Sanders and McGovern

In 1972, the nicest man to ever run for president lost 49 states to 1 to the least nice guy to ever run.  In retrospect, America probably would have been better off if McGovern had won.  Not because McGovern would have been a success—I think he would have failed—but America’s neoliberal revolution could have started a few years sooner. (Actually, anyone elected in 1972 would have failed.)

Matt Yglesias has a post comparing McGovern to Sanders, and I think in some ways it’s a good comparison.  In a later post, Yglesias discusses why the young are less allergic to the term ‘socialism’ than those of us old enough to recall how socialism failed in the 20th century.  It wasn’t cool to talk about socialism when Britain was an economic basket case in 1979, or when Russia’s economy was imploding in 1989.  Now that’s all forgotten and it’s cool to be socialist again.

(Except in Jeremy Corbyn’s favorite Latin American country.)

But I see one important difference between Sanders and McGovern.  Sanders has spent his whole life in the public sector, whereas McGovern went out and started a business later in life.  When McGovern learned what a nightmare it is to deal with government regulations, his views on economics shifted to the right.  This is from an editorial he wrote in 1992:

In retrospect, I wish I had known more about the hazards and difficulties of such a business, especially during a recession of the kind that hit New England just as I was acquiring the inn’s 43-year leasehold. I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender.

Today we are much closer to a general acknowledgment that government must encourage business to expand and grow. Bill Clinton, Paul Tsongas, Bob Kerrey and others have, I believe, changed the debate of our party. We intuitively know that to create job opportunities we need entrepreneurs who will risk their capital against an expected payoff. Too often, however, public policy does not consider whether we are choking off those opportunities.

My own business perspective has been limited to that small hotel and restaurant in Stratford, Conn., with an especially difficult lease and a severe recession. But my business associates and I also lived with federal, state and local rules that were all passed with the objective of helping employees, protecting the environment, raising tax dollars for schools, protecting our customers from fire hazards, etc. While I never have doubted the worthiness of any of these goals, the concept that most often eludes legislators is: “Can we make consumers pay the higher prices for the increased operating costs that accompany public regulation and government reporting requirements with reams of red tape.” It is a simple concern that is nonetheless often ignored by legislators.

For example, the papers today are filled with stories about businesses dropping health coverage for employees. We provided a substantial package for our staff at the Stratford Inn. However, were we operating today, those costs would exceed $150,000 a year for health care on top of salaries and other benefits. There would have been no reasonable way for us to absorb or pass on these costs.

Some of the escalation in the cost of health care is attributed to patients suing doctors. While one cannot assess the merit of all these claims, I’ve also witnessed firsthand the explosion in blame-shifting and scapegoating for every negative experience in life.

Today, despite bankruptcy, we are still dealing with litigation from individuals who fell in or near our restaurant. Despite these injuries, not every misstep is the fault of someone else. Not every such incident should be viewed as a lawsuit instead of an unfortunate accident. And while the business owner may prevail in the end, the endless exposure to frivolous claims and high legal fees is frightening.

.  .  .

It is clear that some businesses have products that can be priced at almost any level. The price of raw materials (e.g., steel and glass) and life-saving drugs and medical care are not easily substituted by consumers.  .  .  .

In services, however, consumers do have a choice when faced with higher prices. You may have to stay in a hotel while on vacation, but you can stay fewer days. You can eat in restaurants fewer times per month, or forgo a number of services from car washes to shoeshines. Every such decision eventually results in job losses for someone. And often these are the people without the skills to help themselves — the people I’ve spent a lifetime trying to help.

[Insert $15 minimum wage discussion here]

In short, “one-size-fits-all” rules for business ignore the reality of the marketplace. And setting thresholds for regulatory guidelines at artificial levels — e.g., 50 employees or more, $500,000 in sales — takes no account of other realities, such as profit margins, labor intensive vs. capital intensive businesses, and local market economics.

The problem we face as legislators is: Where do we set the bar so that it is not too high to clear? I don’t have the answer. I do know that we need to start raising these questions more often.

Maybe Sanders should take some time out to run a bed and breakfast in Vermont.

HT:  Edward,  Travis

PS.  At Econlog I have a follow-up post to my “important issues” post, which suggests that Switzerland may do best.

PPS.  Don’t ya love it when leftists tell you that “actually Corbyn is not that extreme.”

1.  Wants the UK to exit NATO.

2.  Wants to impose rent controls.

3.  Wants to renationalize transportation, energy, etc.

4.  Doesn’t think the UK healthcare is socialist enough.  Ditto for education.

5.  Wants to give a “right to buy” to tenants.

6.  Thinks the Ukraine crisis was caused by the West.

7.  Loves Chavez.

8.  Wants to reverse Labour’s welfare cuts.

9.  Wants to try Tony Blair as a war criminal.

10.  Wants a “Peoples QE”, aka hyperinflation.

Those comments from the left don’t tell me much about Corbyn, but they are quite revealing as to the state of the left, circa 2015.  As long as you are at least slightly to the right of Pol Pot, you are in the mainstream.




57 Responses to “Sanders and McGovern”

  1. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    20. September 2015 at 08:04

    For me this is must read every day;

    Having lived in pre-Thatcher England, in which retail stores near Picadilly Circus operated by candlelight due to miners’ strikes, I recognize the ideology.

  2. Gravatar of Nick Nick
    20. September 2015 at 08:04

    I really like this write up Sumner, kudos to you.

    The two main things I like:

    1. You reference the US youth growing comfort with socialism, due in part to their lack of experience with it in it’s most extreme form.(or simply not noticing how it exists today)

    2. Your example of how minimum wage market manipulation can destroy jobs/business.

    Setting aside for a moment that one major characteristic of socialism is the redistribution of wealth, only because some people might feel they can justify theft/redistribution from a utilitarian standpoint(that’s a whole different topic)-

    I’d like to focus on your superb observations in regard to market manipulation:(like minimum wage laws)

    The other major characteristic of socialism is this very market manipulation you of.

    Said manipulation destroys price discovery obviously. Many economists have written about this as the defining reason why socialism fails(the lack of price discovery). Most of those economists are not considered “en vogue” today. I believe they still have made valid points.

    The socialist central planner operates under the assumption they can gather enough data to make informed decisions in a positive manner that control/affect hundreds of millions of people today.

    This isn’t limited to minimum wage in the US, it covers a variety of areas. From milk/crop subsidies to sugar tariffs, to cigarette taxes, to money supply.

    All of these activities, most of which are done for the “good” of the public in the eyes of central planners, destroy price discovery- which Nobel prize winner Hayek makes the prime subject of in his book “The Fatal Conceit”(which really is based on the work of his predecessors, Mises, etc.)

    Again, very good write up Sumner- thank you for it.

  3. Gravatar of Nick Nick
    20. September 2015 at 08:06

    edit: “you speak of”

  4. Gravatar of E. Harding E. Harding
    20. September 2015 at 09:47

    Actually, socialism is cool in Venezuela (and Peru) as well:

    Sure these polls are, from, like, seven years ago, but, still, doubt much has changed.

    Also, there’s nothing wrong with 1, 6, 9, and 10 (10 will prove the anti-austerians wrong, or will, at least, force them to change their case, and 6 is true!). 3 and 4 I’m not sure of (I dunno much about the UK). The rest are pretty bad. Is Corbyn Britain’s 1980s Papandreou?

  5. Gravatar of Ray Lopez Ray Lopez
    20. September 2015 at 10:05

    How is this Sumner polemic economics and not politics? Oh yes, “political economy”.

    In point of fact, politics is neutral to the economy, long term. The only thing that matters is not tax rates (capital gains and double taxation, phht), nor excessive government regulations (if you don’t comply with regs, you simply pay a fine, same as with individuals and your visa if you’re an expat like me), nor ‘minimum wage’ (phht, a mere cost of doing business, like shrinkage). No, the only thing that matters long term is the rate of innovation in a society–the Solow model shows this–and ironically Sumner is anti-patent. The government can increase innovation by reforming patent laws but Sumner believes in ‘free’ and ‘free trade’. Everybody should face a horizontal demand curve and produce commodities at the substance level says Sumner. Except his rich friends, their dividends should not be taxed. Phht.

  6. Gravatar of E. Harding E. Harding
    20. September 2015 at 10:09

    @Ray, completely off-base in almost every way.

  7. Gravatar of ssumner ssumner
    20. September 2015 at 10:22

    Patrick, Yes, the good old days of socialism–it was like being on a camping trip.

    Nick, Good comment.

    Ray, You said:

    “In point of fact, politics is neutral to the economy, long term. The only thing that matters is not tax rates (capital gains and double taxation, phht), nor excessive government regulations (if you don’t comply with regs, you simply pay a fine, same as with individuals and your visa if you’re an expat like me), nor ‘minimum wage’ (phht, a mere cost of doing business, like shrinkage). No, the only thing that matters long term is the rate of innovation in a society-the Solow model shows this-”

    Yeah, I could never figure out why North Korea was poor and South Korea was rich until I read Solow’s growth model. It can’t be due to differing economic policies, because Ray Lopez tells us those don’t matter. I guess the South has more “innovation.”

    E. Harding, You said:

    “Sure these polls are, from, like, seven years ago, but, still, doubt much has changed.”

    No, I can’t imagine much has changed. I mean the Venezuelan economy has collapsed under socialism, but I can’t imagine that anyone in Venezuela noticed that fact. I’m sure Chavez’s ideas are still really popular.

  8. Gravatar of W. Peden W. Peden
    20. September 2015 at 10:35

    Strictly speaking, Corbyn wants monetization, not hyperinflation, as far as I know.

  9. Gravatar of David R. Henderson David R. Henderson
    20. September 2015 at 11:00

    Good post except for the start. I doubt that you could establish that McGovern was the nicest or Nixon was the least nice. Nixon, especially, has a lot of tough competition. I’m thinking Woodrow Wilson, for one.

  10. Gravatar of E. Harding E. Harding
    20. September 2015 at 11:20

    -They’ve been noticing since the year Chavez died, but I’ve seen no evidence they’ve changed their minds about socialism. If you can find any, let me know.

  11. Gravatar of collin collin
    20. September 2015 at 11:22

    Even as a Progressive, at 5.1% unemployment Sanders is great to watch about but not the right choice. Heck it is time think of ways of cutting food stamps. (I also agree with Matt Yglesias the best Democrat choice is not allowed to run.) For all the complaints about Corbyn, he was a loud voice against Iraq (and Sanders) and at least you know he won’t suck his country in economy sucking Mission Creep war. Tony Blair is not a war criminal but he deserved to remember for supporting Iraq. At this point in History, I think that is the most important thing a President can do economically.

    The main problem I have with HRC is she has more hawkish tendencies than either her husband and especially Obama. On the Republican side, I would vote Trump because he is the least hawkish candidate and I do believe he would be more careful with the military cost. (He would be angry the Saudias are paying us to help them in Middle East wars so we won’t fight it.) And Rand Paul only suddenly realized his father’s supporters don’t like Republican hawks.

  12. Gravatar of Daniel Daniel
    20. September 2015 at 11:22

    And Blair (or Bush, for that matter) shouldn’t be tried for war crimes because … they’re on the winning side ?

    Must be utilitarianism at work.

  13. Gravatar of John S John S
    20. September 2015 at 14:50

    Wants a “Peoples QE”, aka hyperinflation.

    If the Fed sent a $1 check to every US citizen, would that cause hyperinflation?

  14. Gravatar of benjamin cole benjamin cole
    20. September 2015 at 15:43

    Good post, but people’s QE is an interesting idea.

    Hyperinflation? That’s what they said about QE.

    I would prefer QE buy bonds and place them into the Social Security and Medicare Trust Funds, while FICA tax cuts are enacted on employees and employers.

    Only the productive would benefit from money creation the most. Business costs would go down.

  15. Gravatar of benjamin cole benjamin cole
    20. September 2015 at 15:59

    Also, why is the topic always the minimum wage, and never the criminalization of push-cart vending and the restrictive zoning of retail space?

  16. Gravatar of Ray Lopez Ray Lopez
    20. September 2015 at 16:33

    @Sumner – obviously I was referring to capitalist countries, not communist command-and-control countries, though the latter are actually superior in war planning (and that’s why democracies copy them in wartime).

    @David R. Henderson – Woodrow Wilson was nasty not nice? Is that what they’re teaching now at Hoover’s greatest erection? Ridiculous. Aside from perhaps his later years when he suffered a stroke, which may change your personality (I’m ignorant about that), Wilson was a UN pioneer, a Nobel Peace Prize winner like Obama, and against imperialism. His Progressive streak was good to bust up trusts, which at the time were deemed a menace to society, rightly or wrongly (‘by 1899 Standard Oil controlled 90 to 95 percent of the oil refined in the United States’), depending on whether you think oil refining is a natural monopoly. Finally, Wilson helped create the Fed Reserve, which is harmless since money is neutral, and Wilson hated Wall Street, see:

  17. Gravatar of ssumner ssumner
    20. September 2015 at 17:34

    W. Peden, Yes, but monetizing debt generally leads to hyperinflation, unless interest rates are zero (which seems unlikely by the time of the next election.) But yes, I realize that Corbyn would not actually produce hyperinflation, I was just playing with the logical implication of his ideas.

    David, It’s awfully hard to imagine someone nicer that McGovern actually being nominated by a major party. How would they get the nomination? It doesn’t seem possible. Come to think of it, how did McGovern get nominated?

    I’d like to see some evidence that Wilson was worse than Nixon. You might be right, but I’m very skeptical. On the other hand I view Wilson as the worst president in American history, so Nixon wins that one.

    ((And don’t anyone tell me President X was worse than Wilson. There are so many bad ones, who were bad in so many different ways, that it’s hard to compare. Wilson’s my choice.))

    Collin, You said:

    “On the Republican side, I would vote Trump because he is the least hawkish candidate”

    I presume you didn’t hear Trump describe himself as the “most militaristic” of all the GOP candidates.

    Agree about Rand Paul. He’s in the wrong party. He should have run as a libertarian and stuck with the anti-militarism. Then if Sanders and Trump were nominated, he might have actually won.

    Daniel. If you are going to define “war criminal” so broadly that it includes them, it would also have to include a huge number of other politicians in the US and UK, as well as many many former Presidents and Prime Ministers. Lots of generals too. Sure, you can do that, but it seems kind of silly in a world where there are lots of real war criminals. Do you really want to get in the habit of putting one former president after another on trial for war crimes, like a banana republic where the leaders are always prosecuting the former leaders?

    John, I don’t know. It depends on lots of other factors.

    Ray, I’m sure you are right, and North Korea would easily defeat South Korea.

  18. Gravatar of Scott Freelander Scott Freelander
    20. September 2015 at 19:36


    Political issues aside, and setting aside the fact that issues the people of the concrete steppes care about aren’t real issues, what would the problem be with a central bank simply electronically crediting bank accounts/issuing checks when stimulus is needed, and having the ability to debit accounts if inflation’s too high?

    And, while I oppose Corbyn’s idea, because I don’t think politicians should be trusted to manage a program like that, if “peoples’ QE” were only used when stimulus is needed, need it be hyperinflationary?

    Yes, I see no reason to being to support a policies like this, because I see no advantages over the current system, but need they be disastrous?

  19. Gravatar of Zack Zack
    20. September 2015 at 21:19

    I assume David Henderson is referring to Wilson’s racist/segregationist policies and imprisoning anti-war activists.

  20. Gravatar of Daniel Daniel
    20. September 2015 at 21:41

    I think that blowing up the entire Middle East for absolutely no reason at all (which is what Bush and his lap-dog did) absolutely warrants a very public trial.

    I’m not the hypocritical type, I don’t mind imperialism – as long as the empire actually stands to gain something.

    But in this case … nobody won, everybody lost.

    So yes, there should be a prosecution. For sheer bloody-minded stupidity, if nothing else.

  21. Gravatar of W. Peden W. Peden
    21. September 2015 at 02:10

    Scott Sumner,

    I agree that hyperinflation would be where his policies would tend. A man who regards Venezuela as a model rather than a warning has no place as Prime Minister.

  22. Gravatar of Major.Freedom Major.Freedom
    21. September 2015 at 03:13

    “Yes, but monetizing debt generally leads to hyperinflation”

    So-called “open market operations” ARE monetizations of debt. The net impact is the same as buying the debt directly from the Treasury.

    The presence of member banks, which you can understand as “made” banks in mafia terms, who act as middlemen, buying for the sake of selling to the Fed, does not eliminate the existence of debt monetization.

    QE is a euphemism for debt monetization.

  23. Gravatar of ssumner ssumner
    21. September 2015 at 04:55

    Scott. I’d say it’s either disastrous or pointless. What’s the point of “monetizing” the debt with a small amount of QE? The term “QE” would be meaningless in that case. And it’s not being in a recession that makes QE non-inflationary, it’s being at the zero bound. If the US had done QE in the 1982 recession we would have had hyperinflation, as we weren’t at the zero bound.

    Zach, As I said, Wilson was a worse President than Nixon. But that has no bearing on my claim that Nixon was the least nice guy to ever run for office. I’m talking about personalities not policies. You can be really nice and still do horrible policies, and vice versa.

    McGovern proposed lots of bad policies.

    OK, a show trial for stupidity, and don’t forget to include all the people who supported the policy.

  24. Gravatar of Dan W. Dan W.
    21. September 2015 at 05:18

    Most of what government does is theater and the politicians and bureaucrats are the actors. So on this it matters not much who is in charge. Consider that it has been during the regime of “anti-oil” Obama that US oil production boomed.

    Political leadership does matter but often power is in the hands of men and women of mediocre talent who are small-minded and who care about small things. They may show lots of motion but they in fact don’t change the trajectory. For example whether it was Gore or Bush in 2000 the neocons were going to get their middle east war, the bureaucrats were going to get NCLB and the economy was going to take a blow when the housing bubble burst. BTW, Daniel, Obama and his gang have blown up the middle east as much as the Bushies. Sadly, blowing up the middle east is what the US government does, no matter who is in power.

    I do think that Obama has been particularly bad on ignoring the damage to the economy from the cost and confusion of his regulatory regime. I believe a similar thing happened under Carter. In contrast both Reagan and Clinton offered much greater clarity and commitment to the private sector and the economy responded positively. However both Reagan and Clinton were transitory and after their respective terms of service the “system” returned to its “normal” state of muddling through.

  25. Gravatar of collin collin
    21. September 2015 at 05:32

    Yes, I have heard Trump is the most militaristic. However, Trump answers all questions “Our leaders are stupid, I am so great, then we get to actual policy, and finally, the world will listen to me because I am such a Winner!” Trump was the first Republican candidate to state that he would follow the terrible Iran deal but since he was so great Iran and the world would comply. (Bush, Paul, and Kaisch I believe have now staked similar positions without all chest beating.) I am not saying how dovish Trump is but how hawkish the other 16 candidates are. And Paul was the most disappointing here of all candidates.

  26. Gravatar of collin collin
    21. September 2015 at 06:04

    Also, HRC is leading national polls (40 – 45%) for the Democratic Primary and will probably take the majority of the support when Biden finally announces if he will run. (Doesn’t matter if Biden runs or not…His polls will drop a month later.) It is true Sanders will likely win NH and has a chance Iowa especially if Biden runs, but he does poorly in the heavily minority states. In 2016, a Democrat needs to win minority voters to win the nomination.

  27. Gravatar of Alain Alain
    21. September 2015 at 07:27


    Great post on McGovern. I had no idea that his ideas had changed due to his personal interaction with the regulatory machine that he helped to create. It should get tremendously more press. I think that this is a solid example of why candidates should be required to have run an enterprise, preferably for a good length of time, before running for office.

    Although now that I think about it, it may not matter. The politicians will always go where the votes are, and so long as there are large portions of the populace who aren’t exposed to the regulatory machine there will always be leftists.

  28. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    21. September 2015 at 07:28

    Again, this is why I read ‘Morning Star The People’s Daily’;

    [Liberal Party leader] TIM FARRON botched his bid to woo Labour voters and MPs to the Lib Dems this weekend by describing some of Thatcher’s most divisive acts as “undoubtedly necessary.

    ….”I am nostalgic for my youth but I am not nostalgic for those Labour economic policies which created the space for Margaret Thatcher to win in the first place and which kept her in power for a decade,” he said.

    ….”She was very good at tearing things down “” the over-wielding power of the union bosses, old-fashioned industrial practices stuck in the past, public-sector monoliths removed from the people they served.”

    ‘Better the Iron Lady than those cardboard men.’, I remember one English youth saying in a man-in-the-street BBC interview.

  29. Gravatar of Floccina Floccina
    21. September 2015 at 08:29

    My theory is that with intelligent design the Federal Government (a charity with an army) could spent half what they do now on charity and still help the poor more than they do now. I think George McGovern was for a BIG which seems to me much more efficient than what we have now.

  30. Gravatar of Njnnja Njnnja
    21. September 2015 at 08:30

    Nixon was the least nice guy to ever run for office.

    Nixon wasn’t a nice guy, but he didn’t go around killing people for insulting his wife, like Andrew Jackson, or for being a political opponent, like Aaron Burr (who was also a traitor). And there are some where it is tough to split their political views from their morality, like John C Calhoun and George Wallace (at the time he ran).

    PS even if you try not to include policies, I would have thought that the guy who killed a central bank and the guy who killed Hamilton should earn a couple extra demerits in your book.

  31. Gravatar of Anand Anand
    21. September 2015 at 08:49

    Scott’s comments on “socialism” always strike me as a caricature. It’s as if when anyone mentioned “capitalism”, vulgar Marxists would bring out colonial British India.

    What is with Chavez bashing always on this blog? Venezuela had many many problems under his administration, many to do with exchange rate policy, but there were undeniable benefits to the large majority of the population. Control of the oil industry was vital here, as everyone up to the World Bank recognizes – the oil strike by the opposition led to a coup there after all.

    Extreme poverty was cut in half, poverty and child malnutrition fell dramatically. (see chart here, also see detailed charts here ( Old age pensions, education etc. Do these count as “economy” or what? The GDP growth was nothing to sneeze at either. A fair bit of the credit goes to oil prices and so on, but Venezuela’s problems go back decades: why couldn’t someone else have done this?

  32. Gravatar of Anand Anand
    21. September 2015 at 09:08

    By the way, you don’t talk about foreign policy much on this blog, so I won’t reply in detail, but many of the “extreme” views (again, stripped of caricature – see this article for his position on Ukraine are quite defensible.

    If thinking that the West was partly at fault in the Ukrainian mess, then Henry Kissinger would be a radical leftist as well.

  33. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    21. September 2015 at 11:37

    Anand, whatever problems Venezuela had before Chavez/Maduro pale into insignificance to what’s going on there today. For instance;

    Roughly translated from the Spanish, at least 11.3% of Venezuelans eat only two meals per day. 80.1% report they don’t earn enough to buy food. Of those who report that they go hungry, 39.1% are from the poorest sectors of Venezuelan society (El Presidente Maduro’s base).

    And even if you have enough money, there’s nothing on the store shelves. That’s self-inflicted wounding.

  34. Gravatar of derivs derivs
    21. September 2015 at 12:24

    “A fair bit of the credit goes to oil prices and so on”

    I would say “all the credit”… Chavez, like Lula was just in the right place at the right time. He believed he could sell oil to cover all needs, demonized profits resulting in the shut down of all production of products and diversification in the economy, and then when oil/commodity prices went to poop…

    But it’s OK, Maduro can drive a bus to pick up the drunk Lula and the coke head Morales and all problems should be figured out in no time. Probably while fantasizing about playing chinese finger cuffs with Kirchner. South America politics is like one big moron convention searching for the lowest common denominator. Makes the US look like a finely tuned Swiss watch.

  35. Gravatar of Justin D Justin D
    21. September 2015 at 14:24

    “My theory is that with intelligent design the Federal Government (a charity with an army) could spent half what they do now on charity and still help the poor more than they do now. I think George McGovern was for a BIG which seems to me much more efficient than what we have now.”

    These two sentences don’t go together.

    The government at all levels spends $2.6 trillion on transfer payments, or about $8,100 per person. An equal sized basic income grant per person would leave many of the poor worse off than they are now (e.g. a senior who was previously receiving $15,000/yr from social security as well as Medicare benefits).

    Targeted benefits are always more efficient.

  36. Gravatar of johnleemk johnleemk
    21. September 2015 at 21:55

    I’m amazed anyone still defends Venezuela under Chavez by citing his supposed accomplishments in reducing infant mortality, etc. Not only did Chavez accomplish this with the tailwinds of booming oil prices, but he still underperformed peer countries. As FiveThirtyEight pointed out last year, those intent on singling out a radical left-wing government for praise should focus on Bolivia:

    Bolivia benefited similarly from the oil price boom (although still not as much as Venezuela did), but saw better economic growth, lower inflation, better infant mortality reduction, etc. Bolivia’s government actually maintained a fiscal surplus and paid down its debt so in spite of its soaring left-wing rhetoric it turns out to be much less of an ideal left-wing test case, which possibly explains the paucity of people citing it as a successful left-wing regime. Ironically, Bolivia is a classic case of a point Scott often makes: left-wing politicians might be elected on a left-wing platform, but to succeed, even on their own terms (infant mortality reduction, broadening of access to education, income growth, etc.) they often have to adopt right-wing economic policies.

    Sure, Chavez’s government made marked progress on a variety of socioeconomic indicators. But when Venezuela benefited from one of the largest economic windfalls among its regional peers (as measured by its external terms of trade) and yet made only little to mediocre progress on these socioeconomic indicators versus those same peer countries (all of whom adopted a variety of different policies across the political spectrum, although most of them are still significantly more left-wing than policies in the US), it’s ridiculous to cite these statistics as a point in the Chavez government’s or Chavez’s policies’ favour. If other countries were able to accomplish more with less of a favourable economic environment than Chavez’s government, how can Chavez’s policies be plausibly lauded as a success?

  37. Gravatar of johnleemk johnleemk
    21. September 2015 at 22:31

    Justin D:

    Most plausible proposals I’ve seen for a basic income either treat it as a supplement to the existing welfare system and/or still apply a means test (the most straightforward instance being a progressive negative income tax, where as people’s market income rises, the amount they’re given in guaranteed income gradually falls). I think proposals to throw away the entire existing welfare system and replace it with a basic income are politically unrealistic, but it is not implausible to significantly reduce welfare expenditures and replace many of them with cash benefits.

    (Aside: for similar reasons I think a world of no borders or even borders with no passport controls is not politically realistic for the foreseeable future, but I think it’s perfectly feasible to work towards a world where any individual who isn’t being sought for a crime and isn’t bearing weapons or diseases has the right to enter any civilised country, clear its passport controls, and work, study or settle there with minimal regulatory burden. In both the case of a basic income and open borders, I think my “ideal compromise” scenarios yield a very substantial amount — say 80-90% — of the benefit of that would be realised under the economist wonk’s dream scenario, without actually stretching the body politic far beyond the point of utopian unrealism.)

    Since most basic income proposals would include some form of means testing, much of the US population would be ineligible for a basic income, or see a much reduced basic income vs the theoretical $8k per person implied by peanut buttering $2.6t across 320m Americans. For example, if you just gave the entire annual expenditure on transfer payments to only people poorer than the median American, i.e., 160m beneficiaries, you’ve doubled the per person basic income to $16k per person. In a 1-person household that’s still not a lot — though if they can find a room for $500/month they’re almost at that magical threshold of spending 1/3rd of their income on housing which is often used to define whether someone’s got a livable income vis-a-vis their housing expenditure. This level is already enough to guarantee a 2-person household the equivalent of a lower middle-class income of $32k; and a theoretical household of 2 adults plus 1.5 kids, or 3.5 people, would be entitled to slightly more than the American median household income of $52k! Moreover, since there’d be nothing keeping these people from working, people would still be perfectly able to work and earn market income to supplement their basic income. Indeed, they’d still have some incentive to do so, as every reasonable means testing proposal wouldn’t so drastically phase-out benefits as to utterly disincentivise working.

    The most plausible objection IMO to a basic income is that any phase-out might still disincentivise work too much; indeed, this was often the result found in many experiments with the policy that took place in the Western world during the 1970s. But that doesn’t mean variants of the programme other than what was tried in the 1970s couldn’t work; conditional cash transfers, a form of a basic income (albeit still tied to some conditions, per the name) have seen success in Latin American countries. GiveWell’s work with unconditional cash transfers has also shown a lot of promise, although one should be careful about extrapolating likely policy outcomes from the results of a philanthropic programme. I also find it not implausible that it won’t be as necessary to have as high labour force participation rates in the future, if liberal immigration policies and robotics/increasing automation deliver anything close to the productivity results which experts expect — making basic income policies more practical.

    BTW, the FiveThirtyEight article I mentioned in my comment about Venezuela cites conditional cash transfers as one particularly successful anti-poverty policy which many of Venezuela’s peers adopted. Venezuela consciously rejected such policies, and its alternatives have not met with as much success; here’s another article that focuses specifically on the different approaches Latin American countries have taken with welfare policies:

  38. Gravatar of Anand Anand
    22. September 2015 at 05:38

    Firstly, the analysis is flawed in many ways. For instance, it does not mention that there was a coup in 2002 and an oil strike. Readers might wonder why there is a curious V-shape in the first graph? A lot of the indicators worsened dramatically during this period. See for instance the chart I gave above. Child malnutrition in 2003-04 was roughly the same as 1999 because of this. Everyone, from the opposition to the government to the World Bank, agrees that the major gains came after Chavez got control of the oil industry and used it to fund programs.

    Secondly, comparing inflation in Bolivia and Venezuela is like comparing apples and oranges. Venezuela always has had very high inflation. Chavez’s administration saw much lower, but still high inflation, and now inflation is very bad again. It is not as if Chavez came down from the ninth circle of hell and made inflation bad.

    Thirdly, Morales came into power in 2006, while Chavez was elected in 1999. The oil price boom, if you recall, began in 2003.

    Nevertheless, I am aware of the dangers of “Macroeconomic populism” in Latin America ( which Rudi Dornbusch warned back in 1989, and Chavez’s administration falls into that pattern. It gives a much better explanation of Venezuela’s good and bad performance than that flawed 538 piece, which explicitly identifies its analysis with the opposition.

  39. Gravatar of derivs derivs
    22. September 2015 at 06:54

    “The oil price boom, if you recall, began in 2003”

    Anand, In ’99 I very well remember oil (Which was basically a product that was thought of at the time, to trade in the teens) doubling up to the insanely high 30’s. Short of the few months leading into Gulf War 1 – and ending in a memorable and very unexpected price collapse the night the shooting started, these levels in 00-01 were unprecedented. Money was pouring into energy in 00-01 from every direction. Enron was about to rule the world those years, or you don’t remember?

    As for draining a company/country’s assets dry in order to short term fund social programs, and then leaving an absolute disaster in its wake, that doesn’t seem like it takes much management skill to do.

  40. Gravatar of Justin D Justin D
    22. September 2015 at 09:01


    I don’t think tinkering with the details of the basic income grant can fix it. There is a trilemma of cost, negative incentives and effectiveness in alleviating poverty, and you can only deal with two at any one time. Arguably there is also a fourth aspect, simplicity, which doesn’t always play nice with the other considerations.

    If you keep the cost low and limit negative economic incentives, it won’t help a lot of poor people. If you limit negative economic incentives and really help the vast majority of poor people, then the cost will be outrageous. If you keep the cost low and effectively deal with poverty (and these two by themselves are difficult enough to achieve together), then you’ll have horrendous negative economic incentives.

    Let’s consider your example.

    One big problem with means testing, as you recognize, is that it creates severe implicit marginal tax burdens. Let’s assume that the max benefit is $16,000 and falls from there as income rises.

    In 2014, the median income of the 223 million individuals 14 years and older was $28,757 (and the median income of all Americans is obviously lower), but if we use that higher value, phasing it out creates an implicit marginal tax rate of 55.6% on low wage workers, not considering the impact of other taxes. If $16,000 is the average benefit, not the maximum, then the implicit marginal tax rate would be close to, and perhaps even above, 100%, for low skill workers.

    How much does this income grant cost? If we assume those 160 million Americans are receiving on average half of the grant, then the cost of this is still about $1.3 trillion/yr.

    Let’s look again at specific situations. As you say, two people living together earn a combined $32,000/yr without working. That looks pretty good if you are two 19 year old guys who want to play Xbox and drink beer, but if you are a 70 year old married couple, it’s a lot worse than what you are currently enjoying considering the cost of health care. So you have negative incentives to work both from the income and substitution effect for young/healthy people, but those already using the existing welfare system can be worse off, considering the means tested basic income in isolation.

    The questions go on:

    Are the people required to purchase health insurance? Do they still get subsidies or is the grant all they get now? What about someone who earned $30,000 in the first half of the year and lost their job? Is she ineligible for the income grant, as they she has already earned more than the median income? Or does she still receive regular payments but faces an IRS bill of $16,000 the following April? Do fringe benefits count as income towards means testing? If not, you’re providing a huge incentive to shift low wage worker compensation towards it. If they do, then a single worker earning $23,000/yr plus employer health insurance receives nothing. Do ex-convicts and immigrants receive the benefit? Do kids receive the full benefit? If I’m a single mother with 9 kids, do I receive $160,000/yr in taxpayer money? If the average sized American family receives $52,000/yr for free, why should either parent work? Certainly, given the high phase out rate and the cost of childcare, a huge number of second workers at a minimum would quit. Is the grant adjusted for regional cost disparities, or do those living in San Francisco receive the same as those in rural Alabama? What happens to people who spend their money on stupid things and now can’t pay for food or rent? Do programs like WIC and school lunches go away too? What about kids who see their money blown by the parents and are now hungry?

    We presumably will need to retain Medicare, Medicaid and Obamacare as $16,000/yr isn’t enough for a person both to live and have health insurance, especially for the elderly or very sick, and these are the people who generate most of the health care expenditures. Politically, you will need to retain Social Security too, or at least ‘make whole’ elderly recipients who receive less from the income grant than they would with Social Security, and this will likely cost several hundred billion annually.

    In the end, it seems that you will be spending similar amounts of money, giving more to some people who don’t need it and less to others who do need it, all the while creating bad economic incentives.

  41. Gravatar of Anand Anand
    22. September 2015 at 09:07

    There was a boom/bust during around 2000, but the sustained boom started in 2002/3. See this chart.

    Anyway, if one is concerned about bad management, one should consider the history of Venezuelan performance in the 80s and 90s. It was an absolute disaster, and there was no Chavez administration back then. Chavez is a result of the collapse of the party system due to the huge disaster, much like Syriza today. Venezuelans remember the times, even if you don’t.

  42. Gravatar of Anand Anand
    22. September 2015 at 09:23

    I forgot to make one point about Bolivia. Bolivia indeed has managed its currency and foreign reserves better than Venezuela (and Venezuela should have done the same), but I doubt that it would pass Scott’s definition of “right wing economics”. Since it nationalized the oil industry, doubled public investment, almost tripled the minimum wage and so on. Scott might like that it decriminalized coca though.

  43. Gravatar of Art Deco Art Deco
    22. September 2015 at 09:43

    the least nice guy to ever run.

    I take it the biographies of Woodrow Wilson, John F. Kennedy, Lyndon Johnson, Bilge Clinton, Robert Dole, John Kerry, John McCain, and Barack Obama are ones with which you’re not familiar.

  44. Gravatar of Art Deco Art Deco
    22. September 2015 at 09:48

    Sanders has spent his whole life in the public sector, whereas McGovern went out and started a business later in life.

    That might be salient in assessing his 1984 campaign, not the 1972 campaign. His father was a clergyman and his principal employments prior to 1957 were his military service and his years as a college teacher.

  45. Gravatar of derivs derivs
    22. September 2015 at 09:54

    Anand,You need to learn how to read a graph. The bottom was in ’99, even the “bust” in ’01 still was at it’s lowest point 50% above ’99. Actually investment in energy died in 02-03 with the bankruptcies that rippled through the industry. 00-01 was frothy. But what would I know, I just owned 2 seats on the NYMEX back then.

  46. Gravatar of Art Deco Art Deco
    22. September 2015 at 09:57

    I doubt that you could establish that McGovern was the nicest

    “Nice” is a strange thing to call a middle-aged man. However, he’s certainly a candidate for the most genuinely kind figure to win the nomination in recent decades. See Gloria Steinem’s account of what George McGovern was like one-on-one (in her telling, like no other prominent politician she’d ever met) and read Joseph Bottum’s account as well. He had physical courage and integrity as well. He was just wrong all the time. Calvin Coolidge might be in his league, Mitt Romney might be, Hubert Humphrey perhaps.

  47. Gravatar of Art Deco Art Deco
    22. September 2015 at 10:04

    For example whether it was Gore or Bush in 2000 the neocons were going to get their middle east war,

    There is no such thing as a ‘neocon’ except in the imagination of kooks and anti-semites. As for a war in the Near East, there was the little matter of that unpleasantness in lower Manhattan (which anti-semites and kooks like to attribute to various approved bogies).

  48. Gravatar of Art Deco Art Deco
    22. September 2015 at 10:09

    And there are some where it is tough to split their political views from their morality, like John C Calhoun and George Wallace (at the time he ran).

    Split Wallace’s political views from his mundane life and he still looks awful, because his treatment of his 1st wife was ghastly (and she was stupefyingly forgiving about it, as were his children). There’s a reason the insufferable little popinjay was married 3x.

  49. Gravatar of Art Deco Art Deco
    22. September 2015 at 10:10

    I think that blowing up the entire Middle East for absolutely no reason at all (which is what Bush and his lap-dog did) absolutely warrants a very public trial.

    No one merits a trial for running afoul of your delusions.

  50. Gravatar of Anand Anand
    22. September 2015 at 14:57

    I was referring to the 2002-08 rise in oil prices in my earlier response. But you are correct that even after the recession/bust around 2000, oil prices were much higher in 2002-03 than 1999. But that was not my main point. Chavez only got control of the oil industry around 2003, after the coup and oil strike.

  51. Gravatar of ssumner ssumner
    22. September 2015 at 17:23

    collin, You said:

    “Yes, I have heard Trump is the most militaristic.”

    What an odd way of describing Trump’s claim that he is the most militaristic.

    Njnnja, In those days dueling was more acceptable, the mark of a gentleman.

    Anand, Chavez was incredibly lucky to preside over a huge surge in oil prices during his administration. So the last thing you want to do is cite oil as a mitigating factor. The fact that Venezuela is a basket case despite being rich in oil speaks volumes. But yes, the previous (non-socialist) governments were also awful.

    Yes, I’m very anti-socialist and anti-fascist, as I regard those as the twin evils of the 20th century, which is when I formed my worldview.

    I’m no expert on foreign policy, but I know enough to see the game Putin is playing.

    My point was that it’s simply unacceptable for the leader of a major British political party to be praising Chavez. Even most intelligent leftists understood he was an idiot. To use an analogy on the right, Berlusconi’s fondness for Putin should have also been a disqualifying factor (as if Berlusconi didn’t have a dozen others.)

  52. Gravatar of Art Deco Art Deco
    23. September 2015 at 04:55

    Berlusconi’s fondness for Putin should have also been a disqualifying factor (as if Berlusconi didn’t have a dozen others.)

    “Fondness” for Putin would be very odd (though some members of the alt-right seem to have a homoerotic affection for him). You can still adjudge him as not nearly so dangerous to the West as he’s made out to be and of having some domestic achievements to his credit. He’s guilty of many abuses, but he came by his domestic constituency honestly and Russian liberals were never able to build a generous popular base and propagate their views well.

  53. Gravatar of ssumner ssumner
    23. September 2015 at 06:20

    Art Deco, Shorter version–Russian society is profoundly dysfunctional, and always has been.

    And that despite the fact that many individual Russians are extremely talented.

    There’s no moral difference between Putin grabbing the Crimea and Hitler taking the Sudetenland. Listen to Putin speak sometime, he’s basically wrong about everything. On every issue he discusses he takes the more evil side. It might be left or it might be right, but he has an unerring ability to be on the wrong side. (Yes, a bit of hyperbole, but not much.)

  54. Gravatar of Peldrigal Peldrigal
    23. September 2015 at 08:50

    Technically what Blair Bush and Co. did were not “war crimes”, i.e. violating the international laws of war, but “crimes against peace”, i.e. violating the procedures to lawfully wage war. The Judge Advocate General agreed with that and resigned in protest, and it’s s widely held opinion among international law scholars.

  55. Gravatar of Daws Daws
    23. September 2015 at 15:51

    Professor Sumner

    your Sudetenland analogy seems inappropriate, ex post, given the mass murder by Hitler in his captured territories. has Russian rule in Crimea been so violent?

    when Tyler Cowen interviewed Jeff Sachs, Sachs shared interesting observations about the decision not to bail Russia out. I think Scott Sumner’s point about good macro begetting good micro is useful in thinking about Russia’s efforts at structural reform. If we don’t preserve AD in liberalizing countries to make sure that the structural reforms seem to win, then their publics will join the natural enemies that reformers find in the course of specialinterestectomy. “it’s the economy, stupid”, and our discredited friends in Russian civil society can only lamely appeal for the rights of vandals and sexual minorities. the only serious opposition comes from Trumplike billionaires and nationalists

    having lost Russia sucks. dissing Putin seems harmful, as there is no apparent alternative to Putin in Russia, and because we can’t seem to make him do anything. Russia is not ez to divert or deactivate. shares some of our short and long-term goals

  56. Gravatar of Anand Anand
    24. September 2015 at 06:02

    I won’t talk about Ukraine except quoting the following from Corbyn’s article linked above: “Russia has gone way beyond its legal powers to use bases in the Crimea. Sending unidentified forces into another country is clearly a violation of that country’s sovereignty.” The fact that he doesn’t stop there, and goes on to fault the West as well, is apparently some sort of sin, shared by Henry Kissinger, and many of the “realist” school. See for an example.

    As to the fact that “Chavez was lucky” maybe he was, but why did the IMF severely underestimate the growth rate under his administration, like it did in Argentina? ( And it severely overestimated the growth rates in Greece? Perhaps something was wrong with orthodox policies which required this sort of break. Venezeula had a couple of decades-long depression, a large part of it under IMF tutelage.

    And something which broke out of the pattern is a sin, praising which automatically disqualifies a Western leader? In contrast to another leader of the same party who blindly followed a slightly different leader into a war killing tens of thousands of people?

  57. Gravatar of ssumner ssumner
    24. September 2015 at 14:00

    Daws, You said:

    “your Sudetenland analogy seems inappropriate, ex post, given the mass murder by Hitler in his captured territories.”

    Not sure what you mean–would the Sudetenland invasion have been OK if not followed up by WWII?

    Anand, You said:

    “And something which broke out of the pattern is a sin, praising which automatically disqualifies a Western leader? In contrast to another leader of the same party who blindly followed a slightly different leader into a war killing tens of thousands of people?”

    You seem confused by my views. Yes, anyone supporting Chavez should automatically be disqualified. And anyone promising to get the UK into a pointless war costing thousands of lives should also be disqualified. But Blair never made that promise when campaigning–for obvious reasons.

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