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Monday, December 5, 2011

Stern Idiocy

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.

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