Brian Gongol Show on WHO Radio - April 28, 2013
Brian Gongol

Tragedy in Bangladesh

Any reasonable person has to be heartbroken by the tragedy in Bangladesh this week, where a factory collapsed and killed at least 350 people. There are plenty of people eager to jump on any incident like this and use it as a means to criticize capitalism and international trade. Unfortunately, they miss the point. If you look carefully at Bangladesh's stage of economic development, you'll see that per-capita income is below the comparable figure for the United States in the 1930s, life expectancy is about the same as that in the US in 1940, and literacy rates are below those of the US in 1900. In other words, by objective measurements of development, the country is about a century behind the United States. That does not, in any sense, justify exploitation of workers, or locking fire escapes, or otherwise treating those people unjustly. But if you know your American history, you might recall the Triangle Shirtwaist fire, which happened in 1911. That date should come as no coincidence -- 146 American workers were killed in a garment-factory fire when our state of development was about the same as Bangladesh's today.

Those kinds of things don't happen in America today because lots of factors have come together that prohibit similar tragedies from reoccurring: Higher living standards mean we can afford better fire protection; democratic lawmaking means the public has demanded better workplace standards for health and safety; shifting costs mean that more work is done automatically and less is done by human hands. Over time, countries like Bangladesh will go through the same stages of development -- and, eventually, there will be no more tragedies like this one. But we can't stop them from happening by shutting down trade.

In fact, closing down trade would make the situation worse. Countries that are trying to develop need to be able to exchange their abundance (which is in the form of low-cost labor) for cash from the outside. It's not necessarily a pretty process; in fact, it's a lot like watching sausage being made. Radio insiders will tell you that we can tell the difference between people who "came up through the ranks" and those who just stumbled into a gig through good luck. There is a real difference between the two -- and coming up through the ranks is obviously a lot harder, with more dues to pay, and usually more bumps and bruises along the way. But, in general, it's the only way to become great. Nations usually don't have the option of stumbling into something great...and when they do, it often turns out to be due to a stroke of luck with natural resources, like Saudi Arabia (or Venezuela or Libya) and oil. But those lucky breaks usually turn out to be like the lottery winner's curse -- the easy gains lead to waste and corruption, and the people as a whole end up worse-off than had they never been "lucky" in the first place. The point is that the tough route is usually the only option available that leads to sustainable, durable development. We'd like to create an express lane, and in the 24/7, Internet-powered media age, we're occasionally brought face-to-face with the unpleasant reality that no such shortcut exists. But if we truly understand the name "developing nation" to mean "developing" -- not just as a euphemism for "poor" -- then we have to engage the people of those countries and trade with them. Tragedies are, sadly, inevitable along the way, but we can't let them make us go wobbly over the issue of free exchange. It's not always pretty, but it's the only sure-fire way to real development.

International development works best when it involves exchange and trade. And economic growth begets political freedoms, which we want for our fellow human beings as well. But the process takes time and it isn't always smooth -- nor is it without errors and pain along the way. Bill Gates is right when he touts the philosophy that every life has equal value, so does and should offend us when we see others lose their lives tragically and without reason. But we should not be misguided into thinking that we will protect others' lives by stopping our exchange of goods, services, and ideas with them. Bangladesh (and other countries) should be able to grow from their present living standards to those much closer to America's in a matter of 25 to 50 years, if they're guided by people with wisdom, adopt the rule of law, and trade with the world. South Korea and Japan did it in half a century after World War II, and we've learned many new things since then. We can and should expect better for all of our fellow humankind...but we can't expect to achieve it all overnight.

Do you feel that civic pride?

Sioux City has lost its Jaycees chapter because the membership numbers fell below the required minimum. It's just one of many civic organizations that has run out of gas, and we should be thinking about ways to turn that around. America needs non-governmental groups that do good things. Civic and frateral organizations for many years have filled that role, providing socially good things while giving their members a range of benefits, from a feeling of self-fulfillment to networking opportunities. If we let those slide away, it will have a similar effect as the one Social Security has had on our approach to savings. What should have been a backup plan or a safety net has turned into a primary means of "savings" for a lot of people. I read a Facebook forward the other day from some un-attributable author tearing through a rant about how much he or she is owed by the government for Social Security, and threatening something just barely on the legal side of revolution should the Federal budget be balanced with any help from the entitlement program. It was a sad read, but probably reflects how a lot of people feel. And that's the problem: Instead of Social Security serving as a true "safety net" for those who weren't able to save enough on their own, it's viewed by many as their just due in return for decades of tax payments into the program. The truth is, it's not enough for most people to retire comfortably, yet it also costs far, far more than is reasonable and it will (hand-in-hand with Medicare) run us bankrupt if we don't reform it deeply and soon. We are served neither well nor affordably by the program, largely because it's too much for government to do well. Likewise for the many good things that we want to have done in our communities: If we expect government to do them all, it will neither do them well nor affordably. For retirement, we should have a national commitment to private-sector savings, with a government-funded safety netto provide a backstop when that private saving falls short. For our communities, we should have a vibrant civic sector -- non-governmental, voluntary groups, clubs, and associations -- that do much of what we want, with the government there to take care of the things we truly need. But if our civic groups are shrinking and failing, then we're headed down the wrong path and need to reconsider quickly.

The trouble with taxing the Internet

The Senate is working through a plan to make every online retailer collect sales taxes for the entire country. If it happens, big businesses will win at the expense of small ones. It's crony capitalism at its worst. We need to think of a better way to collect the revenues that local governments need to operate -- one that doesn't impose a completely unreasonable burden on the small businesses that keep much of the economy chugging.

If you want your rights, you want a free judiciary

The state lawmakers who want to cut the pay of Iowa's supreme-court justices should be ashamed of themselves. Cutting pay (or otherwise seeking to enact punishment) for judges who decide against your wishes is the best way to destroy the safeguarding role that the judiciary plays in a healthy republic. We need the judiciary to make unpopular decisions occasionally, when the popular will is actively (or soon to be found) trampling on the rights of others. Rights aren't a matter of popular will, if we believe our founding documents and their "self-evident truths". So when the popular will is hostile to rights, we need the judiciary to provide a sober backstop. The lawmakers who want to exact punishment against the judges are behaving in a truly anti-constitutional manner.

Is Ben Bernanke going to pull a George Costanza?

Probably. The economy has been pumped full of money like a goose being fattened for pate. It's going to take someone with a titanium backbone to pull the cash off the table when monetary velocity picks up again. Right now, it's changing hands at the lowest-ever recorded rate. But that's probably because banks are hoarding it as they try to meet new capital-reserve requirements, businesses are sitting on it to improve their balance sheets, and households have been (at least until recently) paying down their debts and actually saving for the first time in a long while. But the tide will eventually turn, and the money supply will start moving much more quickly -- which means prices are going to rise (i.e., inflation will set in) unless the Federal Reserve takes a lot of cash out of circulation very, very quickly. Whomever does that will probably not be popular for it. When Paul Volcker launched all-out war on inflation, his name became a dirty word among many of the people whose lives were directly affected. But he was administering essential medicine, even if the patient didn't know or appreciate it. Where will we find the next Paul Volcker?