Day: September 15, 2024

A firefighter tackling flooding in lower Austria was also killed, Austrian Vice Chancellor Werner Kogler said on Sunday on social platform X as authorities declared the province, which surrounds Vienna, bordering the Czech Republic and Slovakia, a disaster area.

Rivers overflowed from Poland to Romania, where four people were found dead on Saturday, after days of torrential rain in a low-pressure system named Boris.

Some parts of the Czech Republic and Poland faced the worst flooding in almost three decades.

In the Czech Republic, a quarter of a million homes were without power due to high winds and rain. Czech police said they were looking for three people who were in a car that fell into the river Staric near Lipova Lazne, 235 kilometers east of Prague on Saturday.

In Poland, one person died in Klodzko county, which Prime Minister Donald Tusk said was the worst-hit area of the country and where 1,600 had been evacuated.

“The situation is very dramatic,” Tusk told reporters on Sunday after a meeting in Klodzko town, which was partly under water as the local river rose to 6.65 meters Sunday morning before receding slightly.

That surpassed a record seen in heavy flooding in 1997, which partly damaged the town and claimed 56 lives in Poland.

The nearby historic town of Glucholazy ordered evacuations Sunday morning as the local river started to break its banks, while firefighters and soldiers had been fighting since Saturday to protect a bridge in the town.

Residents across the Czech border also said the situation was worse than flooding seen before.

“What you see here is worse than in 1997, and I don’t know what will happen because my house is under water, and I don’t know if I will even return to it,” said Pavel Bily, a resident of Lipova Lazne.

The fire service in the region said it had evacuated 1,900 people as of Sunday morning, while many roads were impassable.

In the worst-hit areas, more than 10 centimeters of rain fell overnight and around 45 centimeters since Wednesday evening, the Czech weather institute said.

More rain is expected Sunday and Monday.

In Budapest, officials raised forecasts for the Danube to rise in the second half of this week, to above 8.5 meters, nearing a record 8.91 meters seen in 2013, as rain continued in Hungary, Slovakia and Austria.

“According to forecasts, one of the biggest floods of the past years is approaching Budapest but we are prepared to tackle it,” Budapest’s mayor Gergely Karacsony said.

In Romania, authorities said the rain was less intense than on Saturday, when flooding killed four and damaged 5,000 homes. Towns and villages in seven counties across eastern Romania were affected, and the country’s emergency response unit said it was still searching for two people missing. 

The French and British governments have sought for years to stop the flow of migrants, who pay smugglers thousands of euros per head for the passage to England from France aboard small boats.

A police source told AFP the accident occurred shortly after the boat embarked.

Regional prefect Jacques Billant is set to hold a news conference at 10 a.m., his office said.

Maritime authorities said Saturday that numerous attempts by migrants to make the perilous crossing in small boats have been attempted in recent days, with 200 people rescued in 24 hours over Friday and Saturday alone.

At least 12 migrants, mostly from Eritrea, died off the northern French coast when their boat carrying dozens of people capsized this month.

It was the deadliest such disaster this year and brought to 37 the number of migrant deaths in the Channel, up from 12 in 2023.

More than 22,000 migrants have arrived in England by crossing the Channel since the beginning of this year, according to British officials.

British Prime Minister Keir Starmer and France’s President Emmanuel Macron pledged this summer to strengthen “cooperation” in handling the surge in undocumented migrant numbers.

The Channel crossings often prove perilous, and in November 2021, 27 migrants died when their boat capsized in the deadliest single such disaster to date.

French authorities seek to stop migrants taking to the water but do not intervene once they are afloat except for rescue purposes, citing safety concerns.

In 2022, philanthropic organizations the Hewlett Foundation and the Omidyar Network gave millions of dollars in grants to top universities to “reimagine capitalism.” This reimagination is necessary, they said, because “for more than 40 years, neoliberalism has dominated economic and political debates, both in the U.S. and globally, with its free-market fundamentalism and growth-at-all-costs approach to economic and social policy.”

In his book What Went Wrong with Capitalism, Ruchir Sharma essentially asks, “What in the world are you talking about?”

The past 40 years have not been characterized by small government, free markets, or pursuing economic growth at the expense of everything else. Since at least the 1930s, Sharma argues, government has only grown in one direction: bigger. And the consequences of that enlargement have been widespread discontent with a transmogrified low-growth capitalism that doesn’t permit the creative destruction that markets need to work well.

Sharma sounds like an Austrian-school economist when he talks about the business cycle, the expansions and recessions that chart the economy. Austrian-school theorists, such as F.A. Hayek, posited that easy money fuels malinvestment during expansions that crashes during recessions. The crashes, though unpleasant in many respects, have the positive effect of cleaning out the malinvestment and reallocating resources to better uses.

Sharma argues that the major economies of the world, the United States chief among them, have stopped permitting that cycle to play out. They have done so asymmetrically, by permitting the booms and forbidding the busts. Or at least, they protect people from facing consequences for malinvestment when the busts inevitably come.

Government steps in with bailouts for big firms and sometimes entire sectors that have failed. Government runs deficits in recessions and during expansions, always padding the economy with extra cash. Central banks held interest rates at historic lows for 15 years in the United States and the European Union and for 30 years in Japan, fueling asset-price inflation that supercharged the portfolios of the wealthiest and giving corporations an unlimited supply of cheap credit that could paper over just about any problem.

No part of that is free-market capitalism, and it is actually detrimental to capitalism. Sharma says that critics of capitalism such as Bernie Sanders are half-right, that the major economies of the world currently do have “socialism for the rich,” but, Sharma writes, “My diagnosis of how it went wrong could not be more different.” The problem was not shrinking government, but growing government.

During the purported 40 years of brutal neoliberalism, welfare spending has only increased. Government deficits, especially in this country, are largely caused by Social Security and health care programs. The COVID pandemic showed governments at their most interventionist, with left-wing and right-wing parties around the world showering residents with cash.

The regulatory burden has only increased. There have been specific instances of deregulation in certain industries (such as transportation in the United States) or privatization of public companies (such as British Steel, British Telecom, and Rolls-Royce in the U.K.). But the regulatory codes of all major economies have gotten longer and more nitpicky.

In many cases what is called “deregulation” is actually just different regulation. “In Margaret Thatcher’s ‘Big Bang’ reform of the British financial system in 1986, for example, the government opened the London Stock Exchange to outside owners and eliminated fixed commissions on stock sales, but also passed a new Financial Services Act creating a web of red tape,” Sharma writes.

Decades of dirigisme has, predictably, resulted in slow economic growth throughout the developed world. Americans might not realize that since the United States is growing faster than other developed countries, and it has been for some time. Japan is the poster child for stagnation, but the U.K., France, Italy, and Spain have essentially been stagnant for 10 years or longer. Germany was in a recession before COVID hit and is in another one now.

Despite this long track record of bloated government and slow growth, academics have invented the field of “neoliberalism studies” to engage in the kind of reimagination that Hewlett and Omidyar are happy to fund. They think they are reimagining the future of capitalism, but they are really reimagining its history.

Every few years, left-wing economist Joseph Stiglitz declares the end of neoliberalism. He most recently did so in his book The Road to Freedom, self-righteously mocking Hayek with the title. As Phillip Magness pointed out in a 2019 article for the American Institute for Economic Research (which publishes my podcast, Econception), hegemonic neoliberalism is a fairytale.

The ideas of economists whose views are often described as “neoliberal,” such as Ludwig von Mises and Milton Friedman, have been routinely ignored by governments, not implemented at scale. Mises viewed bureaucracy and markets as a binary choice; the proliferation of government agencies demonstrates that America has often chosen bureaucracy. Richard Nixon, the president with whom Friedman was closest, issued economy-wide wage-and-price controls, which, to put it lightly, is not what Chicago price theory would recommend.

“Their prescriptive approaches to economic policy—typically calling for a deeply constrained or rule-based form of economic intervention in Friedman’s case, and broad adherence to economic non-intervention in Mises’s framing—have been eschewed for politically entrenched alternatives that favor proactive government intrusions into most economic matters,” Magness wrote.

Though this style of criticism of free markets and support for government intervention perhaps comes more naturally to the political left, some on the political right also believe in the fairytale of neoliberal hegemony. As Samuel Gregg wrote for National Review in 2022, the right looks to blame social isolation, the breakdown of the family, and “deaths of despair” on neoliberalism.

“At this point, you start to realize that neoliberalism operates as a catch-all phrase for the Left—and now parts of the Right—to describe everything that they think is wrong with the world in general and America in particular,” Gregg wrote. Never mind that it never existed.

Sharma’s is one book striking back against this prevailing narrative, but it is heavily outnumbered. I have reviewed one of the books on the other side, Sohrab Ahmari’s Tyranny, Inc., which denounces the “neoliberal counterpunch” that followed the “three glorious decades” after World War II.

It would be one thing if “neoliberalism studies” was just one flavor in the Baskin-Robbins freezer of peer-reviewed frivolity universities crank out every day. But the fabricated history it projects influences politicians who promise to undo austerity that never happened and revolutionize politics by calling for more of the same.

In a 2023 speech at the Brookings Institution, national security adviser Jake Sullivan perfectly echoed the “neoliberalism” narrative: “The vision of public investment that had energized the American project in the postwar years—and indeed for much of our history—had faded. It had given way to a set of ideas that championed tax cutting and deregulation, privatization over public action, and trade liberalization as an end in itself.”

Deluding itself into believing it was doing something fresh, the Biden administration has doubled down on the statist status quo. It has plunged trillions of dollars into infrastructure, green energy, and semiconductors. It saw the Obama administration’s record on regulation, which added over $300 billion in regulatory costs at this point in its first term, and has far exceeded it, adding $1.7 trillion in regulatory costs.

There are exceptions to the trend, but they are fleeting. The Trump administration had reduced regulatory burdens by about $100 billion at this point. The Reagan administration cut some of the bureaucracy. The Clinton administration and Republicans in Congress had a few years of budget surplus. None of these altered the overall trajectory of government growth going back 100 years.

Developed economies are already up against a wall when it comes to economic growth. In his book Fully Grown, economist Dietrich Vollrath outlines how economic growth consists of three components: physical capital growth, human capital growth, and productivity growth. Physical capital growth has never mattered that much, and it has remained relatively stable. Human capital growth—more humans, and better education, mostly—drove most of the economic growth in the 20th century.

As people become wealthier, they prefer smaller families on average (this is true basically everywhere in the world). Vollrath wrote that rising living standards and more effective and widespread use of contraception account for about two-thirds of the decline in the average growth rate in GDP per capita between the 20th and 21st century. That means basically all economic growth from here on out is going to have to come from productivity growth.

That’s all the more reason to get government out of the way of productivity growth. And yes, that is going to mean downturns might be more painful. Sharma’s book can, in part, be described as a defense of recessions. He argues economists and policymakers have become too confident that they have mastered the business cycle and made recessions a thing of the past. They haven’t, of course, and they shouldn’t want to. For creative destruction to work, destruction must be permitted to occur.

Destruction is basically impossible when money is free. Sharma argues that easy money is ruining capitalism by allowing everyone to get away with bad investments and poor business decisions. When money is cheap, companies can become heavily indebted and just keep borrowing without having to acknowledge mistakes or improve their productivity. Easy money is an economy-wide subsidy for failure.

Central bankers thought the years of easy money were fine because, until COVID, they did not cause consumer-price inflation. But they did cause asset-price inflation and massively grew the size of financial markets. Critics of “financialization” should look to Sharma’s diagnosis rather than vilifying banks and investors. The finance sector was simply following the lead of central banks. “Since Alan Greenspan promised Fed support after the 1987 crash, the stock market has grown from half the size of the U.S. economy to two times larger,” Sharma writes.

“In 1980, before central banks had contained inflation and started lowering rates, global financial markets including stocks, bonds, and other debt products, such as packages of mortgages, were worth a total of $12 trillion, which was about the same size as the global economy,” Sharma writes. Today, that same set is worth almost $400 trillion, about four times the size of the global economy. The world has not actually become over 30 times wealthier since 1980; this growth was the result of decades of easy money from central banks.

Sharma errs in calling for the resumption of an older way of doing antitrust enforcement, where government would place more weight on factors other than consumer welfare in deciding to break up companies. If governments listened to the rest of Sharma’s advice, the antitrust problems he is concerned with would likely resolve themselves. Without government shielding companies from their own mistakes, competition would increase as a matter of course.

Perpetual easy money, massive government deficits, omnipresent bailouts, all-encompassing regulation, and a generous welfare state are not evidence of “free-market fundamentalism.” Yet they have characterized governments’ approach to economic policy around the developed world for decades. If you’re not satisfied with the slow growth that has resulted, maybe we should try capitalism instead of reimagining it.

What Went Wrong With Capitalism
by Ruchir Sharma
Simon & Schuster, 368 pp., $30

Dominic Pino is the Thomas L. Rhodes Journalism Fellow at the National Review Institute and the host of the American Institute for Economic Research podcast Econception.

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In Go Woke, Go Broke: The Inside Story of the Radicalization of Corporate America, Charles Gasparino, the Fox Business Network senior correspondent and longtime Wall Street reporter, wades directly into America’s culture wars to focus on how progressive politics is running rampant in corporate boardrooms. The idea for the book—Gasparino’s sixth and his first in more than a decade—was taken straight out of last year’s business headlines when an array of U.S. companies found themselves on the receiving end of consumer and political backlash for their progressive stands.

In taking on his subject matter, Gasparino does not shy away from the hot-button social issues of the day, including diversity, equity, and inclusion (DEI), critical race theory (CRT), and transgenderism and LGBT rights. The author recounts much of last year’s press coverage about Disney “using shareholder money to thwart a Florida law” and “make sure kids knew about gender reassignment therapy and intercourse between various sexes,” Target celebrating Pride Month by displaying “tuck-friendly bathing suits for men transitioning to women near rainbow-colored onesies for toddlers,” and Anheuser-Busch “turning to a transwoman influencer in its marketing of the nation’s then-top-selling beer, Bud Light,” with additional color provided by Gasparino’s Rolodex of unnamed sources. For maximum provocation, Gasparino chooses as the title for his book the ubiquitous Go Woke, Go Broke epithet that has become a rallying cry for conservative groups looking to boycott overly progressive companies.

Technically speaking, this anti-woke catchphrase overstates the case. So-called corporate wokeness is not a leading cause of bankruptcy. Despite the press spin at the time, Silicon Valley Bank collapsed and was seized by bank regulators in March 2023 due to weak interest rate risk and asset-liability management policies, not because of management’s apparent obsession with DEI causes (although this clearly was a distraction). Moreover, none of the book’s main corporate targets—Disney, Target, and Anheuser-Busch—appear to have suffered lasting financial harm for their recent woke transgressions, judging by their respective stock prices as of the August release date of Go Woke, Go Broke.

That said, corporate boycotts and negative headlines can have real and lasting financial impact, as seen by Bud Light’s continuing loss of market share and brand revenues nearly 18 months since the Dylan Mulvaney fiasco. Why is it that Anheuser-Busch, maker of iconic American beers and pitch-perfect advertising campaigns, still can’t (or won’t) right its marketing ship? Why do Disney and Target still pander to the LGBT community at the risk of alienating their core customer bases? Why have so many companies forgotten Michael Jordan’s sage advice about selling sneakers to both Democrats and Republicans?

Gasparino argues that most American CEOs, despite being “masters of the universe,” are basically cowards at heart, afraid to rock the boat at the pinnacle of their careers. This begs the question: Exactly who or what are the titans of business afraid of? None of the various explanations offered by Gasparino—Millennial workforces, younger demos, omnipotent human resources departments, and fringe activist groups—are particularly compelling. He tries to make the case that the events of 2020—the death of George Floyd and ensuing Black Lives Matter protests and civil unrest—were somehow catalytic and cathartic in awakening corporate executives to America’s social problems, but this too falls flat.

A major flaw of the book is that it compartmentalizes corporate wokeness and the acrimonious acronyms of DEI, CRT, and LQBT and never connects these dots back to the broader environmental, social, and governance (ESG) investment movement. By doing so, the reporter Gasparino misses the bigger story and the key role played by financial firms in enforcing the new progressive rules of sustainable business and stakeholder capitalism. This blind spot becomes clear in the book’s kid-glove treatment of Wall Street, which stands in stark contrast to Gasparino’s scathing rebukes of the financial industry in his previous books. Now, Gasparino channels Gordon Gekko’s “greed is good” mantra to justify the embrace of ESG by investment firms such as BlackRock, often bending over backward in the process.

Gasparino notes that ESG has made BlackRock “uber-wealthy” because asset managers can charge higher fees for funds carrying a sustainable label. Such hyperbole ignores the fact that ESG funds comprise a small minority of global assets under management (i.e., roughly 6 percent for BlackRock at year-end 2023), and integrating ESG criteria into all fund categories and asset classes is an overhead expense drag on investment returns. It directly contradicts, moreover, the main thesis of the book. If progressive environmental and social business practices such as DEI do not drive stock prices or credit ratings, then ESG necessarily cannot improve investment performance for fund managers (and should not be implemented on fiduciary grounds).

Contrary to Gasparino’s take, most of Wall Street has been suckered into the sustainability trade not by the money but rather by the need to virtue signal in the wake of the 2008 global financial crisis. Over the past 16 years, more than 5,300 financial firms have joined the United Nations’ Principles for Responsible Investment, the main ESG affinity and advocacy group on Wall Street. Now, with financial regulations looming that will make ESG mandatory, no one on Wall Street is willing or able to hit the exit door. Gasparino gives short shrift to the role played by the government sector in pushing the ESG agenda on the financial markets, first indirectly through supranational agencies such as the U.N. and international NGOs like the World Economic Forum and now directly through the regulatory function. Indeed, in the grand ESG scheme of things, DEI and the other cultural war issues that Gasparino focuses on are mainly a distraction from the priority goal of climate change, which is a topic largely ignored throughout the book.

The business community is now holding its collective breath to see if climate and ESG mandates by the Securities and Exchange Commission, the Department of Labor, and other executive agencies become the financial law of the land in the United States, much as they already have in Europe. Regardless of political leanings, what keeps all corporate CEOs up at night these days is the fear of paying more for growth capital or losing financial market access altogether if their companies are deemed “unsustainable.”

As with all things progressive, ESG is an all-or-nothing package deal, with the contrived concept of intersectionality requiring the acceptance of the entire policy program. This is why corporate leaders now reflexively grab onto third-rail social and political issues such as abortion, sex education, and parental rights and refuse to let go even when it hurts their companies financially. It is a progressive loyalty test, and they do not want to fail due to the potential market implications.

Go Woke, Go Broke sheds additional light on the progressive takeover of Big Business and the financial markets. It raises many important questions. Unfortunately, it fails to answer most of them.

Go Woke, Go Broke: The Inside Story of the Radicalization of Corporate America
by Charles Gasparino
Center Street, 320 pp., $30

Paul Tice is a senior fellow at the National Center for Energy Analytics, an adjunct professor of finance at New York University’s Stern School of Business, and author of  The Race to Zero: How ESG Investing Will Crater the Global Financial System.

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