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The Lighthouse is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

Volume 9, Issue 15: April 9, 2007

  1. U.S. Tariffs Undermine Ethanol Alliance
  2. Somali Mess Made in U.S.A.
  3. P. J. O’Rourke Explains Adam Smith
  4. The Independent Review—Spring 2007 Issue Now Available

1) U.S. Tariffs Undermine Ethanol Alliance

The U.S. government’s 54-cents-a-gallon tariff on ethanol imports is undermining its own efforts to forge an “ethanol alliance” between the United States and Brazil, Independent Institute Senior Fellow Alvaro Vargas Llosa explains in his latest syndicated column. Because ethanol derived from sugarcane (the biofuel that Brazil manufactures in abundance) is eight times more efficient than corn-based ethanol (the type made in the U.S.), the tariff discourages U.S. consumption of the more cost-effective variety, Vargas Llosa explains.

The goals of U.S. policymakers are partly environmental and partly geo-political: Washington would like Central American and Caribbean countries to substitute more ethanol for oil, thus reducing the economic leverage of Hugo Chavez of oil-rich Venezuela. This prospect worries Fidel Castro, an ally of Chavez, so the Cuban dictator recently authored an article denouncing those who want to—brace yourself—“convert food into combustibles” and thereby precipitate massive starvation!

“But unless there is a major change in policy, Castro need not worry too much about ethanol,” writes Vargas Llosa. “In order for the U.S. ethanol program to achieve, say, what Brazil has achieved—namely, replacing 40 percent of oil consumption—the country would need to make available massive amounts of new farmland on which to grow more corn and, given how inefficient that crop is as a source of energy, waste colossal amounts of capital transforming it. True, the U.S. could help start a sugarcane-based ethanol industry in Florida. But then it would need to protect the Floridians from Brazilian competition, which would not exactly thrill the other member of the ethanol alliance.”

“The Ethanol Alliance,” by Alvaro Vargas Llosa (4/4/07) Spanish Translation

Liberty for Latin America: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa

Center on Global Prosperity (Alvaro Vargas Llosa, Director)

Spanish-language Blog

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2) Somali Mess Made in U.S.A.

Support by the United States for Ethiopia’s occupation of Somalia—especially its fierce fighting in Mogadishu—has contributed to continued support for anti-U.S. Islamists in that troubled country, and it may eventually lead to the Islamists becoming the “dominant political force in the country,” argues Independent Institute Senior Fellow Ivan Eland in his latest op-ed.

“The U.S.–backed Ethiopians, already unpopular, have become even more despised as a result of their alleged indiscriminate shelling of Mogadishu’s civilian areas, which human rights groups are calling a war crime,” Eland writes. “Unlike the period when the Islamists controlled Mogadishu, the transitional government has been unable to keep order, undermining both its credibility and public support. As a result, many in Somalia see the period of Islamic rule as good days, and now long for its return. And that’s probably what will happen. Like the resurgent Taliban in Afghanistan, whose recent good fortunes were brought about by continued foreign occupation of that country, we will likely see the Somali Islamists make a comeback.”

The news media, Eland continues, has done a poor job reporting the underlying causes of anti-U.S. violence in Somalia, Afghanistan, and elsewhere. This pattern, he concludes, has enabled the U.S. government to make the same mistakes over and over again.

“U.S.-Made Mess in Somalia,” by Ivan Eland (4/9/07) Spanish Translation

The Empire Has No Clothes: U.S. Foreign Policy Exposed, by Ivan Eland

Center on Peace and Liberty (Ivan Eland, Director)

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3) P. J. O’Rourke Explains Adam Smith

Adam Smith’s mammoth treatise The Wealth of Nations (1776) is a thorough—and, to modern readers, thoroughly demanding—argument for why “the obvious and simple system of natural liberty,” as Smith called it, is the straightest path to progress. But the book changed the world for the better, and thus every truly educated person should have a working knowledge of its profound ideas and huge impact, humorist P. J. O’Rourke recently told an overflow audience at an Independent Policy Forum devoted to his new book on Smith’s classic economic treatise, aptly titled On The Wealth of Nations.

Fortunately, the essence of Smith’s treatise can be encapsulated in a single sentence, O’Rourke said: “Economic progress depends upon three individual liberties: the pursuit of self-interest, the division of labor, and the freedom of trade.”

Smith wrote his famous example of the benevolent social consequences of the butcher, the brewer, and the baker—each pursing his self-interest, yet also promoting the ends of others as if guided by an invisible hand—partly to reassure the old-guard elites who were leery of new opportunities for commoners, O’Rourke explained.

More important, Smith wanted to show that specialization and trade allowed everyone to benefit from the efforts, talents, and resources of others. Freedom in production and exchange—founded on secure private-property rights—raises labor productivity, which makes possible savings and investment. Through this process real wealth—not money, but the things that money can buy—is created.

“Wealth is not a pizza, where if I have too many slices, you have to eat the Domino’s box,” said O’Rourke. “Wealth is not a zero-sum game. That is probably the single most important message of The Wealth of Nations.”

O’Rourke had lots of colorful descriptions for the politicians who subscribe to the myths that Smith debunked more than two centuries ago, especially the utterly mistakenand usually politically self-servingnotion that economic progress is enhanced by imposing tariffs and accumulate a net surplus of exports over imports. Rather than steal O’Rourke’s thunder, we invite you to read the transcript of his presentation.

P. J. O’Rourke “On the Wealth of Nations”—Independent Forum Transcript (2/7/07)

Listen to or download audio of the event

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4) The Independent Review—Spring 2007 Issue Now Available

The Independent Review, the Independent Institute’s quarterly journal of political economy, continues its tradition of publishing thorough yet accessible scholarship on important topics. Here are some of the questions addressed in the Spring 2007 issue:

  • How does the U.S. welfare state affect the government’s ability to perform the roles that Adam Smith deemed essential?
  • How do economists’ values shape the design and testing of their economic models?
  • What does the case of Hurricane Katrina relief efforts tell us about the differences between government agencies and non-governmental organizations and networks?
  • Why have social scientists failed to see the Swedish welfare state’s bias toward the middle class?
  • Why have Internal Review Boards gotten worse at their mission of supporting social science, science education, and freedom of inquiry?
  • What can America’s experience with privateers before and after the War of 1812 tell us about the way government-contracted private security services are likely to perform in today’s hotspots?
  • Where did G. K. Chesterton and Hillaire Belloc err in claiming that land reform was essential for improving the lot of the English working class?
  • Why are political entrepreneurs quick to indict cheap imports and immigration as the bane of wage earners?
  • What roles do cooperation, trust, and reciprocity play in the trial and error of societal development?
  • In what sense is globalization a two-way street?

Read The Independent Review and learn.

Spring 2007 Issue: Table of contents and links to selected articles and all book reviews.

Subscribe to The Independent Review.

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