The Josiah Bartlett Center for Public Policy’s Andrew Cline took to the pages of the Concord Monitor on Labor Day to rebut U.S. Sen. Bernie Sanders’ anti-capitalist populism.
Bernie Sanders’ Labor Day fantasies
By Andrew Cline
U.S. Sen. Bernie Sanders, America’s most popular advocate of socialism, is in New Hampshire today to blame free-market capitalism for the economic struggles of America’s lower and middle classes. Unfortunately for Bernie, most of us will be too busy enjoying capitalism’s bounties to listen.
As Sanders mumble-shouts his blame-the-rich populism, tourists from around the world will be packing up and heading home, having dropped millions of dollars at New Hampshire restaurants, hotels, gas stations, and other businesses. It wasn’t the victory of international socialism that brought them from Boston to New Boston, Berlin to Berlin. It was free-market capitalism.
On Labor Day weekend, as many as half of the guests at some New Hampshire inns are international travelers. Mostly they drive down from Canada or fly in from Europe. It is doubtful that many Venezuelans sailed Lake Winnipesaukee or climbed Mount Monadnock, though. Venezuela’s poverty rate hit 82 percent this year, compared to 48 percent when Socialist Hugo Chavez came to power in 1998.
Nor will many Cubans be found at at Castro’s Back Room, the excellent New Hampshire cigar shops named after the man who turned Cuba from a popular resort destination into an island prison. If you’re a Bernie fan, you should consider Cuba doubly blessed. It’s got a socialist government and no international trade with the United States to take away Cuban jobs.
Yet Cuba’s Gross Domestic Product (GDP) per person is just $6,445. Nearby Puerto Rico’s per capita GDP is $25,967. Cuba’s per capita GDP is just slightly higher than where Puerto Rico’s was in 1970. Clearly, capitalism and trade stink.
Socialist sympathizers often blame Cuba’s economic woes on the U.S. embargo. If only Cuba could trade, its economy would thrive. Trade does help economies grow. But Sanders isn’t a fan.
In his 2014 Labor Day speech in Manchester, Sanders noted U.S. factory losses since 2000 and got a standing ovation when he denounced international trade, yelling, “I have never voted for one of these trade agreements, and I was right!”
Except, he was wrong. “Most US manufacturing jobs lost to technology, not trade,” the Financial Times reported in December. A report by Boston Consulting Group noted, “a human welder today earns around $25 per hour, including benefits, the equivalent operating cost per hour for a robot is around $8.”
In the first quarter of this year, U.S. manufacturing output was 80 percent higher than it was three decades ago, according to the Bureau of Labor Statistics. One reason that U.S. factories produce more with fewer people is that unions drove the price of labor prohibitively high.
Sanders in that same speech railed said the United States would bring back good jobs by raising taxes on the wealthy and financing massive jobs programs. Wrong again.
A 2008 Organization for Economic Cooperation and Development study titled “tax and economic growth” concluded that “lowering statutory corporate tax rates can lead to particularly large productivity gains in firms that are dynamic and profitable, i.e. those that can make the largest contribution to GDP growth.”
Regarding personal income taxes, it concluded that “a reduction in the top marginal tax rate is found to raise productivity in industries with potentially high rates of enterprise creation.”
In other words, lowering corporate and personal income tax rates can stimulate the capital investment needed for both job creation and economic growth.
If labor were the driver of economic growth, Americans would be migrating to India, which has 1 billion more people than the United States. But Indians are migrating here. Why?
In 2011, the average income in India was $1,500 U.S. dollars (or $4,800 if adjusted for purchasing power). The average U.S. income was $50,000. India has a lot more labor, but a lot less capital, so its labor is less productive. To generate the most robust levels of productivity and growth, market capitalism is essential.
As Harvard professor of political economy Benjamin Friedman put it, “ever since the Industrial Revolution, de-centralized market economies have had a proven record of delivering rising living standards over sustained periods of time.”
It has become a New Hampshire ritual for Bernie Sanders to cap Labor Day weekend with a resounding denunciation of the economic system that lifted humanity out of abject poverty, transformed subsistence farmers into industrial laborers and gave their employers large enough surpluses to finance the material comforts they eventually demanded.
It must be a lot of fun for Bernie. Just remember that he has the leisure time to harangue us with socialist fantasies only because of the prosperity generated by free-market capitalism.
Andrew Cline, is interim president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.