Welcome to Keith's, my don't tread on anyone and the libertarian Institute today. I am joined by dr. Benjamin Powell. He is the executive director of the free market Institute at Texas, Tech University and a, professor of economics. In the brawls College of Business, and a senior fellow with the independent Institute, dr. Powell, thank you so much for your time. All right, Keith happy to be
with you. You wrote a book called wretched, refuse, the political economy of Ian and institutions. What do people need to know about immigration? All right, so what this does so economists, the social scientists who study immigration, find overwhelmingly that this massive economic gains so the immigrants but also the societies where they arrived, the natives become a little bit wealthier, there's a challenge to that.
That says, what if they undermine and this will be relevant for your audience, really undermine our freedoms, our economic freedoms, our property rights. They break, you know, imagine socialist, immigrants from Cuba come and recreate Socialism in Florida. Well, that would destroy our productivity evaporate, these economic gains and make us worse off.
Now, of course, I choose Cuban immigrants from Florida for a reason because I can think of no better anti-socialist voting Block in the United States then Cuban immigrants. Well, what this book does is it takes the idea seriously that they could undermine institutions? And we look at it, a whole bunch of different ways across lots of countries doing case studies and say, what happens when more immigrants come? What does it do to the
institutions? And for the most part it Doesn't affect a lot of them for some it makes us a little bit more free and in some dramatic cases tends to make us a lot more free. When it comes to social cohesion, having sort of a center point that people can rally around, it doesn't seem like saying, well we're all Americans really matters much. I think the average person would say, well, America was founded by colonialist racist slave owners.
So America is more or less nothing when it comes to building, social cohesion between Americans plus immigrants coming to America. Do you guys have any ideas as to what how we can sort of lead the way in harmonizing are Well, interest like that, yo, I think it matters about what your social cohesion is around and if there are around the ideas of the founding principles of the United States and individual liberty, and freedom. And that's a good thing.
If they're to collectivist, Malik cohesive beliefs than that's would be undermine our institutions and make us worse off. So I think rather than some of what's taught in American schools right now, I think would be better to be proud of American Heritage and where we come from and teach the ideas of individual responsibility Liberty and the Melting Pot. The idea of America of the Ellis Island generation of immigration.
I think the problems that we get in terms of ideology are really more about the education here within the United States rather than the beliefs of foreigners per se. You wrote a book out of poverty sweatshops in the global economy? What is it that people need to understand about sweatshops that you discuss in this book? Yeah, well, it's funny that you link these two together right away because the people who read the first one, don't believe that. I wrote the second one and vice
versa quite often. Because if you hear me talk about immigration, they'll say, well, he's obviously a campus liberal. And if they read the out of poverty one, I'm obviously a corporatist capitalist shelf. Instead there's actually something About free trade that I think runs through both of them. So the main argument and out of poverty is that sweat, shops, provide, a step out of poverty. For some of the poorest people in the world. This was true.
And in our nation's history, I grew up in Haverhill. Massachusetts The Shoe City, my undergraduate was from University of Massachusetts Lowell, the heart of the Industrial Revolution and my ancestors worked in things that would call sweatshops today. And that was part of the stage of development as we accumulate more Capital, get better technology wages Rose working conditions, improved and we We
moved on to a better life. That process is played out from the United States and Great Britain. Initially to, if we go back to Sweatshop country, circa 1960, we're talking about South Korea, Taiwan, Singapore, Hong Kong. And them instead of about 100 Year transformation of something like pre-industrial, that post Sweatshop.
They're about a generation, then you look at what's going on in Vietnam today, in places like that, where sweatshops are Workers. Take these jobs because it's better than their next best alternative. Now, we can aspire to have better alternatives for them and that's what part of the process of development does but you don't make somebody better off by taking away their least bad alternative, which is what these sweatshops often are.
So we could maybe see that using the legislative powers to force people to not be able to work there. Well maybe that's bad. But shouldn't we sort of collectively decide to boycott these organizations to decrease their bargaining power and maybe give them an incentive to pay the laborers more now. So boycotts, dry up the demand for the products, which dries up the demand for the labor, that pushes down wages and destroys jobs and pushes people back into
subsistence agriculture. That's the Direction to go unless it's something like what goes on in the Weger Province in China now and what they're doing with forced internment of people and making them produce things that slave labor and you do want to drive up the dry up, excuse me, dry up the demand for that. But for places where workers voluntarily take their jobs, boycotting them ends up, throwing them back to the worse
alternatives. You go back to sweatshops from the year, 1780 all the way up until I believe 2020. Just amazing research in in this book at any point. Did you sort of find there being a lot of influential politicians or philosophers that gave us the idea that offering someone a job
as evil exploitation? But offering someone nothing no products and no Services. Well that's great and you're a member of the proletariat and we need to Riot together how that seems so How did that idea ever come to so many people? Yeah, I mean I think you find it more in philosophy than economics baby. But the idea that there's certain minimum standards that you must agree to interact with somebody and it would be wrong to interact with them on any
less than that. But that's somehow it's not wrong to ignore them at all. So, in the context of sweatshops, the company that exclusively buys made in the USA, Labor and benefits unionized wealthy workers in the United States. Is somehow more moral than A company that goes and gives a step up to poor workers in Indonesia, that doesn't meet the threshold that the philosopher believes is necessary but seems to be making their lives better than someone who's ignoring them.
I've always found that to be a strange position. When it comes to us, being able to visually see, all right, South Korea, Singapore America, Great Britain. They did have all these sweatshops and now, they're much wealthier than they were previously. But in a lot of these places you could find government legislation or labor supported laws coming about at the same time as we see these labor improvements.
How are we able to determine whether an increase in the standard of living is the result of free markets or government legislation? Yeah, I addressed exactly this. In the book. Keith so by the way, most poor countries today also have anti child labor laws and things like that that just largely aren't enforced now but if you go back and do our history, the United States first anti child, labor law was passed in the 1840s in Massachusetts.
Here's what it said. Children under 12 years of age can't work more than 10 hours per day in a factory so eleven-year-old 60-hour workweek switch for the norm than of 10 hours. Monday through Saturday. That was fine. Just no more than that. And once you're 12, that doesn't apply and you can find these types of restrictions and other US states, you can find them in Great Britain, you can find them in France back when we were
poorer and less productive. The laws that they passed for largely symbolic, they weren't binding, they didn't stop actual child labor and the same goes for health and safety laws and other things like that. What we find is as the economy grew children left the workforce work for workplace safety improved and laws continue to be passed. The largely codified, what was already going on? We didn't get National child, labor law and the United States anti child, labor law, in the United States.
It's all 1938. Basically, once we were past the stage of sweatshop development. Anyway, and economists when they study both anti child labor laws and mandatory School, attendance laws, they find. Once you control for economic growth, these laws did little to change.
Been working or attending school that tells me that they're basically trailing the market process of development and codifying what's already happening and, you know, maybe picking up a laggard here or there, but the thrust of the change comes from us becoming more productive and returned.
By the way, that makes sense. Most of us don't want our kids working, but when you're in extreme poverty, sometimes that child labor is necessary to feed clothes shelter, the family, as soon as you get those needs taken care of child. Labor tends to decrease and we can see this in modern times 2. Look, particularly at one study that was done in Vietnam, tracking individual families and it's not just a nice linear
relationship. As economic growth is like this on the screen as economic growth goes up. Child, labor goes down. Know it's like jumps once you get out of extreme poverty, like can get 2,000 calories per family member big drop in child Labour, then around food shelter, clothing, the official poverty line. Boom, another big drop and that was going on during a decade of growth in Vietnam in the 1990s, that tracked individual. Ways and the children working. With things like inflation.
It can be very difficult to measure economic growth because money doesn't necessarily mean. You have a ton of growth. We've seen hyperinflation in Zimbabwe in Germany and a number of other places. What are some reliable metrics that we can use to judge whether an economy is growing stagnating or shrinking, okay? I'm going to try not to get too much of an econ, dork on your here right now.
So I mean, when a condom is talk about prices or talk about income statistics were always Adjusting for inflation, but inflation adjustments are not perfect. There's lots of things that make them either under state, or over State depending what's going on. But when we're talking about like long-run development, if we look at things like GDP per capita, life expectancy literacy headcount at the poverty line of
extreme poverty. All these things tend to go in the same direction, you get some places where there's some weird anomalies but for the most part they move together, and that's a Sign of Economic Development and growth, an anomaly would be like Cuba's Healthcare statistics in the life expectancy in Cuba verse. How poor they are on other margins and PS part of that is them cooking the books.
Well, I guess we could measure that to cuban-americans and see if it's maybe a cultural thing as that ever been done to you know, of any stats like that. Well, no part of what they're doing is literally cooking the books. They make people have forced abortions on high-risk pregnancies and if you kill the baby before it's born, it doesn't make it into life expectancy statistics.
If it dies shortly after birth, a one-week-old dying does a lot to move the number when your average is 80 years old, If it hurts your life expectancy statistics, that's part of it. The other part is a centrally planned economy and they force a lot of resources into Healthcare at the expense of other things. People would like. Anyway, that's just an example of a weird anomaly one, but for the most part these things go
together. So if I look at people in America assume, I'm just a nationalist. And I say, I want the working class, as if other people don't work, I want these people to have higher incomes. I want them to be wealthier. Why should I see Port free markets. Well, free markets are the best at delivering that for the working class.
The working class is going to be sensitive to the price of all of the things that they consume if we free trip, if we trade freely with the rest of the world and bring in more, a greater variety of products at cheaper prices for them, that makes their real earnings, their income go up. Now what it does is it changes the mix of the jobs, the working class and for that matter, everybody else in the United States is best suited to do when we trade with people in other countries.
Trees who are more suited in econ speak, have lower opportunity, cost of producing particular Goods. By the way, the same game is true with immigration or with International Trade. They're both two different ways to do International Trade, both change, the mix of jobs, that native-born Americans are best suited to do and both make the pie bigger for Americans. Overall, as a result, neither impacts the total number of jobs available for the native-born population. It changes the mix.
And in fact all of the gains from international trade or migration if you don't Shuffle the mix of jobs you don't get the games. So the reshuffling that comes with trade or migration that people bemoan is part of the necessary process of freeing labor up from things that it's not relatively best suited to do and reallocating it to where it can create greater value. You wrote a book called socialism sucks to economists drink their way through the
unfree world. Now, socialism, I guess you could Define it, as simply helping people and making sure that no one's in absolute poverty, what's wrong with that? Well, that's not the definition of socialism. If we just talked about Pleasant outcomes in, you know, milk and honey. Everything feels nice. So, as socialism meant something to Mark's, it meant something to, you know, more than 100 Years of To have studied it.
And people throw this world are grounded, by the way, on both the left and the right misrepresent. What socialism is socialism means abolishing private ownership of the major factors of production, your Capital, your Machinery, your businesses and replacing them. I'll say with some form of collective ownership. In practice for any large Society, this means State ownership of the, major means of production, that's what it meant
on your marks. That's what it meant in the Soviet Union. That meant. That's what it's meant to both Marxist and free-market economists who have talked about this for over a century. When it comes to the backend, the distribution of things, you might hear a lot of Democratic. Socialist, say, you know what, it's not the factors of production, we want to control. Its once all that, once all those goods are produced, we
then want to be able to tax. And then redistribute those goods is that a different sort of economic system, or is that as other people would Define socialism the institutionalized aggression against private property? No, so lesson that if it is an infringement, Private property rights but it's not the whole set sail. Abolition of private property in the major factors of production.
Which once you do you're going to replace with some system of command and control of how you organize economic activity. Because some people will talk about socialism From Below or squishy terms like this as if stuff just comes together like no you need like prices in a market economy, coordinate production. When you get rid of private property, you get rid of the prices that coordinate, you got to replace it with something that State Central.
Anning. Now, when we talk about a welfare state, I think that's plenty of problems with the welfare state. My guess is having a Libertarian podcast, a lot of your viewers probably do too. However we should not mistake them for socialism. So Sweden, which is the first chapter of that book that we visit, is a prime example of this sometimes. Fox News will say that's socialist, Sweden, and same at
the same time. Bernie Sanders when you say, how could you be elected as a socialist, just say, well, I mean, like Sweden, both of these things are bullshit. Sweden. Is a capitalist economy Volvo is privately owned. Go to a restaurant or a hotel. It's privately owned prices coordinated activity. They have pretty close to free. International trade, strong, private property, rights sound money.
Light regulation of business. What Sweden does have is really high taxes and redistribution in a welfare state, and a bunch of Labor Market race. I think that's messed up, and when it was at its worst, it dragged down. Swedish growth Sweden was laissez-faire from mid 19th century to me. 20th century. They grew to be the fourth, wealthiest nation in the world. They put in their big welfare state and high taxes. It didn't impoverish them like socialism, it's slowed their growth.
So they became bottom half of the oecd countries. You know the club of rich countries from fourth in the world down to the bottom tail. Other people group asked, I think that's a problem but I wouldn't confuse it with socialism. When you mention light regulations, can you think of any regulations that America has that they don't end Sweden? Well, these last couple years. Yeah, that's really freaking easy.
Yeah, sweet. And in addition to doing pretty well in the economic freedom index is over. So there's something. By the way, your listeners should look it up called economic freedom of the world annual report. The website is free, the world, got organs, the easy one to remember and you could get a listing of countries, measured economic freedom, across five big areas. Sweden usually falls in the top quarter of the index, but somewhere, 25 to 35, is
something like that. So to of Norway, A and the rest of the Nordic countries. But in these last few years of course Sweden leg regulated covid River relatively right lightly. And I would say you know we've seen hygiene socialism around the world or a form of it.
These last few years of command and control bureaucrats telling us what Market activities and social activities, we can engage in and not and Sweden did relatively little of that and by the way, so did the rest of the Nordic countries, they all come out. Good on this too.
And I actually just published a new study today or released a new study today that a The economic freedom rankings for the covid restrictions and sure enough, Sweden pops up even higher into the capitalist rankings and so does actually Norway and Finland, go up really high, but all of them do very well on that. So mandatory workplace closure stay-at-home orders. There's nothing sweet and wasn't getting that. We all got the last few years. Yeah. Really.
When it comes to Swedish immigrants to America and taking their net worth versus the net worth of the average Swede Did you guys measure that by any chance? No, we did it. I suspect the average. Hmm, I don't know. Got it when it comes to.
Yes. But it would really just be guessing When it comes to the concept of private property, you might think that this would give some people a great amount of institutional power, and allow them to be selfish at the expense of the rest of us. Why is private property? What is private property and why is it important? Well, here's the thing with private property of capitalism, you have competition. So the only way you get something from somebody else, is by offering them a deal, they
accept? I offer you this. You can take or you cannot take and it might be that, you might not have very many other offers that look better, but you still have the ability to say no under socialism. There's a Monopoly called the state. Remember State ownership of the means of production means they're going to dictate how everything gets put together and made. And by the way, you are part of the means of production, labor is one of the factors of the
means of production. You can't control an economy without controlling the laborers there. You don't have A choice, you have command. And by the way, you lose your other type of choice to your political voice, your political choice.
So economists since the great Ludwig, von mises have known that economic calculation under socialism is impossible, but there's another type of thing that's not quite an impossibility, but it almost is. And that's maintaining Democratic freedoms, while having a socialist government. So if you look around the world, economically free democratically. Free tend to go together unfree, unfree, too. Together the off, diagonals are kind of rare, you get some exceptions, like Singapore.
We don't have political freedoms, but you have economic freedoms. But what you don't see is that other off diagonal of, oh, Democratic socialism. We have no economic freedom. We have our Democratic freedoms because once you centralize control over the means of production, you've centralized the ability to punish opposition. You can't maintain a free and independent political voice against the regime if they control your economic livelihood.
So the only example that I can think of in recent years that approximated this was Venezuela and notice I said, was so Maduro, excuse me, Chavez was democratically elected in 1998, he democratically put in a new socialist Constitution and then soon thereafter people lost their free democracy, their economic freedoms, went to hell. Now for a while things look good there. While oil prices were high because they sit on the world's largest oil reserves.
They were basically able to export oil, use the earnings to import Goods. For Venezuela, meanwhile, even during the 2000s, when things seem good food production was declining in Venezuela, but once 2013 hits an oil, prices come
down. And by the way, production came down, because the state wasn't very good at running an oil company, then the game was up, but like Maduro got re-elected with something like seventy percent of the popular vote recently, but in an economy that had hyperinflation and the average Venezuelan losing more than 20 pounds that year. They didn't all find Jenny Craig. Egg usually high unemployment High inflation is a good way to
get. Voted out of office, take hyperinflation and literal starvation, and you get over 60, 70 percent voter approval. That tells me that their democracy is a sham I'm sending Dinesh D'Souza there to see if there were any mules, but casting votes on behalf of the citizens when it comes to the claim of inequality, you can walk into places like San Francisco or New York, and you will see literal homelessness people, starving and wearing
rags. And then you'll see, you know, these Mansions, you'll see these skyscrapers things that are worth billions of dollars. Probably, how can you justify the free market system when It creates such a drastic inequalities. Yeah. Actually, I'd say what you're describing is not the free
market system. So, I want to be clear that when we talk about free markets, that defending capitalism, or things like that, that does not synonymous with the current United States on the Spectrum. The United States is more in that direction than some other places but that's kind of like being the tallest dwarf. So, it's interesting that you say San Francisco, New York City. What's one of the big drivers? Not the only. But one of the big drivers are homelessness is unaffordable
housing. But why do we have unaffordable? In those places, it's because of government restrictions on building things that prevent competition from creating more housing and driving down its price to make it more
affordable. California has long been a leader in doing that, with putting land off limits with putting permit moratoria height, restrictions minimum lot size as minimum setbacks inclusionary zoning, which is a name for Price. Controlling, a portion of new development California's, the worst on this New York's pretty bad too. I remember a class, Asik studies, maybe 20 years old now but that's before the problem even got as bad as it is in San Francisco.
But back then they looked at the difference between the physical construction cost of a new home and the price of a new home and said, how much of this is intrinsically scarce land? It was scarce land. Driving it double the lot size, hold the rest of the house constant and you should double that differential. Instead they find about a 10% change. So 90% of the scarcity was government permission to build not intrinsically, scarce land.
This homelessness crisis is in part a major part, A government created. One of not letting capitalism work to build or as Brian Caplan's new book. Coming out is called build baby build. God, does that guy ever? Stop writing. Don't be a feminist came out two days ago and he's already coming out with a new one. What are some examples? Historically of deregulation? Increasing the quality of goods and services and decreasing the price.
You mean like economy-wide? I mean we have the products or services or countries. So I think one of the countries that we explore in socialism socks. That's one of the inspiring ones to look at today's, the country of Georgia, the former Soviet Republic south of Russia, east of the Black Sea, north of Iran, kind of a tough Geographic spot. It in fact, partially occupied by Russian troops right now and has been for a while but they had essentially no reform.
Fall of the Soviet Union until the mid-2000s you get the rose Revolution. Mikhail Saakashvili goes around handing out roses gets elected he puts kaha been ducats in as his Finance Minister and kaha would be libertarian enough for you to have on the show and for him to maybe call you or somebody else's stateís. He was a hardcore like Roth
party and libertarian type had. They put him in charge as Minister of Finance. And he did, radical privatization of State Property going to the highest bidder, no government Handouts know, anything else and it could even be a foreigner, even a Russian who would buy it. So private property funneled to those who could use it. Most efficiently drastically cut taxes, get down to a ten percent flat tax rate did massive layoffs of government sector.
So he spiked unemployment up to like 30 something percent is first year. Now most people here 30% unemployment they think? Oh my God, that's bad. Well he was firing - productivity workers so it actually increased the country's productivity they had to get reallocated to the private. To where they could create
value. But in fact one of them is he in fired the entire country's traffic police in one day and the joke is crime went down because they were some of the most corrupt people in the country. So Georgia this is what had been an economic Backwater turned around and started growing dramatically since then, you're still relatively poor because of her starting from a very low level, but they're about 30 percent richer than what they
would have. Been in the counterfactual of staying, how they were in about a 10-year period of time. And in fact, they They taught that they cracked the top 10 of most economically free countries a couple years ago. You look at a country like America, that's very wealthy. That just one of the highest GDP is around. Then you see people without access to healthcare or education, therefore the state should step in and provide that education at no cost to those people this way.
No one goes without Healthcare or education. What if anything is wrong with that logic? Well, plenty, they might be able to do it at no cost to somebody, but there's a cost for somebody else always. And then it's a question of, how do you rational if you're not
using prices to ration it? And, you know, I'm sure you've talked before with other guests about the essentially death panels and other countries that have socialist economic, excuse me, Healthcare Systems. So this is like one area where you think about, you can think about a socialist economy or socialized industry. And I don't think it's an accident that you're talking about education and health care. One of them education K through 12 is probably 80 to 90%.
And socialized in the United States. Government paid and provided and tremendously, inefficient, and negligent. And on the job, especially these last two years, when teachers unions like remote work vacations, Healthcare isn't socialized in the United States, but it's almost like a fascist industry where you have nominal private ownership, but extensive mandated government command and control over how the industry functions.
And then, when it doesn't function, Manuel, you ask questions like how can capitalism solve that are? Why can't capitalism solve these two problems that seem essential? It's like, well here to areas where we're not really doing capitalism or free markets in the United States. When it comes to Health Care, Paul Krugman in 2004 said that 44 percent of healthcare is paid for and controlled by the state. He didn't also account for the FDA that was before Medicare Part D before the Affordable
Care Act and Medicaid expansion. It's so corrupt that I'm shocked that they use that. As an example of, when Freedom falls short, final question in a free market, the worker goes to his job as told, where to Sit what to do Hebe lives more or less like a high-class slave. Therefore, what we need is for these decisions to not be made by some Elites at the top but to be made democratically in all working institutions. What if anything is wrong with that idea?
I work at a university that's about as close to a worker run firm as you get with faculty governance and the inefficiency and waste is a parrot for out higher education, when you have people who don't Have a stake in the outcome voting on how to allocate resources that other people could otherwise manage, you get all sorts of perverse outcomes. Ultimately the recourse for workers in a free market.
If you don't like, the conditions of your job, is to say goodbye and go get another job from another employer who offers you better conditions Check out the books socialism sucks out of poverty and retched. Refuse dr. Ben Powell. Thank you so much for your time sir. All right, thank you. Keith.