Political Book Summaries, Reviews and Opinions

Political Book Summaries, Reviews and Opinions

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Book Summary: The World Is Flat by Thomas Friedman


The World Is Flat by Thomas Friedman

The World Is Flat by Thomas Friedman

Chapter One – While I Was Sleeping

As we are introduced to Friedman’s theory that the world is flat, we accompany him on a journey to the various locations around the globe that led him to this conclusion. We start off in Bangalore, India, where he finds himself surrounded by advertisements of traditionally American companies such as Pizza Hut, Epson, HP and Texas Instruments during a round of golf. Traveling with a crew from the Discovery Times channel, he encounters Indian workers and businesspeople working for American companies, speaking in American accents and even adopting American names in their own country. A visit to Infosys Technologies Ltd leaves Friedman in wonder at the massive conferencing system they have created that allows people from around the globe to congregate and collaborate in one giant room via satellite and teleconferencing technology.

Friedman guides us through the different eras of globalization as he has defined them in an historical narrative from the days of Columbus to our present day state. We see the ever increasing pace of globalization through his encounters with people such as Jaithirth “Jerry” Rao, an outsourced businessman in India, and others. Through Jerry, we learn about the process of information exchange online and the effect it has on businesses to perform various duties from remote locations with everything from tax preparation to hair appointment scheduling to hospital bookings cited as examples of outsourcing.

As Friedman travels through Japan, China and back to America, we study various examples of the business outsourcing phenomenon and its impact, positive and negative, on the players involved. Homesourcing and military outsourcing are explored as Friedman explains the sheer prevalence of outsourcing in our society.

Chapter Two – The Ten Forces That Flattened the World

We are introduced to Friedman’s interpretation of the ten influencing factors that led to globalization and world flattening, the first being the falling of the Berlin Wall in 1989, which tipped the balance of power across the world towards democratic free market and away from authoritarian rule. A second flattener is identified as our ability to not only author our own content, but to send it worldwide with the 1995 launch of the Internet. Subsequently, free workflow software was developed, allowing people from around the world to collaborate and work together on projects using a shared medium. As Apache and Wikipedia came into play, we became able to develop and upload web content and community collaboration became another flattening force. Preparations for Y2K required resources beyond those available in the United States and as a result, we see that India became responsible for a huge portion of these preparations. Offshoring, using the Chinese manufacturing sector as a prime example, has forced other developing countries to try to keep up with their low cost solutions, resulting in better quality and cheaper products being produced worldwide.

The seventh flattening factor is our introduction to supply chaining, which is discussed in much greater detail later in Chapter Fourteen. Rounding out his list with insourcing, in-forming and “the steroids”, Friedman examines his flattening factors, their origins and the effect they will have on the way we do business in the future.

List of Ten Forces

  1. Collapse of Berlin Wall–11/89: The event not only symbolized the end of the Cold war, it allowed people from other side of the wall to join the economic mainstream. (11/09/1989)
  2. Netscape: Netscape and the Web broadened the audience for the Internet from its roots as a communications medium used primarily by ‘early adopters and geeks’ to something that made the Internet accessible to everyone from five-year-olds to eighty-five-year olds. (8/9/1995)
  3. Work Flow Software: The ability of machines to talk to other machines with no humans involved. Friedman believes these first three forces have become a “crude foundation of a whole new global platform for collaboration.”
  4. Uploading: Communities uploading and collaborating on online projects. Examples include open source software, blogs, and Wikipedia. Friedman considers the phenomenon “the most disruptive force of all.”
  5. Outsourcing: Friedman argues that outsourcing has allowed companies to split service and manufacturing activities into components, with each component performed in most efficient, cost-effective way.
  6. Offshoring: Manufacturing’s version of outsourcing.
  7. Supply-Chaining: Friedman compares the modern retail supply chain to a river, and points to Wal-Mart as the best example of a company using technology to streamline item sales, distribution, and shipping.
  8. Insourcing: Friedman uses UPS as a prime example for insourcing, in which the company’s employees perform services–beyond shipping–for another company. For example, UPS itself repairs Toshiba computers on behalf of Toshiba. The work is done at the UPS hub, by UPS employees.
  9. In-forming: Google and other search engines are the prime example. “Never before in the history of the planet have so many people-on their own-had the ability to find so much information about so many things and about so many other people”, writes Friedman.
  10. “The Steroids”: Personal digital devices like mobile phones, iPods, personal digital assistants, instant messaging, and voice over Internet Protocol (VoIP).

Chapter Three: The Triple Convergence

Acknowledging that the ten factors he discussed in Chapter Two could not have flattened the world all on their own, Friedman explains that as each of the factors came together, they had to spread and take root to create the environment rich for flattening. He credits this spread, the creation of complementary software and the internet, and political factors that caused several developing countries, including China, Russia, India and Latin America, to open their borders at this time with the creation of the perfect storm that led to the rapid-fire pace of globalization.

Through interviews with U.S. Embassy officials in Beijing, we explore the desperation of Chinese students to study and work in America. For the first time in history, we see that talent has become more important than geography in determining a person’s opportunity in life. We follow the path of a Boeing jet as components of its manufacture are outsourced to Russia and then India, allowing for faster and cheaper development of more planes as Friedman demonstrates the need for individuals and businesses to be able to compete in a global marketplace.

Friedman works to dispel common myths about globalization as we explore the dot.com boom and bust, the American government’s misinformation of the public as the triple convergence took place and the IT revolution we have heard so much about in the last 20 years.

Chapter Four – The Great Sorting Out

Friedman calls for a reality check as we explore the manner in which countries and societies will cope with and adapt to the dramatic changes that globalization brings to the way we do business, as individuals and entities. His comparison of the Industrial Revolution to the current IT Revolution leads us to believe that the world flattening we see today could have been predicted by Karl Marx.

An interview with Harvard’s noted political theorist Michael J. Sandel discusses whether or not exploitation is globalization; are the outsourced people from India being exploited or given opportunity they would not otherwise have had? In search of an answer to this question, Friedman examines the India-Indiana story from 2003, where an Indian company was outsourced to upgrade Indiana’s unemployment computer system, effectively taking work from people in Indiana in order to provide more work for people in India. We examine the blurring boundaries between companies and different groups of workers, as well as the relationships between communities and the businesses that operate within them. Friedman demonstrates that as little people begin to act big, so too are big people able to connect on the smallest level. Identities become harder to define, which will also need to be sorted out. The traditional roles of consumer, employee, citizen, taxpayer and shareholder have all become blurred and intertwined.

Friedman summarizes the chapter with an examination of intellectual property law and means that must be put in place to protect it, as well as the death of the human bond in the online world.

Chapter Five – America and Free Trade

Does free trade still exist in a flat world? As he sets out to explore this dilemma, Friedman considers the banning of outsourcing, an action called for by many, to protect our country’s workers and the effect such an action would have on globalization. He concludes that erecting borders and walls would be detrimental to our goals and that Americans must instead be prepared to compete on a global playing field.

Friedman encourages better education and training, as Americans now compete not only with other Americans, but with the most brilliant minds around the globe for positions. We explore the “lump of labor” theory and new job creation in a global economy. He identifies the workers that will suffer most, should they be unable to keep ahead of the globalization trend, and offers large-scale suggestions to remedy this problem. Using the history of the American agricultural industry as an indicator of future trends in various industries today, he stresses the importance of an ability to adapt and specialize where there is a need. We learn that fear stimulates change and that this is a good thing.

Chapter Six – The Untouchables

Friedman addresses a concern shared by many Americans: what do we tell our kids? As the competition for jobs stiffens, how do we prepare them for the increased competition? His suggestion that we must make ourselves “untouchables” is explored in detail as he identifies three broad categories of workers who will have job security in the flat world. Synthesizers, explainers, leveragers, versatilists and more are identified and explained as viable career options, as well as strategies for preparing for these positions.

Chapter Seven – The Right Stuff

In a frank discussion of the fear amongst Americans regarding competition and education, Friedman explores the “right stuff”; the educational requirements needed to survive in the flattened world and more importantly, the availability of said education in our current system. Stressing the importance of self-learning and learning to learn, Friedman offers valuable advice to parents unsure of their children’s educational and professional futures. He recommends building right-brain skills, or those that cannot be duplicated by a computer, and explores different vehicles to higher learning, including music. Friedman examines the factors necessary to create the right environment for this learning and contemplates methods of achieving this in modern day America.

Chapter Eight – The Quiet Crisis

We begin by examining the U.S Olympic Basketball Team’s unexpected loss at the 2004 Games as an example of our complacency as the rest of the world is learning and catching up in areas we are used to dominating. An interview with Shirley Ann Jackson, 2004 President of the American Association for the Advancement of Science, demonstrates that a quiet crisis is happening slowly but surely as multiple and complex forces are at work creating the perfect storm; demographic, political, social, cultural, economic, etc., that could lead to America falling behind in innovation, science and technology. We explore the dirty little secrets that no one is talking about – a lack of highly skilled scientists and engineers, disinterest in math and science by our younger population, lack of ambition as television and video games take over, an outdated basic education system, lack of funding for research, lack of infrastructure as we focus on war and other countries focus on developing sustainable and innovative business. Friedman explores the differences between different country’s educational systems with Bill Gates and ultimately poses the question, why are we so focused on idolizing Britney Spears when competing countries are idolizing Bill Gates?

Friedman contemplates The “Innovate America” Report, a well-meaning document ignored by the President as he chased his own agenda – and wonders whether China will beat us to the implementation of our own innovation. He sums up the chapter with a call to action to kick-start the long process of preparing ourselves for the future into motion before we are literally left behind.

Chapter Nine – This Is Not a Test

In a call to action, Friedman stresses that we simply cannot do things the same old way anymore and people must be willing to change and adapt. He compares our current crisis to that we faced in competing with the Soviet Union and the launch of Sputnik; the main challenge then came from those who wanted to put up walls while we now have to face those who want to tear them down. Now, as then, we must change our strategy to overcome these issues. He discusses the difficulty in getting America to stand up and take notice of the importance of this issue in a supercharged society where hype and terror are needed to get the public’s attention and support.

Friedman stresses the importance of shoving political barriers aside in what he calls “compassionate flatism” to prepare our country for what lies ahead. He questions leadership and education; who will lead us into the forefront of this new globalized economy? The necessity for lifelong learning and benefits to allow workers to remain mobile and adaptable is very real, though it seems to be at the bottom of our to-do list.

Finally, Friedman examines how companies such as Capital One are working on the lifelong learning objective by providing training and upgrading to employees, increasing their own productivity and bottom line in the process, as he calls for social programs that encourage workers to be creative and hardworking.

Chapter Ten – The Virgin of Guadalupe

We see the Chinese manufacture of statuettes of The Virgin of Guadalupe and their subsequent importation into Mexico as an example of the problem created when one developing country competes with another, as China replaced Mexico as the U.S.’s number two importer in 2003. Friedman discusses the need for developing countries to put policies in place to create the right environment for their companies and entrepreneurs to succeed in the flat world. He states that countries must be brutally honest with themselves in determining their place in the world market if they are to adapt and survive. A comparison of countries who have opened their borders and adopted free trade policies versus those who have not and been left behind illustrates his point.

The concept of reform retail and wholesale is introduced as we explore changes in education, infrastructure and governance. Ireland becomes a case study for financial success as their per capita GDP has risen to second highest in the European Union. Friedman contemplates a society’s ability and willingness to sacrifice for the purpose of economic development and leaders with vision as vehicles of change and conversely, the reason some countries will not.

Chapter Eleven – How Companies Cope

Friedman opines that companies willing to change and accept change are more likely to do things than have things done to them. In profiling Jill and Ken Greer, creators of Greer & Associates multimedia company, we learn of their experience with the rise of freelancers as their competition, as well as the fact that technology that should have simplified their operations made it more difficult by requiring more of them.

We look into commoditization in a wide range of industries, where everything is the same and supply is plentiful. Clients are flooded with options and everyone becomes the same. Each company is driven to be more creative and innovative, or risk falling between the cracks. At this point we meet Fadi Ghandour, cofounder and CEO of Aramex, a home-grown package delivery service. His web-based global network cut costs and allowed him to compete with the biggest in the business and come out ahead. We see through other business models that globalization forces the big to act small: case in point, Starbucks learning from their customers to use soy milk in their coffees. We learn that companies must be willing to collaborate and focus on niche markets, doing themselves what they need to do to stay in front of their customers and outsourcing the rest. The best companies use outsourcing as a method of growth, not to shrink their workforce. Outsourcing allows them to provide more and better services more efficiently.

We also explore socially responsible outsourcing; giving the outsourced workers a good wage and opportunity within their own country that they would not have otherwise.

Chapter Twelve: The Unflat World

Friedman shares stories of the world flattening but humbly announces that he does indeed realize the world is not yet flat. He wants to draw attention to the flattening and the ever-increasing pace at which it is occurring. Part of this understanding must come from a recognization of factors that are preventing globalization from occurring in some people.

Friedman examines different groups of people he believes are disadvantaged for one reason or another and the way that this keeps them from moving forward into a flattened world. The AIDS epidemic affects people who are too sick to hope they will ever make it to middle class. Disempowered people are those who live in areas touched by the flattening of the world but lack the means, knowledge and infrastructure to benefit from it. For example, in India only 2% of the entire population are involved in the high-tech and manufacturing for export sectors.

Different societies and cultures are coming into contact with each other more frequently and more quickly than ever before, leading to great frustration. Using the Arab-Muslim world and his journalistic encounters with their youth as an example, Friedman explores the impact of freedom of thought and expression that world flattening has created and its impact on a traditionally closed society. He warns of a potential threat lurking in the not too distant future: a depletion of our natural resources as people compete to have more and better.

Chapter Thirteen: Globalization of the Local

In this examination of the impact of globalization on world cultures, we learn that globalization came to be seen by many as Americanization, creating a backlash by those who felt that they would be steamrolled and homogenized into being mini-Americans.

But as new forms of communication and innovation create a global platform for the sharing of work, entertainment and opinion, Friedman believes that globalization serves more to enrich and preserve culture than to destroy it, as each person is given their own voice and vehicle of expression through podcasts, websites, etc. The nature of the beast is such that the bad will always be there with the good. As humanitarians and businesses connect online to share ideas, so too do terrorists and predators.

Chapter Fourteen: The Dell Theory of Conflict Prevention

We begin with an in-depth study of the supply chain, using the purchase of Friedman’s own computer as a case study. This leads to an examination of how geopolitical conflicts could derail or slow globalization.

Friedman’s theory is that two countries invested in a business together by being part of the same global supply-chain are less likely to go to war, as they are now heavily invested in the success of the business venture. Any interruption to that supply chain would be critical. As we reflect on the evolution of supply chains and the effect they have had on politics and the stability of countries they affect, we remember that Asia, as opposed to much of the Middle East, has become more stable because they are part of many supply chains and therefore more interested in doing good business. Overall, the price of war is higher than it used to be and countries will have to consider the effect of a war on their place in the business world. Friedman explores both the China-Taiwan relations and India-Pakistan as examples of how the flattening of the world and supply chain have a calming effect and cause countries to think rationally about the true cost of war, making diplomatic solution more likely.

As we explore the darker side of the supply chain phenomenon, we understand how Al-Qaeda and other terrorist networks form mutant supply chains for the purpose of destruction, not profit. In a flat world, the transmission of terror is much easier. We must examine our abilities to derail the nuclear threat by using our capabilities to disrupt the terrorists supply chain.

Chapter Fifteen: 11/9 Versus 9/11

We begin by examining two significant dates in world flattening: 11/9 as an example of creative imagination and 9/11 as destructive imagination. 11/9, with the destruction of the Berlin Wall, was the door opening to a freer, flatter, and more democratic world, where 9/11 saw our world try to snap shut against outside threat. This is Friedman’s call for positive creativity and giving people the tools to do positive things with what is available through the opening of so many doors.

We see the innovation and creativity that Bin Laden put into his 9/11 plan, as horrible as it was. Friedman concludes that the forces that flatten the world can be used to bring everyone up to the same level, or to bring them all down to the same level. Those of us who live in free and progressive societies must lead others to use their imaginations without allowing their imaginations to get the best of them – or us. Technology cannot protect us; we must harness that technology and decide how it will be used. This requires us to define the line between precaution and paranoia to keep things in perspective in a flat world. We are called to remember who we are to avoid losing our identity in a flat world. In exploring eBay as a virtual community, India as the second largest Muslim country where the context and imagination are different than in other parts of the Arab world, and the curse of oil and how it keeps countries from moving forward in other ventures, we learn about different types of creativity.

Friedman reflects on his story of Aramex from Chapter Eleven as an inspirational closing thought; one of a small Arab company that made it big in the world platform.

Paul Krugman: Why markets can’t cure healthcare


All of this doesn’t necessarily mean that socialized medicine, or even single-payer, is the only way to go. There are a number of successful health-care systems, at least as measured by pretty good care much cheaper than here, and they are quite different from each other. There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.

The rest of the post here

I’m a free market guy. That said, I want my police and military to be “single payer”. Why not my healthcare? Paul Krugman argues that healthcare can’t/shouldn’t be a free market entity. He makes some great points.

Book Summary: End of Prosperity, Higher Taxes Will Doom the Economy- If We Let It Happen


Detailing the brutal assault on the US economy by politicians, both Republican and Democrat, The End of Prosperity also serves to offer advice on repairing the damage. The End of Prosperity is my book of the month and was written by by Arthur Laffer, Steve Moore, and Peter Tanous. This post has the summary of the final three chapters 13, 14 and 15. The review will soon follow.

My next book summary, review and critique will probably be a left-wing book as this is a right-wing book and I want to keep it fair. I’m planning on doing The Audacity of Hope of Barack Obama as that seems a good balance to this one.


 

 • Book Summary •

Index | Chapters 13-15 | Review

The End of Prosperity

The End of Prosperity

How Higher Taxes Will Doom the Economy- If We Let It Happen

Chapter 13: Many Happy Returns

Some people want at tax system based on Robin Hood, where we steal from the rich and give to the poor. In the end, this hurts everyone as the “rich” Robin steals from soon learn to hire body guards, thus reducing the amount Robin can steal while increasing the prices the poor pay.

Why do governments impose taxes:

  1. Raise Revenue. Obviously we need to raise money to pay for running the country
  2. Redistribute Income. While most people agree we need to pay taxes to run the government, the Left also wants to use the tax code as Robin Hood and confiscate money from the wealthy to spend on the poor. Both Obama and Hillary want to raise taxes on the wealthy, they’re not even hiding it.
  3. Social Engineering. The tax code is also used to control behavior through rewards and punishments. Often, we do so without even realizing it. We tax drinking and smoking as a form of punishment, trying to decrease those behaviors. Then why do we think high taxes on capital gains, dividend taxes and income won’t do the same?

The Laffer Flat tax would replace most existing federal taxes with a very low 12.1%. By drastically increasing the tax base, we will be able to drop the tax rate for everyone.

We also like the FairTax. Since the Laffer Flat tax is split between income and corporate taxes, they total 24.2%, remarkably similar to the 23% sales tax envisioned by the FairTax. We particularly like the idea of getting the IRS out of financial records and making our exports more competitive. We however think there will be problems with evasion and noncompliance.

  • Henry George, a ninteenth century economist listed four criteria for judging a tax system.
  • Bear as lightly as possible upon production
  • Easily and cheaply collected
  • That it be certain, so as to limit tyranny and corruption in the collection
  • That it be equal, so as to give no citizen an advantage or disadvantage over anyone else.

The Laffer Flat Tax meets those high standards.

Chapter 14: The Death of Economic Sanity

An economic storm is coming to America.

  • Tax rates are going up, not down. Obama wants to raise taxes on dividends, capital gains, income and death. Taxes in many states will approach 60%.
  • America has nearly the highest corporate tax rates in the world. This is one of the reasons the US dollar is collapsing, and a sign of worse economic problems to come.
  • The dollar is falling relative to other currencies and relative to commodities such as oil and food. Some economists see the devaluing as a good thing, a way to increase imports, but as the dollar drops, everyone’s savings get closer and closer to zero.
  • America is turning its back on trade and globalization. During World Wars I and II the Germans blockaded around Britain to keep out cheap products. We are doing the same thing to ourselves by enacting high tariffs, doing to us in peacetime what our enemies try to do to us in wartime.
  • A masochistic cap and kill idea that will send our factories and industries to other nations that don’t impose so many regulations. Hillary Clinton wants to impose a fence around industries creating a job, to restore “appropriate balance” between industry and government. What she really means is more inefficiency and fewer jobs.
  • The federal budget deficit is spiraling out of control and neither party is serious about halting out multi-trillion-dollar liabilities. George Bush was the worst spender since LBJ, increasing the federal budget from 2.2 Trillion to 3.1 Trillion in only 8 years. Democrats are doing all they can to pass his record.
  • The health care system, which is 1/6th of our economy may be nationalized. The idea that additional government will make the health care system better is pure folly.
  • National energy policies raise prices, limit access to domestic oil and make us more dependant on foreign oil. Price controls didn’t work for Carter, they won’t work now. They will only make our problems worse.

Individually, the US economy could handle a few of these. Combined, they spell certain economic cyclones.

Chapter 15: Protecting your investments in the Troubled Times Ahead

Build a portfolio for the ages with a variety of classes of assets so as to diversify your risks. You should aim twenty years out, looking towards retirement or your child’s college education. Growth stocks are companies with predictable growth and low risk. Value stocks are companies that are believed to be selling below their fair price.

At one time, the US stock market was by far the largest and most liquid market in the world. Today, you should put about 20% of your portfolio into foreign companies. You should also get some bonds as ballast against fluctuations in the market. Consider splitting your bonds between regular and TIPS (inflation adjusted bonds) to help negate the effect of inflation.

Which stocks should you buy? None. Leave it to the professionals and get a mutual fund. Moreover, get an index mutual fund. It is very hard for a mutual fund manager to beat the index, and most never beat it enough for the risk, or at all.

Should you get gold? That’s tricky. It peaked at $850 an ounce in 1980, then dropped. For most of the 80’s and 90’s, it would have been a bad investment. Gold is however a great hedge against inflation and has been used that way for centuries. Put no more than 10% of your money into gold. Putting another 10% of your money into oil may also help guard against the coming storm.

Over time, the economy will continue to grow. Political leaders who promote harmful economic policies will be removed and better policies will replace them. But in the meantime, it makes sense to protect one’s assets.

The End of Prosperity: Throw Momma from the Train!


Detailing the brutal assault on the US economy by politicians, both Republican and Democrat, this book also serves to offer advice on repairing the damage. “The End of Prosperity” is my book of the month and was written by by Arthur Laffer, Steve Moore, and Peter Tanous. This post has the summary of  chapters 10, 11 and 12. The rest of the chapters will follow soon. 

After the summary is complete (in a few days), I will follow-up with my review and a critique.

My next book summary, review and critique will probably be a left-wing book as this is a right-wing book and I want to keep it fair. I’m planning on doing The Audacity of Hope of Barack Obama as that seems a good balance to this one.


 

 

• Book Summary •

Index | Chapters 10-12 | Next chapters | Review

The End of Prosperity

The End of Prosperity

How Higher Taxes Will Doom the Economy- If We Let It Happen

Chapter 10: How to Create a Bull Market

In the 1970’s high inflation pared with high capital gains taxes raised the effective capital gains tax to almost 100%. The higher the tax, the less incentive to risk capital with investment. In 1981 America passed a bi-partisan tax reduction bill that cut the capital gains tax from 35 to 28%. This was the first official act of the supply-side revolution. It is now 15%. Obama wants to put it back to 28%.

Jesse Jackson once said, “without capital, capitalism is just another ism”. Why do American workers earn 5-10 times more per hour than Mexican workers? Because our advantage in capital investment makes our workers more productive. More productive workers earn more money.

History shows that when the capital gains tax is cut, revenues go up. When the expected profit from investments increase, so does the amount of investments, shrinking the tax base. President Bush cut the tax rate to 15% in 2003, and was vindicated when revenues jumped from 47 billion in 2003, to 97 billion in 2006, and 110 billion in 2007. Raising the capital gains tax won’t earn America any more revenue, it will cost us revenue.

The capital gains tax is not indexed to inflation. So many times the so-called “gains” are just inflationary prices at work. Government is taxing investors for inflation. Ending the capital gains tax will allow even more capital migration into this country, boost the stock market and increase the earnings of American Workers.

Chapter 11: Throw Momma from the Train

In 2009 the 55% estate tax will drop to 45%, before going away completely in 2009. Then, due to archaic budget rules, it goes back up to 55% in 2011. The argument against it is straightforward: It raises very little revenue, has a 65 cents on the dollar compliance costs, and pushes money out of efficient economy-growing investments into inefficient tax shelters, and it fails to keep wealth from handing over to the next generation.

It just doesn’t work. Families with a great deal of wealth are able, through the myriad of loopholes to protect their family fortunes while less well off, but still wealthy families are left breaking up their family businesses to pay the tax.

Last year the Swedes and the Russians both got rid of their estate taxes. The Swedes are among the most socialist people on the planet, and the Russians are among the most authoritarian. Yet both made the same decision, that the estate tax was counter-productive to economic growth.

Chapter 12: Protectionism Then and Now

Not only do many economists believe the Smoot-Hawley tariff act of 1930 caused the Great Depression, but the fear of its enactment most likely also caused the stock market crash of 1929. In the roaring 20’s the economy was going strong, except for the farmers. The Smoot-Hawley tariff act began as an attempt to protect farmers from foreign competition. Soon, other industries were added to the bill. Though it failed to pass in 1929, other countries reacted to our tariffs were punitive tariffs of their own. On the morning of the Stock Market crash of 1929, the government assured the people they’d get it passed in the very next legislative session.

The result wasn’t an increase in farmers wages, by 1932 the States GDP fell to 68 billion from a high of 104 billion. Exports had collapsed from 5.2 to 1.6 billion. By 1933 unemployment was at 25%.

Today, we have people calling for protectionism once more. Tales of Ohio’s lost manufacturing make a great human-piece article. But the truth can be found in Texas, where manufacturing is booming and supply-side economics are followed. They have added 36,000 manufacturing jobs since 2004. Ohio complains about losing factories, even as it charges the third-highest corporate tax rate in the country of 10.5%.

South Carolina has lost thousands of low-wage textile jobs to outsourcing. But they’ve gained thousands more jobs in higher-paying high tech production jobs. BMW has invest 3.5 billion South Carolina, and plans to invest 750 billion more to expand it’s production.

The Trade Deficit and outsourcing has been unfairly turned into a boogeyman. There is also insourcing. US subsidiaries of foreign companies employ 5.4 million Americans and 31% of them are in manufacturing. History shows that as the trade balance lowers unemployment goes up. If Lou Dobbs really wants to fix the trade deficit, he should cheer on American’s growing unemployment.

We fear that Congress may again pass wrong-minded protectionist laws. Great nations thrive on free trade, it doesn’t cost us jobs; it adds jobs, increases workers spending power, and creates and Capital Surplus where Capital flows into America from other countries.