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

Volume 13, Issue 9: March 1, 2011

  1. Private Sector’s Doubts Hamper Economic Recovery
  2. As Goes Wisconsin, So Goes the United States?
  3. The Matchmakers of Predatory Politics
  4. The Civilian and the Military
  5. New Blog Posts

1) Private Sector’s Doubts Hamper Economic Recovery

The U.S. economy is growing at a snail’s pace, but consumer spending—what consumers spend collectively on toothpaste, haircuts, shoes, cars, and other goods and services—is at an all-time high. A paradox? Not at all. The real fuel of economic growth isn’t consumer spending, it’s private net investment—what the private sector spends on materials, equipment, and other capital goods (beyond the amount necessary to make up for depreciation).

Private net investment plunged drastically in late 2008 and is still less than one third of its 2007 peak. It grew at an annual rate of only $144 billion in the fourth quarter of 2010, compared to $463 billion in the third quarter of 2007. “For the entire year 2010, it was down 60% from its peak,” writes Independent Institute Senior Fellow Robert Higgs in his latest op-ed for Investor’s Business Daily.

Economic growth—and the outlook for more jobs—won’t improve much until private net investment recovers. But decision-makers in the private sector will continue to lack the confidence to make major new investments until the fog created by policymakers in Washington, DC, has dissipated, Higgs concludes: “Although ObamaCare and the Dodd-Frank financial ‘reforms’ were approved by Congress and signed into law last year, these massive statutes leave scores of important details awaiting determination by administrative agencies and courts. This doesn’t create a climate conducive to aggressive investment.”

“Why Boom Is a No-Show: A Lack of Net Investment,” by Robert Higgs (Investor’s Business Daily, 2/25/11)

“What’s Holding Back the Recovery?” by Robert Higgs (The Beacon, 2/21/11)

“Private Business Net Investment Remains in a Deep Ditch,” by Robert Higgs (The Beacon, 2/20/11)

Depression, War, and Cold War, by Robert Higgs

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2) As Goes Wisconsin, So Goes the United States?

Wisconsin Governor Scott Walker’s proposal to end collective bargaining for public employees has the potential to spread like wildfire across the United States, as states and municipalities search for ways to avoid defaulting on their bonds. If other jurisdictions follow Walker’s lead, we might see a surge in momentum for real fiscal reform at the federal level, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.

Real fiscal reform—aimed at pulling the United States out of the black hole of mounting debt and cultivating a climate for sustainable economic growth—is long overdue. “If the dollar were not the world’s reserve currency, a major debt crisis would have exploded by now,” Vargas Llosa writes.

How large is America’s fiscal shortfall? At $14.1 trillion, federal debt is almost equal to annual GDP. And the U.S. budget deficit projected for 2011 exceeds $1.6 trillion. This, Vargas Llosa continues, “represents almost 11 percent of the nation’s gross domestic product—which compares pitifully even with Greece, whose deficit in 2010 amounted to 8 percent of that country’s economy.”

“Wisconsin Matters to the World,” by Alvaro Vargas Llosa (2/23/11) Spanish Translation

Lessons from the Poor: Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa

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

The Che Guevara Myth and the Future of Liberty, by Alvaro Vargas Llosa

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3) The Matchmakers of Predatory Politics

Politics makes strange bedfellows—including alliances of idealists and opportunists who lobby for the same regulations, but for vastly different reasons. The classic example is that of bootleggers and Baptists, both of whom supported local laws to stop the sale of alcohol on Sundays, but scholars have found similarities with other coalitions, including lobbies that promoted NAFTA, tobacco restrictions, and the Clean Air Act.

Typically, “unholy alliances” are formed by an outsider—a political entrepreneur who is alert to political opportunities and plays matchmaker to moralists and profiteers—argue Randy Simmons, Ryan Yonk, and Diana Thomas (all of Utah State University) in the Winter 2011 issue of The Independent Review.

Here’s one maxim the authors discuss that predatory political entrepreneurs embrace: Support noble-sounding goals that can’t possibly be achieved, then position yourself to collect a payoff. Here’s one example: In 1998, Shell Oil, Mobil Oil, and other groups that had opposed the Kyoto Protocol began to support it. Why? An amendment to the Clean Air Act would have compensated them for voluntarily reducing their carbon emissions early on. Mobil alone stood to gain $300 million in relief.

“Bootleggers, Baptists, and Political Entrepreneurs,” by Randy Simmons, Ryan Yonk, and Diana Thomas (The Independent Review, Winter 2011)

Subscribe to The Independent Review. Special Internet Offer: Sign up online for a paid subscription of $28.95 and receive the next six issues for the price of four. A savings of 33% compared to the newsstand price. Available to new subscribers only, not renewals.

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4) The Civilian and the Military

As conflicts continue to intensify in North Africa and the Middle East, it is important to remember the rich antimilitarist tradition that once dictated U.S. foreign policy decisions. Arthur A. Ekirch, Jr. in his book The Civilian and the Military recounts the important American tradition of isolationist pacifism and its eventual decline into interventionism and war.

In a time of uncertainty and unrest, Ekirch's analysis shows why the growing power of the armed forces in national and international policy should alarm thoughtful citizens and policymakers.

As libertarian historian Ralph Raico explains in his foreword to the book, The Civilian and the Military is important for tracing the “portentous transformation” of the United States from a republic leery of maintaining its own standing army to “the world’s greatest military machine and sole imperial power.”

Purchase The Civilian and the Military.

Read a detailed book summary.

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

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