Wall St.Journal 27Feb2020

THE WALL STREET JOURNAL. Thursday, February 27, 2020 |A

This Is No Time to Go Wobbly on Capitalism

1800. Medical breakthroughs mean
      Americans live much longer. In
      1820, 94% of the world lived in ex-
      treme poverty, earning less than
      $1.90 a day, adjusted for purchasing
      power. Today that figure is closer to
      10%. Because of capitalism, the
      world is cleaner, healthier and
      wealthier than ever.
      As governor of South Carolina, I
      saw capitalism work. Pro-market
      policies helped bring our state more
      than $20 billion in capital invest-
      ment and created jobs in every
      county. But I saw something differ-
      ent during my time as ambassador
      to the U.N. I was reminded that not
      every country enjoys the same free-
      dom and prosperity. More than 1.
      billion people still suffer under so-
      cialist regimes.
      Socialism is the dangerous prop-
      osition that government should con-
      trol more of your life, including
      your property, your money and even
      your religion. From North Korea to
      China to Venezuela, socialism re-
      sults in hunger, poverty and misery.
      It destroys communities, represses
      religion and crushes freedom.
      In 2018, I stood on the Simón
      Bolívar International Bridge on the
      border of Venezuela and Colombia.
      I watched thousands of Venezuelans
      cross into Colombia for the only
      meal they might have that day. I
      held a beautiful baby girl. Her
      mother told me all she wanted for
      her daughter was a future of free-
      dom. They were one of millions of
      Venezuelan families whose lives
      have been destroyed by dictator Ni-
      colás Maduro’s socialist policies.
      So imagine my surprise to find
      that socialism has become trendy
      here at home. Only in a free and
      prosperous country is it so easy to
      take capitalism for granted. Ameri-

can socialists claim they seek a gen-

tler socialism, like the one found in

Scandinavian countries. But over

the years Sweden has cut taxes and

introduced a school-choice program.

Denmark has cut its business tax

rate by more than half since the

1990s. Other democracies, including

Israel, India and the U.K., experi-

mented with socialism, only to

abandon it. Socialism has failed ev-

erywhere it’s been tried.

An entire generation of American

adults are too young to remember

the suffering socialism caused dur-

ing the 20th century. Collective his-

torical ignorance is becoming a real

threat. Those of us who remember

have a responsibility to educate

young Americans about the poverty

and tyranny that inevitably follows

socialism.

Socialism represents the greatest

threat to American values, but an-

other movement is also cause for

alarm. Advocates of so-called stake-

holder capitalism—a philosophy

that retains the word “capitalism”

but abandons its meaning—include

the Business Roundtable. Last year,

the chief executives of America’s

largest companies changed their

definition of business. They said

companies should focus on custom-

ers, workers and communities in-

stead of being the best business

possible. This has a nice sound to it

but makes no sense. In reality, a

company that cheats its customers,

mistreats its workers and abuses its

community won’t be around long.

The Business Roundtable knows

better, but corporate America is

buckling under the pressure of po-

litical correctness. This is an un-

healthy development that will make

business the servant of politics. Few

things are more dangerous than big

government in cahoots with big

business.

Then there are critics who call

for other kinds of hyphenated capi-

talism. Some are conservatives who

seem embarrassed by the free mar-

ket. They advocate for more tax

credits here, more subsidies there,

more mandates for this, more regu-

lations for that. But their new capi-

talism would merely give govern-

ment more power over businesses,

workers and families. It differs from

socialism only in degree.

It’s true that some businesses

are corrupt. That isn’t capitalism,

and it isn’t legal. It’s also true that

too many lobbying interests win

special treatment. That isn’t capi-

talism either. It’s cronyism and cor-

porate welfare, which should be

stopped. Finally, it’s true that in-

come inequality exists. But that’s

infinitely better than the alterna-

tive. Under socialism, everyone is

equal—equal in poverty and mis-

ery—except for those who control

the government.

The socialist and hyphenated

capitalist “solutions” will make

these problems worse and lead to

less freedom. The better answer is

to double down on capitalism. Presi-

dent Trump has done that. Unem-

ployment is at a 50-year low. Wages

are rising at the fastest rate in a de-

cade. Welfare is shrinking. Millions

of Americans have found good new

jobs. The stock market boom is

helping millions of retirees. It’s time

to embrace capitalism, not abandon

the values that make America the

envy of the world.

Ms. Haley served as governor of

South Carolina, 2011-17, and U.S.

ambassador to the United Nations,

2017-18. This op-ed is adapted from

a speech she delivered Wednesday

to the Hudson Institute.

By Nikki Haley

PHIL FOSTER

T

here’s an important de-
bate happening in Amer-
ica right now, a competi-
tion among three distinct
views of the world. The
first view is held by those who
think capitalism is the best and fair-
est economic system the world has
ever seen. The second is held by
those who think socialism is the an-
swer to a host of problems from cli-
mate change to inequality. Then
there are those who are pushing a
watered-down or hyphenated capi-
talism, which is the slow path to so-
cialism.

Mark me down as a capitalist. I
grew up in South Carolina as the
daughter of Indian immigrants. My
mom started a small business sell-
ing clothes and gifts. She worked
hard and showed my brothers, my
sister and me what it meant to live
the American dream. The U.S. is a
country where people can find jobs
that match their talents and pas-
sions. America has lifted up more
people and unleashed more prosper-
ity than any other country in human
history.
In 1800, you were lucky if you
lived to be 40. A third of children
didn’t live past 5. Since then, the
U.S. has become an industrialized
nation. Average real income per
person has soared by 4,000% since

As Democrats embrace

outright socialism, some

CEOs and Republicans call

for unwise compromises.

The Fed Can’t Wait to Respond to the Coronavirus

A

central bank’s primary job is
to offset major disturbances to
the economy. Today, the novel
coronavirus is a material risk to the
economy. It represents an unexpected
shock, and the Federal Reserve
should lead the world’s central banks
in taking immediate action.
In a coordinated move alongside
the People’s Bank of China, the Euro-
pean Central Bank, the Bank of Eng-
land, the Bank of Japan and others
so willing, the Fed should announce
a 0.25-percentage-point interest-rate
cut and make clear it’s open-minded
about further action. The Fed should
also encourage other central banks
to take appropriate simultaneous ac-
tion to loosen monetary policy in
their jurisdictions. Global action
would help make the most of scarce
policy ammunition.
Milton Friedman, in his presiden-
tial address to the American Eco-
nomic Association more than 50
years ago, stated that “monetary pol-
icy can contribute to offsetting ma-
jor disturbances in the economic sys-
tem arising from other sources.” He
emphasized that the economic shock
must be “major” for monetary policy
to be used forcefully and effectively.
Friedman was no fine-tuner, but he
didn’t believe in passivity during
times of trouble either.
More than a decade ago, then-Fed

Chairman Ben Bernanke and his col-

leagues chose to act decisively.

When confronted with a major eco-

nomic shock, the Fed took extraordi-

nary monetary-policy actions, often

in coordination with other leading

central banks. Acting sooner would

have been better, but Mr. Bernanke’s

leadership at the Fed was exem-

plary. Less appreciated but no less

important, the Fed benefited from a

rich inheritance: a strong, highly

credible institution replete with a

large reservoir of interest rates to

cut and a modest balance sheet with

space to grow.

The novel coronavirus presents

Beijing with a real test. China’s

first-quarter growth is likely to be

negative. Aggregate demand is fall-

ing fast. Chinese consumers are par-

ing consumption markedly. The in-

ventories of key Chinese exports,

including consumer products and

intermediate industrial goods, are

declining rapidly. High levels of in-

debtedness, especially at smaller

firms, are leading to an increase in

insolvencies. Many employees have

stayed home in February, which is

constraining the production side of

China’s economy. It isn’t clear when

people will be returning to work or

how bad the contagion risks will be

when they do.

The window to contain the virus

inside China has long since closed.

The window to mitigate its effects

on the global economy remains

open—but not for long. U.S. trade

and investment were poised to ac-

celerate this year after a series of

new trade accords. But a sudden

stop is a clear and present risk to

U.S. economic prospects.

Even if the virus is more con-

tained than people think, or dissi-

pates in the spring, economic activ-

ity in unlikely to spring back to life.

The disruption to global supply

chains will take several months to

reset. Business confidence in the

U.S., which has turned decidedly

more negative in recent weeks, will

also take to time to reassert itself,

especially in an election year. Epide-

miologists will ultimately decide

whether to categorize the novel cor-

onavirus as a pandemic. Real people,

however, won’t wait for the final

judgment of experts to make up

their own minds.

The signals from financial mar-

kets are disturbing. Since the start

of the year, commodity prices are off

10%. Oil prices are down nearly 20%.

Yields on 10-year Treasury notes—

the most important risk-free asset in

the world—have tumbled in recent

weeks and are now at historic lows.

The U.S. economy is best posi-

tioned among the Group of 20 coun-

tries, the largest economies in the

world, to withstand the shock. U.S.

workers’ incomes are growing at the

fastest rate in a generation. The un-

employment rate is at a 50-year low.

Profits for U.S. businesses are near

cyclical highs. Productivity has im-

proved markedly in the past year.

And the U.S. health-care system is

better equipped than any to combat

a nationwide outbreak.

If the Fed had normalized policy

early in the decadelong recovery, it

would be far better situated—in

terms of ammunition, efficacy and

credibility—to take necessary action

now. Still, the Fed has a necessary

role to play, even if its tool kit isn’t

fully stocked.

The Fed’s choices in the past 18

months may be contributing to pol-

icy inertia. The Federal Open Market

Committee chose an awkward time

to raise rates in December 2018. The

economy was weakening. The FOMC

then reversed itself abruptly in 2019,

cutting rates cumulatively three-

quarters of a point to a current fed-

funds rate of about 1.6%. The Fed’s

stated rationale for its policy rever-

sal was to ensure inflation moves up

from 1.7% to its target rate of 2%.

Fed leaders call the current, os-

tensibly low level of inflation the

greatest challenge for this genera-

tion of monetary policy makers. I

disagree. An exogenous, uncertain,

global economic shock is a far big-

ger and more pressing challenge.

And a far more compelling rationale

for policy action.

A coronavirus pandemic would be

the biggest threat to the global

economy since the financial crisis.

We simply don’t know what will

happen. The Fed should be in the

business of responding to “tail

risks”—unlikely events that would

have highly damaging effects on

output and inflation—not fine-tun-

ing around the base economic out-

look.

In 2019, the global economy

looked to be trending away from

globalization and moving toward

regional self-reliance. But the hu-

man suffering of the novel corona-

virus might not be in vain: Large

benefits could result from a timely

response to turmoil. This is a time

for the world’s central banks to act

together in the common interest.

For that to happen, the Fed must

take the lead.

Mr. Warsh, a former member of

the Federal Reserve Board, is a dis-

tinguished visiting fellow in econom-

ics at Stanford University’s Hoover

Institution.

By Kevin Warsh

The pandemic is a threat

to the global economy. U.S.

central bankers should

lead a global response.

OPINION

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OK Boomer? Bernie, Biden and Bloomberg Are Older Still

F

or nine months after Steve
Jobs was diagnosed with pan-
creatic cancer, he reportedly
refused the surgery that might have
saved him. He is said to have given
himself over to magic thinking and
tried to treat his condition with
acupuncture, dietary supplements
and juices. He abandoned that
course only after it was too late. It
was Steve Jobs’s magic thinking
that created the iPhone, and magic
thinking may have ended up killing
him in 2011. He was 56.
My theory is that under the spell
of ubiquitous, miraculous electron-

ics, the people of the early 21st cen-

tury have become somewhat prone

to magic thinking in their lives and

politics. Such thinking has become a

powerful tendency of an American

people that once had a reputation

for shrewdness and practicality. The

effect may be magnified among mil-

lennials. The young are less aware of

the limitations imposed, even on he-

roes, by age, disease, dementia.

As Jobs found, neither extreme

optimism nor stubborn denial will

prevail against mortality. Whatever

remarkable medical advances now

prolong human life, death, the old

way of doing things, will have its

dominion.

Voters may begin to suspect

there is something risky and irre-

sponsible in the idea of nominating

a 78-year-old man who recently

suffered a heart attack for the job

of president of the United States.

It’s a question to consider sepa-

rately from the magic thinking of

Bernie Sanders’s democratic-social-

ist agenda, his future in which the

lemonade springs and the bluebird

sings.

The average life expectancy of an

American man in 2020 is 78. That

means that, statistically speaking,

Mr. Sanders is living on borrowed

time from here on out. That is also

true of 78-year-old Mike Bloomberg.

Joe Biden is 77 and will cross over

into the statistical twilight of 78

about two weeks after the Novem-

ber election. True, men who have

reached 78 can expect to live an-

other nine years on average—which

leaves Mr. Sanders and his peers a

roughly 50/50 chance of fading out

before completing a second term.

If Mr. Sanders became president,

he would be 79 when inaugurated

and 83 at the end of his term. He

would still be three years younger

than Justice Ruth Bader Ginsburg is

today—and 45 years older than Pete

Buttigieg is right now.

In the past, America has not ex-

actly been Confucian in its rever-

ence for age. Why then is the Demo-

cratic Party finding leaders at such

geriatric altitudes? Is there a com-

plex politics of the generations at

work? Or coincidence? At the least,

such politics will become manifest

in the party’s choice of a vice presi-

dential nominee. Someone much

younger may be deemed necessary

to provide generational balance and

serve as reassuring actuarial

backup.

Messrs. Sanders, Bloomberg and

Biden are pre-baby-boomers—mem-

bers, like me, of the Silent Genera-

tion, those born during World War

II or even a little before (1939 in my

case). My motto for some time has

been “Don’t Trust Anyone Under

70.” But I am kidding.

Even the most alert and active

members of AARP—my friend John

Leo once had the idea of starting a

magazine for them called Geezer &

Crone—inhabit the past more than

they imagine the future. Their minds

tend to be retrospective. That may

be either a good or a bad thing.

Americans have appealed to in-

spired magic thinking from time to

time in their history: “All men are

created equal,” for example. The

nation started off under the influ-

ence of youth. Thomas Jefferson

wrote the Declaration of Indepen-

dence at 33, in 1776, when John

Hancock was 39. Alexander Hamil-

ton was 21, and Gouverneur Morris

was 24. Jefferson died a half-cen-

tury later at 83, long after he had

left the White House, and on the

same mystical day as 90-year-old

John Adams, July 4, 1826.

Presidents age in different ways,

at different speeds. Woodrow Wil-

son was only 63 in 1919 when he

suffered the stroke that left him a

ghost in the White House. Franklin

D. Roosevelt, the master illusionist

who told Americans in 1933, against

all evidence, that they had “nothing

to fear but fear itself,” was entirely

spent by the time he died in Warm

Springs, Ga., at 63.

Presidential history is filled with

ironies and counterfactuals. John F.

Kennedy’s Addison’s disease almost

killed him when he was in his 30s.

Republican Wendell Willkie—a vig-

orous, 48-year-old bear of a man—

ran against Franklin Roosevelt in

1940 and lost. Willkie died of a

heart attack at 52 in October 1944—

some six months before FDR suc-

cumbed. But amazingly, Willkie’s

1940 running mate, Charles McNary

of Oregon, died eight months earlier

than Willkie at 70.

If Willkie and McNary had won

the 1940 election, then, Willkie’s

secretary of state, whoever that

might have been, would have be-

come president. (Under current

law, the House speaker would ac-

cede to the presidency.) History

would have set off in who knows

what direction.

At what point should age become

disqualifying? Only a fool does not

think about it. At the very least, all

the candidates’ medical records

should be opened for inspection by

the public.

Mr. Morrow is a senior fellow at

the Ethics and Public Policy Center.

By Lance Morrow

By Inauguration Day 2021,

all three of them would

have reached the average

U.S. male’s life expectancy.