cut short by a father’s sickness; unrelenting duties on an unprepossessing farm and mill; a mother’s lingering dementia and an unhappy marriage, thusly ill-contracted.

After the funeral, when he saw her preparing to go away, he was seized with an unreasoning dread of being left alone on the farm; and before he knew what he was doing he had asked her to stay there with him. He had often thought since that it would not have happened if his mother had died in spring instead of winter… (70)

Even the prospect of abandoning Starkfield for a modicum of contentment comes to naught by his wife Zeena’s social inadequacies, as ‘Ethan learned the impossibility of transplanting her. She chose to look down on Starkfield, but she could not have lived in a place which looked down on her.’ The outside world, too, conspires against him. ‘Even Bettsbridge or Shadd’s Falls would not have been sufficiently aware of her, and in the greater cities which attracted Ethan she would have suffered a complete loss of identity (71-72).’

Only the arrival of his wife’s destitute cousin, Mattie Silver, sent to Starkfield to aid Zeena in her perpetual discomfort — ‘[w]hen she came to take care of his mother she had seemed to Ethan like the very genius of health, but he soon saw that her skill as a nurse had been acquired by the absorbed observation of her own symptoms (72)’ — offers him moments of respite, ‘a “feel” of spring in the air (149)’, that fleetingly relieves his sadness, then heightens it, and with a stroke makes it permanent.

The climax of the story is swift; its repercussions, like most bad ends, plays out for decades. His usually self-absorbed wife, newly curious of an unsuspecting-Ethan’s attentions elsewhere, pronounces the cousin’s care inadequate; she hires a new girl to tend to the household and turns an ill-prepared Mattie out to fend for herself. In a fit of desperation Ethan and Mattie, both facing unpalatable futures, opt for a careening sled and a well-placed elm to bring them lasting rest, but fate has other plans: they survive the ‘smash-up’ — she an invalid, he badly crippled — with the cruel irony that Zeena must now serve as nurse-maid to both.

It is in these vicissitudes where Ethan Frome is as immemorial as human nature and the four seasons; sadly, Ethan and his family know only one. Edith Wharton believed that at its heart was a bare, uncompromising moral as timeless as the bedrock upon which the village sat. In an introduction written for a 1922 edition, she explained:

the theme of my tale was not one on which many variations could be played. It must be treated as starkly and summarily as life had always presented itself to my protagonists; any attempt to elaborate and complicate their sentiments would necessarily have falsified the whole. They were, in truth, these figures, my granite outcroppings; but half-emerged from the soil, and scarcely more articulate (ii).

Unlike the momentarily victorious House of York, for Ethan Frome there is no hope that ‘now is the winter of our discontent made glorious summer’.3 His winter lasts year-round; his disappointments are continuous, cemented by the attempted ‘escape’ that fateful February night, which not only ensnared him in its perpetual gloom, but his wife and her cousin, too — misfortune and grief compounded. Only death, on its own terms and in its own time, will bring relief.

They turned in at the gate and passed under the shaded knoll where, enclosed in a low fence, the Frome grave-stones slanted at crazy angles through the snow. Ethan looked at them curiously. For years that quiet company had mocked his restlessness, his desire for change and freedom. “We never got away—how should you?” seemed to be written on every headstone; and whenever he went in or out of his gate he thought with a shiver: “I shall just go on living here till I join them (50-51).”

For me, Ethan Frome is a novel of winter to be read in winter, when the nearness of freezing cold and blanketing snow makes the reality of Starkfield more emphatic. Even the rare occasions when love does break the surface (to acknowledge The Austin Chronicle’s enthusiasm), it must flail against the chill of broken humanity which, in the end, masters it. For me, Ethan Frome will always remind of a place where ‘[a] mournful peace hung on the fields, as though they felt the relaxing grasp of the cold and stretched themselves in their long winter sleep (79).’

ENDNOTES

1. Edith Wharton, Ethan Frome [1911] (New York: Charles Scribner’s Sons, 1922). All quotations in the essay are taken from this edition.

2. An allusion to Love in a Cold Climate.

3. See Shakespeare’s Richard III, I.i.1-2.

12 November 2014

Will America follow Canada’s economic fight against impertinent obstructions?

Twenty-six years after the United States and Canada concluded their historic free trade agreement, it may startle some to see how their constituents size up the trading relationship.

In a report published last month, Nanos Research (in collaboration with the University of Buffalo) found that when Canadians were asked to ‘rank the top two countries that are closest with Canada in terms of business values’, the United States polled at 61 per cent, far beyond the next two challengers, with Britain at 20 per cent and Germany at 12 per cent.1

Meanwhile, when Americans were asked the same question in relation to their own business values, Canada came in at a mere 24 per cent, followed close at the heels by Britain and Japan, both at 21 per cent.2

Were citizens asked to describe the socio-economic fabric of their countries, no doubt a plurality of Americans would respond through a mantra coloured by the heroics of their Founding, noting their adherence to limited government, free market values, and individual freedom, principles which FEE founding father Leonard Read described as ‘the essence of Americanism’.3

Canadians, still hewing to the country’s tory origins (which skew social democratic), would list their traditions of robust government, interventionist economic policies, and communal politics. Indeed, many Canadians reflexively identify themselves as the ‘un-Americans’ — our own Confederation moment, aspects of which continue to show up in the Nanos/UB survey on border security. And yet in many respects, Canadians — or at least their federal government — have come to exemplify those American values which its southern neighbours have allowed progressive ideals to supplant.

During the Great Recession of 2007-09, for instance, Canadian banking rules regulating adequate reserves and conservative lending practices meant that Bay Street experienced few of the credit disturbances or the financial meltdowns that became regular occurrences on Wall Street. And, under the Liberal governments of Jean Chrétien and Paul Martin and the Conservative government of Stephen Harper, Ottawa has pursued measures of deficit reduction and lower government expenditures as a percentage of GDP, policies virtually orphans on Capitol Hill with its $500 billion deficits and $18 trillion debt. Canada’s commitment to global competitiveness is clearly visible it its reduction of corporate taxes to 15 per cent, where in America corporate taxes are amongst the highest in the West at 35 per cent.

According to the 2014 Index of Economic Freedom, published annually by the Heritage Foundation, Canada ranks sixth in the world, making it the ‘freest economy in the North American region.’ Its debt to GDP stands at 86 per cent — its path toward fiscal prudence slowed by the Great Recession. The United States, meanwhile, does not even place in the top ten, ranking twelfth among leading nations. Its debt to GDP now exceeds 100 per cent.

Canada’s economic successes are replicated within the Anglosphere, with Australia and New Zealand surpassing it on the Heritage Index (third and fifth, respectively), with Ireland at ninth and the United Kingdom placing fourteenth. (Britain’s former colony of Hong Kong, reunited politically to mainland China since 1997 under a ‘one country, two systems’ agreement, ranked first.)

All is not lost for the United States, though. Already the country has made strides in the right direction, largely through forced sequestrations and its indomitable entrepreneurial spirit to succeed. As Adam Smith observed in The Wealth of Nations:

The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.4

America’s fundamentals remain strong; only its government agenda of Keynesian policies and interventionist programmes, including the Fed’s adherence to quantitative easing, need to be reformed. ‘Interventionist policies create uncertainty, raise the costs of financial intermediation and discourage investment. I might almost say that the problem is not that the government has done too little, but that it has done too much,’ writes Roger Koppl in From Crisis to Confidence: Macroeconomics after the Crash. ‘The problem is changing rules, uncertain regulations, shifting Fed policy. The problem is the variability and unpredictability of government economic policy.’5

These economic interventions are among the ‘impertinent obstructions’ with which the federal government burdens the states, business enterprises, and individual men and women. Canada’s own time of reckoning came in the mid-90s, when the choice was between reform or collapse. Forward-thinking leaders, putting national well-being before any ideological qualms, faced reality and restructured downward the Welfare State. Much the same scenario took place in Australia and New Zealand, with the United Kingdom making up for opportunities lost under its Labour governments.

To-day, with slight hiccups, the economic future of all these countries is promising. Now America is poised on a similar precipice. As Leonard Read observed, the key is leadership and a faith in ‘the spiritual antecedent of the American miracle’:

As this belief in the use of force as a means of creative accomplishment increases, the belief in free men—that is, men acting freely, competitively, cooperatively, voluntarily—correspondingly diminishes. Increase compulsion and freedom declines. Therefore, the solution to this problem, if there be one, must take a positive form, namely, the restoration of a faith in what free men can accomplish.6

Will the United States follow the Commonwealth example and, following the November mid-term repudiation of ‘Big Government’ and in preparation for the presidential contest in ’16, rally against coercive intervention and for economic prosperity?

ENDNOTES

1. CAN-AM Relationship Drift Continues, The Nanos-UB North American Monitor — Year 10, 11.

2. Nanos/UB Survey, 12.

3. See Leonard E. Read, ‘The Essence of Americanism’, The Freeman, 48:9 (September 1998), 527-32.

4. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Edwin Cannan, ed., Vol. 2 (London: Methuen & Co., 1904 [1776]), IV.v, 43.

5. Roger Koppl, From Crisis to Confidence: Macroeconomics after the Crash (London: Institute of Economic Affairs, 2014), 14.

6. Read, ‘The Essence of America’, 531.