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Four Cheers for Capitalism in a Time of COVID

So many of our institutions failed us during the pandemic. Free enterprise isn’t one of them.

By KEN LANGONENational Review

A General Motors worker uses a sonic welder while producing Level 1 medical masks at the former GM Transmission facility in Warren, Mich., April 23, 2020. (Rebecca Cook/Reuters)

When future historians tell the story of this pandemic, I hope American capitalism is not so despised and maligned by the professoriate that they leave out the pivotal role private enterprise and individual autonomy played, not just in slowing and ultimately defeating the virus, but in getting the country back to work.

It was individual Americans who started socially distancing in March, as COVID-19 took hold in Italy and many mayors and governors were still calling fears of contagion from China overblown, if not bigoted. By the time our leaders came around to the crisis, millions of American workers and their employers were already taking steps to keep each other safer. And while Republicans and Democrats in Washington played politics with financial aid aimed at blunting the great economic pain necessitated by shutdowns, thousands of businesses, trade associations, and patrons were starting relief funds for the most heavily impacted.

Among the companies that could stay open, I will admit I am biased in my pride for one in particular.

Home Depot, the company I helped found, boosted wages and doubled overtime to acknowledge the valor of workers who wanted to stay on the job during some very scary times. Knowing that kids were at home because schools were closed, Home Depot expanded paid time off to help parents and made hours more flexible for older workers who were deemed at risk for COVID-19 infection. Many other companies offered similar incentives.

When it came time to attack the virus itself, businesses around the country showed the same decency and ingenuity, quickly repurposing to meet demand for personal protective equipment (PPE) such as masks and gowns for frontline medical workers. Apparel company Brooks Brothers and MLB uniform tailor Fanatics switched their stitch to make masks. So did hockey company Bauer and retail stores David’s Bridal and Jo-Ann Stores. A NASCAR team, North Carolina-based Stewart-Haas Racing, helped its neighbors by putting idle racing transports back on track, delivering 2 million medical masks to Novant Health facilities in North Carolina, South Carolina, and Virginia. Whiskey and vodka distilleries, especially small, locally owned ones, switched to making bottles of alcohol-based hand sanitizer.

Cutting-edge manufacturers used 3-D printers to make PPE. Charlottesville-based women’s shoemaker OESH made a mask that had soft edges, making its seal as strong if not better than what would be provided by N95-rated masks. There wasn’t time for FDA approval (which is a question we should take up later), but the skillful engineering made the mask a success.

One Delaware company, ILC Dover, worked with the National Institute for Occupational Safety and Health to shorten the regulatory review process from one month to a week. That way the company could make its new Powered Air Purifying Respirator hood, which provides 100 times the protection of an N95 mask, available to health-care workers attending to patients with COVID-19.

National big-box stores, corner-store pharmacy chains, and delivery services really stepped up in hiring temporary workers. Wal-Mart, Walgreens, CVS, Costco, 7-Eleven, Ace Hardware, Dollar Tree, Dollar General, Domino’s, Pizza Hut, Papa John’s, Instacart, FedEx, UPS, and grocery chains around the country all upped their hiring to meet demand and provide opportunities to the recently unemployed.

Perhaps most strikingly of all, tech companies have really shined. Amazon, Uber Eats, GrubHub and dozens like them made it possible to keep a social distance while keeping the homestead supplied with groceries and supplies. Tech companies didn’t just keep us fed, they kept us on the job. Employers used existing, but often untapped, IT capabilities provided by companies such as Zoom, Microsoft, Apple, and Google to transform a cubicle and conference-room workforce into a remote team interacting through a camera and video screen. In the short term this kept a company’s productivity up, and long-term applications could create a more flexible workplace that could better support parents or employees who want to live in a rural area.

Of course, the biggest heroes are yet to earn their fame. Hard at work are the world’s leading scientific and research minds toiling for vaccines and treatments. Eli Lilly, Johnson & Johnson, and Moderna all have billion-dollar investments into fast-tracking a cure.

Throughout this entire ordeal, which is far from over, our blinkered press has focused on the negative, on anecdotes of price gouging, temporary supply-chain disruptions and shortages, and companies that saw outbreaks in the workplace.

But it takes a special kind of dumb to look at all the institutions that came up short under the pandemic and put free enterprise anywhere near the top of the list. Our free-enterprise system is the best at allocating resources and responding to crises. The private sector should be praised, not demonized, for its efforts during this pandemic. The examples are numerous, and they keep on coming.

The best thing the government did, arguably, is get out of the way. Government watchdog Americans for Tax Reform has identified more than 600 rules or regulations that were changed to give companies the room to innovate and adapt to meet the demand for equipment and other goods created by the pandemic. My hunch is these are probably 600 regulations that do not need to come back once this is over.8

We are not a perfect country, but we do have something that will always help us prevail — either over a pandemic or the next pitfall we encounter. We have regular people who dare to do heroic things.

Americans don’t need to be told what to do, and companies don’t need command-and-control regulation to do what’s best for a community. That’s because Americans’ entrepreneurial spirit is the biggest factor flattening the curve.


Judge Stops Illinois Governor From Extending State Lockdown

The judge’s temporary restraining order sets the stage in Illinois and perhaps nationally for a legal battle over public health experts’ far-reaching demands for public confinement.

By Dennis ByrneThe Federalist

In one of the nation’s first successful legal challenges to mandatory quarantine directives, an Illinois state judge has thrown a wrench into Gov. J.B. Pritzker’s extension of his stay-at-home order until at least May 30.

The judge’s temporary restraining order sets the stage in Illinois and perhaps nationally for a legal battle over public health experts’ far-reaching demands for public confinement against the rising fear about the drastic consequences of a nationwide economic shutdown.

In the case, Downstate Circuit Court Judge Michael McHaney on Monday temporarily restrained Pritzker from enforcing the lockdown order against state Rep. Darren Bailey, a Downstate Republican from tiny rural Xenia. Bailey sued Pritzker for violating a provision of the state Emergency Management Act that allows such drastic closure actions for only 30 days. Because Pritzker originally issued his order on March 8, Pritzker’s authority expired on April 8, Bailey argued.

Bailey said he is “irreparably harmed each day he is subjected to” Pritzker’s executive order. In a statement, he said, “Enough is enough! I filed this lawsuit on behalf of myself and my constituents who are ready to go back to work and resume a normal life.”  The judge cited in his order Bailey’s right, in “his liberty interest to be free from Pritzker’s executive order of quarantine in his own home’

The suit follows an argument made earlier made by Northbrook, Illinois attorney Michael Ciesla, who first pointed out on his law firm blog how Pritzker’s extension violated the 30-day provision and that even the governor is required to follow the law. Ciesla’s argumentation was widely ignored while Pritzker, Democratic Chicago Mayor Lori Lightfoot, and the Chicago media scorned or dismissed the suit as a cheap political stunt.

So when McHaney saw enough merit in the lawsuit to issue an injunction against the extension, Pritzker and Lightfoot claimed the action threatens everyone’s health. But they utterly failed to address the heart of the lawsuit—the plain language of the act that clearly lays out the 30-day restriction.

Technically the decision applies only to Bailey, but legal experts agree that the precedent gives weight to any Illinoisan who chooses to challenge the order. Just how seriously Pritzker and Lightfoot take the decision can be measured by the depth of their denunciations.

Pritzker warned that if his order were immediately lifted “people would die” and deaths would “shoot into the thousands by the end of May…. Our hospitals would be full, and very sick people would have nowhere to go.” Lightfoot called the decision “troubling and wrong” and despite it would continue her lockdown policies “to stay the course.”

The “course” is some of the country’s most stringent controls, such as Lightfoot’s closing of parks and other outdoor activities. Pritzker’s new order, effective May 1, would among other things require everyone in Illinois to wear a face mask outdoors, while including some modifications such as opening state parks.

Bailey says he was hoping to push Pritzker into creating a “more realistic plan” reflecting the fact that Illinois is such a diverse region, requiring different approaches for the mostly rural Downstate and metropolitan Chicago. Bailey’s hometown of Xenia has a population of 364. It’s located about 100 miles east of St. Louis in Clay County, which has recorded just two confirmed coronavirus cases and no deaths.

Chicago’s Cook County has 31,953 confirmed cases and 1,347 deaths, but the most feared outcome hasn’t materialized. The city’s sprawling exhibition hall, McCormick Place, had been fitted with 3,000 emergency beds to handle the expected overflow from jammed hospitals, but because of low usage, 2,000 beds are now being removed.

Tensions between the state’s two regions are an historic constant. Most recently those differences show up in a growing movement by Downstaters to separate Chicago from the rest of the state. In this, Illinois is but a microcosm of how heavily infected, urbanized New York and vast swathes of Middle America are vastly different and require tailored approaches in the fight against the coronavirus pandemic. It also reflects the argument—opposed by many liberals—that the fight is best carried on the local level.

Illinois’ regional differences will play out in an expected high-speed appeal of McHaney’s stay. The Downstate appeals court that would hear the case is dominated by Republicans, who, being elected, would not be expected to overturn McHaney’s decision. The Illinois Supreme Court, which could hear the appeal directly, is controlled by Democrats, and considered likely to ultimately back Pritzker.

Still, with growing sentiment that the various shutdown orders have gone too far, with increasing public protests against the restrictions, crushing unemployment, and the unease that epidemiologists and their models are running the country, what’s happening in Illinois could presage even more objections to unprecedented assaults on liberty.


How Advocates of ‘Corporate Social Responsibility’ Distort Shareholder Power

By pressuring companies to put ‘sustainability’ before profit, they hurt pensioners, small investors, and all those who depend on a robust economy.

By ANDREW STUTTAFORDNational Review

Many years ago now, Milton Friedman explained something that should never have needed explaining, when, writing for the New York Times Magazine, he reminded his readers what —and whom — a company is meant to be for:

In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to [the] basic rules of . . . society, both those embodied in law and those embodied in ethical custom. . . .

What does it mean to say that the corporate executive has a “social responsibility” in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers.

The executives who retool a company’s mission to suit a particular conception of “social responsibility” are spending shareholders’ money on a moral agenda unrelated to company objectives, an affront that’s only made worse if their crusade depresses returns, share price, or both.

Friedman was writing in 1971. Since then, like so many bad ideas, corporate social responsibility has become institutionalized. To take a recent example, in 2017 JP Morgan Chase gave $500,000 to the Southern Poverty Law Center, an organization that, sadly, has strayed far from its original ideals. Had they learned of it, this gift would probably have irritated a good many shareholders. The employee who had to justify it was — you guessed it — the bank’s “head of corporate responsibility,” a title that signifies how deep the rot has gone.

It’s been a long time since companies’ supposed social responsibility could be discharged by a handout or two, but the pressure on them to toe some outsider’s line has, in recent years, been stepped up. Often repackaged as a demand that corporations be measured by the extent to which they match arbitrary and ever-tightening E (environmental), S (social), and G (governance) standards, it is now a way of corralling private enterprise without the bother of legislation. The G, which can cover such issues as transparency and compliance, is relatively uncontroversial, but so far as many shareholders are concerned, insisting on the E and, to a lesser degree, the S, which can range from the benign (worker safety) to the malign (stipulating what legal products a company may or may not sell), is a form of expropriation.

It is a mark of just how ingrained the ideas behind ESG have become that the Financial Times, mistakenly thought by the old-fashioned to be the house journal of capitalism, now has a section presumptuously called “Moral Money,” billed as “the trusted destination for news and analysis about the fast-expanding world of socially responsible business, sustainable finance, impact investing, [ESG] trends, and the UN’s Sustainable Development Goals” — a rebarbative combination for which those running the FT clearly believe there is an audience.

If Davos is any indicator, they are right. Here’s an extract from the World Economic Forum’s “Manifesto for 2020”:

A company serves society at large through its activities, supports the communities in which it works, and pays its fair share of taxes. It ensures the safe, ethical and efficient use of data. It acts as a steward of the environmental and material universe for future generations. It consciously protects our biosphere and champions a circular, shared and regenerative economy. It continuously expands the frontiers of knowledge, innovation and technology to improve people’s well-being. . . .

A company is more than an economic unit generating wealth. It fulfils human and societal aspirations as part of the broader social system. Performance must be measured not only on the return to shareholders, but also on how it achieves its environmental, social and good governance objectives.

Unfortunately, what goes on in Davos does not stay in Davos.

The existence of the FT’s “Moral Money” section is yet more evidence of this larger trend. In a recent edition, we could read about how a Bank of America analyst examined the environmental implications (at least as seen from the perspective of climate warriors) of bringing supply chains closer to home in the wake of COVID-19. The author’s conclusion that doing so would reduce emissions would, in happier times, not have concerned investors — their interest would only have been in the financial consequences of such a change. But we do not live in those times.

Banks are not charities. They would not write research reports of this type unless there was a market for them, and there is. ESG investing is becoming big business. Thus, as one of the “Moral Money” team reports:

According to research from Sustainable Research and Analysis, an independent research shop based in New York, the total assets held in sustainable mutual funds and ETFs hit $1.6tn in 2019, growing from a base of just $400bn at the end of 2018. Even with the coronavirus outbreak sending markets into a tailspin, ESG funds added a further $500bn in assets through Q1 2020.

Reading on, there is a glimmer of hope:

But only a small portion came from net new money. In 2019, investment managers rebranded 475 existing funds to incorporate ESG factors, which accounted for more than $1tn, or 86 per cent of the total “new” ESG assets.

So Wall Street is behaving with its customary cynicism, and in the moral universe of “Moral Money” that will not do:

On the face of it, this seems troubling and sends up red flags for greenwashing.

It would take a heart of stone not to laugh here, but one would be laughing too soon:

Henry Shilling, director of research at Sustainable Research and Analysis, says most asset managers are not just slapping an ESG label on their funds and calling it a day. “Most of the rebranded funds have adopted ESG integration strategies,” he said, explaining that they had explicitly changed their prospectus documents to include ESG as a part of their investment process and were engaging with portfolio companies on ESG issues.

“Engaging with,” however, can mean sending a token memo or doing something more substantive. So it’s time for some more pearl-clutching:

Even with all of the companies making public commitments to cut emissions and look out for stakeholder interests, a shocking minority have gone so far as to tie executive pay to any sort of ESG metric. In fact, new research from Sustainalytics shows just 9 per cent of all companies in the FTSE AW index have done so. And on top of that, the vast majority of those that have done so have only targeted occupational health and safety.

“Only” is doing a lot of work there.

It’s worth pausing to note the citations of Sustainanalytics, which describes itself as “the leading independent global provider of ESG and corporate governance research and ratings to investors,” and of Sustainable Research and Analysis, a firm that serves “as a source for sustainable investment management information, research, opinions and sustainable fund ratings.” Both are part of the flourishing (and profitable) ecosystem that ESG investing has created. It encompasses consultancies, advocacy organizations, “chief sustainability officers,” and many, many more rent-seekers besides. ESG is bad news for investors, but it is not a bad way of filling the wallets of those that feed off it.

None of this is to deny that there is room for ESG-based investment strategies. If investors want to base their stock selection in whole or in part on ESG criteria, that is, of course, up to them, and if investment companies wish to market ESG-compliant funds, that’s fine. Funds that will not invest in companies that, say, sell guns or alcohol have been around for a long time. ESG-compliant funds are simply an extension of the entirely reasonable idea that investors should not be forced to choose between their principles and smart investment. The more choice that such investors have the better.

But choice is the key word here. Much of the pressure for companies to raise their ESG game comes either directly from state or other governmental pension funds, which are not exactly free from political pressure and ideological bias, or from the investment companies that wish to sell to them. Thus “Moral Money” reports on a number of proxy fights over ESG issues brewing at companies such as ExxonMobil and the British bank Barclays. Among those named as leading the charge in these battles are Brunel Pension Partnership, which manages the pension funds for ten local British governments, the Liverpool-based Merseyside pension fund (also for local government employees), and — this is far from just a British thing — the New York State Common Retirement Fund.

Turn to Brunel’s website, and you find that:

[Brunel’s] investment team [has] the ability to clearly think in 10 to 20-year timeframes. As such, environment and social risk considerations, along with good governance and stewardship, are integrated into [its] decision making processes. . . .

The key objective of our climate policy is to systematically change the investment industry to ensure that it is fit for purpose for a world where temperature rise needs to be kept to well below 2°C compared to pre-industrial levels.

Pension funds ought to be trying to deliver the best possible economic returns for their pensioners, who are, in a sense, captive clients. Equally, where such pensions are funded or, in the case of defined-benefit schemes, underwritten in whole or in part by taxpayers, there is — or there ought to be — a duty owed to those who may end up on the hook for them. But for Brunel, other objectives now seem to have come into play.

A still bigger problem may yet come from investment groups such as BlackRock. As the FT notes, the firm is currently coming under fire from ESG activists, despite the stance taken by its chairman and CEO, Larry Fink, who claimed in a letter earlier this year that “climate change has become a defining factor in companies’ long-term prospects,” and went on to explain how:

BlackRock [has] announced a number of initiatives to place sustainability at the center of our investment approach, including: making sustainability integral to portfolio construction and risk management; exiting investments that present a high sustainability-related risk, such as thermal coal producers; launching new investment products that screen fossil fuels; and strengthening our commitment to sustainability and transparency in our investment stewardship activities.

More details were set out in a letter to clients:

We have been working to improve access for several years — for example, by building the industry’s largest suite of ESG ETFs, which has allowed many more individuals to more easily invest sustainably. . . . We intend to double our offerings of ESG ETFs over the next few years (to 150), including sustainable versions of flagship index products, so that clients have more choice for how to invest their money.

Some of this merely reflected BlackRock’s self-interest — and there’s nothing wrong with that. As noted above, extending investor choice is to be welcomed. But there is also the fact that:

Every active investment team at BlackRock considers ESG factors in its investment process and has articulated how it integrates ESG in its investment processes. By the end of 2020, all active portfolios and advisory strategies will be fully ESG integrated — meaning that, at the portfolio level, our portfolio managers will be accountable for appropriately managing exposure to ESG risks and documenting how those considerations have affected investment decisions.

Investors are free not to invest with BlackRock, but because BlackRock is so large, that doesn’t eliminate the problem that this new policy could pose. Before the coronavirus crisis began, BlackRock had over $7 trillion under management. If a company doesn’t play by BlackRock’s ESG rules, it risks shutting itself off from a potentially substantial source of capital and/or support for its share price. If a company’s management decides that it doesn’t want to run that risk, it may have to adopt policies that damage the business’s long-term prospects. That might help the share price, at least for a while, but it is hardly a desirable outcome.

Even if a company has no interest in having BlackRock as a shareholder, BlackRock may have an interest in it. Once BlackRock takes a stake in a company, the chances are that it will apply pressure on management, as any shareholder has the right to do. Most shareholders only do so to increase their return, but BlackRock, whatever its claims about the connection between “sustainability” and longer-term profitability, has other targets in mind:

We have engaged with companies on sustainability-related questions for several years, urging management teams to make progress while also deliberately giving companies time to build the foundations for disclosure consistent with the Sustainability Accounting Standards Board (SASB) and TCFD. We are asking companies to publish SASB- and TCFD-aligned disclosures, and as expressed by the TCFD guidelines, this should include the company’s plan for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than two degrees is fully realized. Given the groundwork we have already laid and the growing investment risks surrounding sustainability, we will be increasingly disposed to vote against management when companies have not made sufficient progress. [Emphasis added.]

SASB and TCFD are two other creatures in the ESG ecosystem. The former was once chaired by Michael Bloomberg, while the latter still is. SASB says that it is on a “mission . . . to help businesses around the world identify, manage and report on the sustainability topics that,” it claims boldly, if inaccurately, “matter most to their investors.” Meanwhile, TCFD, the Task Force on Climate-related Financial Disclosures, says it aims to “develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders,” an objective with a clever twist: If companies do not go along with these “voluntary” disclosures, their banks and insurers — part of a sector unusually susceptible to political pressure — may turn the screws.4

As a shareholder, BlackRock has every right to insist that the managements of the companies in which it invests comply with its diktats. Equally, other shareholders are free to insist that BlackRock be told to take a hike, at which point the whole thing can be thrashed out at a general meeting. But many of the other shareholders will also be institutional investors. Even if they do not agree with BlackRock’s agenda, they may feel compelled by commercial pressures of the type that I have mentioned above to go along.

In effect, therefore, many companies — and not just those that are publicly listed — will be forced to change the way they do business as they try to keep up with ever-more-stringent rules set not by democratically elected legislators but by the unaccountable, the ambitious, the greedy, and the fanatical. Milton Friedman would have been appalled (if not altogether surprised) that activists such as these ESG vigilantes could exercise such a power through their ownership of shares. Today’s small investors, pensioners, and, for that matter, anyone else who depends on a robustly growing economy ought to be angrier still.


New FCC Chairman a Win for Free Speech, Free Enterprise

by Elizabeth Harrington • Washington Free Beacon

Ajit Pai will serve as chairman of the Federal Communications Commission after his appointment by President Donald Trump on Monday.

Pai has been an outspoken defender of free speech and freedom of the press, as he’s worked to expose the FCC’s politicization since he joined the agency in 2012.

Pai gained notice in 2014 when he exposed the FCC’s plan to “police the newsroom” through a study that would have sent government-backed researchers into nearly 300 newsrooms to learn how they decide which stories to run.

Pai believes in free markets and less regulation and has promised to “fire up the weed whacker” against net neutrality rules finalized under the Obama administration. Continue reading


Ronald Reagan Lecture Series presents George Landrith of the Freedom Foundation


Free Markets Are Moral and Superior


The Case Against Higher Taxes

 

While the 2000s may have been a lost decade for the American dream, a revival of our model’s advantages is still a real, worth-desiring possibility.

Reagan-tax-cuts2by Ross Douthat

Because it was tax day recently, because he mentions me and because I’m easily provoked, below the quote you’ll find three rejoinders to Jonathan Cohn’s admirably forthright argument that American society would be much better off if most of us were writing larger considerably larger checks to Uncle Sam:

Maybe you don’t like tax day … [because] it reminds you of how high taxes are—and you think that, because of those high taxes, the economy grows more slowly. That would mean fewer jobs and less pay for you—and the country as a whole. It’s not a crazy argument … But the evidence for this point of view turns out to be thinner than you’ve probably heard. Relative to other countries, tax rates in the U.S. are relatively low, even when you throw in local and state taxes and add them to federal levies. Overall, according to the Tax Policy Center and Center on Budget and Policy Priorities … taxes in the U.S. are among the lowest in the developed world. The average for countries in the Organization for Economic Cooperation and Development, an organization of rich countries, is higher. And in countries like Sweden, Norway, and the Netherlands countries, the average is much higher. In those nations, taxes account for more than half of total national income. Continue reading


Big Government: Strangling Life

big governmentby John Stossel

There are now 175,000 pages’ worth of federal laws. Local governments add more.

I’m not so cynical that I think politicians pass laws just to control us. Someone always thinks: “This law is needed. This will protect people.”

But the cumulative effect of so many rules is to strangle life.

Yet lawyers like George Washington Law professor John Banzhaf want more rules. Continue reading


George Soros and PBS vs. Art Laffer

Children Health Dental Careby Kerri Toloczko

Capitalism is good for everyone. Entrepreneurs access financial resources to create businesses. Businesses hire workers, and workers provide services to consumers. Consumer payments create profit, leading to more services,employees and entrepreneurs.

And according to one of America’s foremost economists, capitalism is even good for children’s teeth. You’d think everyone would be happy. But of course, they’re not.

Mainstream dentistry and Medicaid have habitually underserved low-income children — with painful consequences. Chronically untreated cavities can turn into painful abscesses, leading to costly Emergency Room visits and excruciating pain for a preventable problem. Poor children without dental care often suffer long-term health issues, school absences and even death. Continue reading


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