Price gouging

From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Price_gouging

1904 cartoon warning attendees of the St. Louis World's Fair of hotel room price gouging

Price gouging is a pejorative term for the practice of increasing the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair by some. This commonly applies to price increases of basic necessities after natural disasters. Usually, this event occurs after a demand or supply shock. The term can also be used to refer to profits obtained by practices inconsistent with a competitive free market, or to windfall profits. In some jurisdictions of the United States during civil emergencies, price gouging is a specific crime. Price gouging is considered by some to be exploitative and unethical and by others to be a simple result of supply and demand.

Price gouging is similar to profiteering but can be distinguished by being short-term and localized and by being restricted to essentials such as food, clothing, shelter, medicine, and equipment needed to preserve life and property. In jurisdictions where there is no such crime, the term may still be used to pressure firms to refrain from such behavior. The term is used directly in laws and regulations in the United States and Canada, but legislation exists internationally with similar regulatory purpose under existing competition laws.

It is sometimes used to refer to practices of a coercive monopoly that prices above the market rate by deliberately curtailing production. Alternatively, it may refer to suppliers' benefiting to excess from a short-term change in the demand curve.

Price gouging became highly prevalent in news media in the wake of the COVID-19 pandemic, when state price gouging regulations went into effect due to the national emergency. The rise in public discourse was associated with increased shortages related to the COVID-19 pandemic. The resulting inflation after the pandemic has also been blamed, at least in part, by some on price gouging. During the pandemic, the idea of 'greedflation' or 'seller's inflation' also moved out of the progressive economics fringe by 2023 to be embraced by some mainstream economists, policymakers and business press.

Laws against price gouging

United States

As of March 2021, Proskauer Rose counted 42 states that have emergency regulations or price-gouging statutes. Price-gouging is often defined in terms of the three criteria listed below:

1. Period of emergency: The majority of laws apply only to price shifts during a declared state of emergency or disaster.
2. Necessary items: Most laws apply exclusively to items essential to survival, such as food, water, and housing.
3. Price ceilings: Laws limit the maximum price that can be charged for given goods.

Washington state does not have a specific statute addressing price gouging, can nevertheless have sought to apply its consumer protection act to argue that high prices during COVID-19 for PPE was an "unfair" or "deceptive" practice.

When the law goes into effect

Statutory prohibitions on price gouging become effective once a state of emergency has been declared. States have legislated different requirements for who must declare a state of emergency for the law to go into effect. Some state statutes that prohibit price gouging—including those of Alabama, Florida, Mississippi, and Ohio—prohibit price increases only once the President of the United States or the state's governor has declared a state of emergency in the impacted region. California permits emergency proclamations by officials, boards, and other governing bodies of cities and counties to trigger the state's price gouging law.

What the law prohibits

State laws vary on what price increases are permitted during a declared disaster. California has set a 10 percent ceiling on price increases. The law includes exceptions for price increases that can be justified in terms of the increased cost of supply, transportation, demand, or storage. Florida prohibits a price increase "that grossly exceeds the average price" of that same item in the 30 days leading up to the emergency declaration. Alabama state law does not define what constitutes a "gross disparity," making it difficult for either affected residents or law enforcement to determine when price gouging has occurred, while others merely limit vendors and landlords to price increases of less than 25 percent.

Enforcement

Enforcement of anti-price gouging statutes can be difficult because of the exceptions often contained within the statutes and the lack of oversight mechanisms. Statutes generally give wide discretion not to prosecute. In 2004, Florida determined that one-third of complaints were unfounded, and a large fraction of the remainder was handled by consent decrees, rather than prosecution.

California

California Penal Code 396 prohibits price gouging, generally defined as anything greater than a 10 percent increase in price on items such as rent, hotel lodging, gasoline, food, and other essentials, once a state of emergency has been declared. Unlike other states that require the President of the United States or the state's governor to declare a state of emergency, California allows emergency proclamations by officials, boards, and other governing bodies of cities and counties to trigger C.P.C. § 396.  The prohibition lasts for up to 30 days at a time and may be renewed as necessary.

In the wake of the 2017 California wildfires and the 2018 California wildfires, Governor Jerry Brown repeatedly extended the price-gouging ban for impacted counties. One of his last acts as governor was to extend the prohibitions until May 31, 2019.

Until 2018, the state had no limitations on the rent that could be charged for housing that was not on the market until after a disaster. Due to complaints from the district attorney that she couldn't prosecute high priced new rentals which came on the market after the Tubbs Fire, the legislature amended C.P.C. § 396.

The above 2018 price gouging law makes it illegal to offer a previously unrented property for more than about $10,000 per month during an emergency. In the wake of the January 2025 Palisades Fire, this price cap has made it harder for displaced people to find housing, because many comparable properties normally rent for more than this, and this rent cap discourages owners of high-end vacation homes from making their homes available for rent. One expert estimated that hundreds to thousands more homes might be available for rent if this rent cap did not exist.

Florida

Florida's "state of emergency" law criminalizes price gouging. A supplier of essential goods and services may be charged when it sharply raises prices in anticipation of or during a civil emergency or when it cancels or dishonors contracts in order to take advantage of an increase in prices related to such an emergency. The model case is a retailer who increases the price of existing stocks of milk and bread when a hurricane is imminent. Though the effect of such laws have been proven to actually increase the risk of extreme shortages since the absence of increased prices replaces higher prices with an incentive for the earliest person to market to obtain all of a product about to imminently experience a period of very high demand.

In Florida, it is a defense to show that the price increase mostly reflects increased costs, such as running an emergency generator or hazard pay for workers, while California places a ten percent cap on any increases.

United Kingdom

Laws and regulations in the United Kingdom do not use the phrase "price gouging" in consumer protection regulation but are similar to U.S. laws.^{[citation needed]} Chapter II of the UK Competition Act 1998 prohibits businesses with market dominance from engaging in "abusive" conduct, including "unfair" pricing. Market dominance is considered when a business has greater than 40% of the market share within their respective industry. In the case of a violation of Chapter II, a business can be forced to pay up to 10% of global revenues.

European Union

Similar to UK regulations, the EU does not include "price gouging" explicitly in regulation.^{[citation needed]} Article 102 of the Treaty on the Functioning of the European Union is "aimed at preventing undertakings who hold a dominant position in a market from abusing that position." As stated, "such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions..." In 2016, the EU Commissioner for Competition Margrethe Vestager stated that the EU Commission will "intervene directly to correct excessively high prices" specifically within the gas industry, pharmaceutical industry and in cases of abuse of standard-essential patents.

Price gouging and COVID-19

In the early stages of the COVID-19 pandemic, there were shortages of some consumer goods like toilet paper due to supply chain congestion.

On March 13, 2020, a national emergency was declared in the United States by President Trump in response to the outbreak of the COVID-19 pandemic; the declaration allowed for an initial $50 billion to be used to support states. As studied by the National Institutes of Health, the COVID-19 pandemic induced a panic as mandates were put in place for Americans to stay at home, quarantine, and wear masks. The declared COVID-19 emergency made state-level price gouging laws and regulations go into effect. Demand for certain products increased while supply decreased. Such products in short supply included surgical masks, N95 respirators, hand sanitizer, and toilet paper. More than 30 states' attorneys general urged Facebook, Amazon, Craigslist, eBay, and Walmart to restrict the selling of necessary products at "unconscionable" prices.

Online price gouging

A 2018 appeals court overturned a lower court ruling, arguing that the dormant commerce clause of the U.S. constitution meant Maryland's anti-price gouging statute was unconstitutional.

Online Merchants Guild v. Cameron, 2020

This complaint relates to online merchants selling necessary products on Amazon during the US national state of emergency invoked in response to the COVID-19 pandemic. The Online Merchants Guild, a trade association for online merchants, filed a case in Kentucky on the basis that state regulations against price gouging are unconstitutional in the online marketplace since online merchants are unable to control pricing by state. Judge Gregory Van Tatenhove sided with the Online Merchants Guild on June 23, 2020, saying that the Kentucky Attorney General cannot enforce the price gouging regulations on Amazon sellers. The Sixth Circuit Court of Appeals unanimously overturned that ruling in April of 2021.

Price gouging-related lawsuits during the COVID-19 pandemic

In response to the issuance of emergency price gouging regulations, multiple state attorneys general and federal agencies have investigated potential cases of price gouging impacting consumers and agencies. Since regulatory measures vary by state, there is no uniform interpretation of price gouging violations, and it is left to state courts to decide.

Eggs

On August 11, 2020, New York Attorney General Letitia James sued Hillandale Farms, one of the largest U.S. egg producers, for allegedly price gouging more than four million cartons of eggs by increasing prices by almost five times during the pandemic. The lawsuit alleges that the price increases were an effort to profit off of higher consumer demand during the pandemic. To settle the lawsuit, Hillandale Farms agreed to donate 1.2 million eggs to New York food banks.

Personal protective equipment

A Mississippi businessman purchased scarce personal protective equipment (PPE) including gowns, face shields, and masks through his pharmaceutical wholesale company. An indictment alleges that the business then solicited health care providers, including the U.S. Veteran's Association, to purchase the PPE at excessively inflated prices as part of a $1.8 million scheme. This case was investigated by the FBI, Veteran's Association, and Fraud Section of the United States Department of Justice. The charges brought were conspiracy to commit wire fraud and mail fraud, conspiracy to defraud the United States, conspiracy to commit hoarding of designated scarce materials, and hoarding of designated scarce materials.

Economic analysis

Allocative efficiency holds that when prices function properly, markets tend to allocate resources to their most valued uses. In turn, those who value the good the most and are able to afford it will pay a higher price than those who do not value the good as much or who are unable to afford it. According to Friedrich Hayek in "The Use of Knowledge in Society" (1945), prices can act to coordinate the separate actions of different people as they seek to satisfy their desires.

Economists such as Thomas Sowell (Chicago School of economics) in 2004, Donald J. Boudreaux in 2005, and Raymond Niles (Senior Fellow at the American Institute for Economic Research) in 2020 argue that laws prohibiting price gouging worsen emergencies for both buyers and sellers.

In a 2012 survey of leading American economists by the Initiative on Global Markets, only 8 percent agreed with a proposal in Connecticut to prohibit "unconscionably excessive" price increases during severe weather events. Those who disagreed stated that the wording was vague or unenforceable, and that restricting price increases leads to misallocation of resources.

2020 to present

In 2022, Federal Reserve Bank of St. Louis economist Christopher J. Neely said that "most economists believe broad price controls to be costly and ineffective in most situations" because high prices function to "allocate scarce goods and services to buyers who are most willing and able to pay for them, [and] they signal that a good is valued and that producers can profit by increasing the quantity supplied."

A 2022 Working Paper by the International Monetary Fund explores the implementation of windfall profit taxes, which have gained renewed interest following the COVID-19 pandemic, the war in Ukraine, and subsequent surges in energy and food prices. The paper discusses the potential of such taxes as a tool for efficiently taxing economic rents, which are often a result of monopolistic power or unexpected events like pandemics, war, or natural disasters, and contribute to windfall profits. Such profits have raised public and policy concerns about price gouging, where firms are perceived to be profiting excessively from unforeseen circumstances.

In Australia in 2023 and 2024, major supermarket chains Coles and Woolworths received criticism as price gouging, especially in less competitive markets. Coles and Woolworths control 65% of Australia's grocery market.

In March 2024, the Federal Trade Commission accused grocery chains in the U.S. of price gouging. The Commission also sued to block the proposed acquisition of Albertsons by Kroger citing the need for more competition to keep prices down.

A study from 2024 showed that oftentimes when allegations of "price gouging" are made, the profit margins of sellers and vendors is substantially lower than critics believe, such as in the case of grocers recently accused of "price gouging" who actually had a 1.2% profit margin after expenses; with Kroger having their highest profits in the previous 15 years occurring in 2018 at 3%.

The Commanding Heights

From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/The_Commanding_Heights

 

The Commanding Heights: The Battle for the World Economy

Author	Daniel Yergin, Joseph Stanislaw
Subject	Economics, globalization
Publisher	Free Press
Publication date	1998
Pages	488
ISBN	978-0-684-83569-3

The Commanding Heights: The Battle for the World Economy is a book by Daniel Yergin and Joseph Stanislaw first published as The Commanding Heights: The Battle Between Government and the Marketplace That Is Remaking the Modern World in 1998. In 2002, it was adapted as a documentary of the same title and later released on DVD.

The Commanding Heights attempts to trace the rise of free markets during the last century as well as the process of globalization. Yergin attributes the origin of the phrase commanding heights to a speech by Vladimir Lenin referring to the control of perceived key segments of a national economy.

Overview

The authors take the thesis that prior to World War I, the world effectively lived in a state of globalization, which they term the First Era of Globalization. The authors define globalization as periods in which free markets predominate and countries place few, if any, limits on exports, immigration, imports, or information exchanges. Overall, they see globalization as a positive movement that improves the standard of living for all the people connected to it, from the richest to the poorest. According to the authors, the rise of communism and fascism, not to mention the Great Depression, nearly extinguished capitalism, which rapidly lost popularity.

After World War II, the authors note that the work of economist John Maynard Keynes came to be widely accepted in Western economies. Keynes believed in government regulation of the economy, which the authors underline as Keynes' great influence and prestige. The authors consider that the so-called commanding heights were often owned or severely regulated by governments in accordance with Keynes' ideas.

The authors then discuss how the political changes of the 1980s ushered in accompanying changes in economic policy. The old trend changed when Margaret Thatcher became Prime Minister of the United Kingdom and when Ronald Reagan was elected President of the United States. Both leaders parted ways with Keynesian economics and governed more in the tradition of the works of Friedrich Hayek, who opposed government regulation, tariffs, and other infringements on a pure free market and those of Milton Friedman, who emphasized the futility of using inflationary monetary policies to influence rates of economic growth.

In practice, Hayek's policies were applied only selectively, as Reagan's 1986 income tax reforms substantially increased taxes on the lowest quintile of wage-earners but dramatically decreased rates for the upper two quintiles. In contrast to Hayek's ideas, Reagan's policies also continued and expanded tax write-offs, rebates and subsidies for many large corporations. Friedman's monetarism was also abandoned in practice as government-issued debt as a percentage of GDP rose dramatically throughout the 1980s. While Thatcher, Reagan, and their successors made sweeping reforms, the authors argue that the current era of globalization finally began around 1991, with the collapse of the Soviet Union. Since then, they assert countries embracing free markets have prospered on the whole, and those adhering to central planning have failed.

While strongly in favor of this trend, the authors worry that globalization will not last. More specifically, they believe that if inequality in economic growth remains high and if Third World nations are not offered the proper opportunities and incentives to support capitalism, the movement will end just as the first era did. The authors place so much emphasis on narrowing economic gaps because they believe, contrary to many of the people who are interviewed, that there is no ideological support for capitalism, only the pragmatic fact that the system works better than any other, as they remark:

The market also requires something else: legitimacy. But here it faces an ethical conundrum. It is based upon contracts, rules, and choice—in short, on self-restraint—which contrasts mightily with other ways of organizing economic activity. Yet a system that takes the pursuit of self-interest and profit as its guiding light does not necessarily satisfy the yearning in the human soul for belief and some higher meaning beyond materialism. In the Spanish Civil War in the late 1930s, Republican soldiers are said to have died with the word "Stalin" on their lips. Their idealized vision of Soviet communism, however misguided, provided justification for their ultimate sacrifice. Few people would die with the words "free markets" on their lips.

International analysis

In the book, the authors examine briefly many different nations and regions and their economic development since World War II. (In the case of industrialized countries, they often begin before the war.) Admitting that the book cannot touch on every single aspect (Yergin remarks that the topic of their book constitutes an entire new academic discipline), the authors make many assertions.

United States

The robber barons were often condemned in the press, but the United States had much more commitment to industrialization and free markets than did other countries in the late 19th and the early 20th centuries. Unlike many countries after World War I, the 1920s saw great economic expansion for upper-income individuals and a growth in median income. However, labor unrest continued to mount throughout the 1920s and the 1930s because of the lack of wage and hour rules, child labor protections, unemployment insurance, right to organize, workplace safety requirements, and social security, which all continued to exacerbate the discontents of the substantial numbers of working poor.

The Great Depression caused massive unemployment and massive public distrust of corporations and wealthy individuals. In response, the New Deal of President Franklin D. Roosevelt went into effect with massive public support. Many lawyers and economists, influenced by Keynes, worked under the New Deal and believed that free markets would lead to disaster without proper regulation.

The American economy boomed for about 30 years after World War II with the benefit of Keynesianism, robust antitrust regulation to promote competition and financial regulations preventing the most volatile forms of market speculation, high unionization rates and protections promoting the growth of domestic industry. However, during the 1970s, stagflation was brought on by the 1973 oil crisis and the shift from the gold standard to fiat currency, which discredited the policy consensus that was set in place by the New Deal Coalition. Eventually, Ronald Reagan was elected as president in 1980, and many of the statutes and organizations created by the New Deal were dismantled.

United Kingdom

London was the center of the so-called First Era of Globalization because of the power and resources of the British Empire. However, World War I severely weakened Britain, causing massive unemployment. The United Kingdom successfully held out during World War II and emerged victorious, but the war effectively caused the dismantling of its empire.

Winston Churchill was influenced by the work of Hayek and opposed heavy government interference in the British economy. However, the Labour Party, led by Clement Attlee, came to power in force after the 1945 general election and was dedicated to government controls to prevent another economic crisis. The United Kingdom's major industries were nationalized over the following decades (including the Bank of England, electricity, water, natural gas, railways, mining, bus transport, telecommunications, along with large portions of the oil, shipbuilding, aerospace, automotive, and steel industries.

Basic human services such as healthcare and university education were brought under government control and made available for free, while rents in the private housing market were regulated and council housing provided homes for around a third of the population by the late 1970s. Meanwhile, practically all occupations and wages were heavily regulated and unionized.

The practices became so prevalent that even Conservative governments elected after the initial wave of nationalisations in the late 1940s kept them. However, during the 1970s, massive strikes by unions (see the Three-Day Week and Winter of Discontent) and other economic woes, such as the 1973 oil crisis, almost ground the British economy to a halt. Thatcher, an ardent admirer of Hayek, began privatizatizing industries. While her results were initially mixed, the Falklands War brought on a nationalistic fervor that kept Thatcher in office long enough to keep her reforms in place. Even when the Labour Party later came back to power, it did not attempt to challenge the key principles of Thatcherism.

Soviet Union and Russia

Within a few years of the rise of the Russian Revolution, the Soviet economy went into a major crisis. Lenin responded with the New Economic Policy, a program that allowed limited capitalistic activity, which resulted in what he would call state capitalism, and the economy began to improve. Lenin's commanding heights speech was his attempt to defend himself against accusations that he sold out the principles of the revolution by implementing the new policy.

Under Joseph Stalin, the Soviet agricultural and heavy manufacturing sectors were largely centralized. During the 1940s to the 1970s, the Soviet economy grew at a rate that outpaced that of Western European nations.

By the 1980s, however, the Soviet economy was in shambles. Because of a lack of incentives and, ironically, a more tolerant central government, workers did not put much effort into their duties. Nonetheless, the Soviet Union continued to build the military even though at times such spending took up half the country's revenue. Mikhail Gorbachev tried to reform the economy, but he took only limited steps (see perestroika and glasnost). When he lifted the Brezhnev Doctrine and allowed Poland's Solidarity to usurp that country's communist regime, the entire Warsaw Pact collapsed, soon followed by the Soviet Union itself.

However, even with the fall of the Soviet Union and the rise of the relatively free market-minded Boris Yeltsin, former members of the Communist Party of the Soviet Union maintained much power in Russia, blocked free-market movements, and forced the resignation of Yeltsin's free-market allies such as Yegor Gaidar. During the 1996 presidential election, Yeltsin was forced to accept support from Russian oligarchs to counter the growing power of the Communist Party of the Russian Federation. While Yeltsin remained in power, the privatization of industries proceeded extremely unequally.

Germany

As had been predicted by Keynes, the hyperinflation caused by the Treaty of Versailles devastated the German economy and created political instability. In addition to widespread unemployment, the hyperinflation effectively wiped out the country's middle class. That environment made it easy for the Nazi Party to gain power. The authors also argue that the Nazis practiced central planning although industries were privatized en masse.

After the war and the division of Germany, East Germany came under the rule of the Soviets, and West Germany remained part of the Western powers. When economic conditions in occupied West Germany failed to improve, Ludwig Erhard completely destroyed price controls in 1948 without consulting the occupying powers. Western Germany underwent a fast massive economic recovery, but such free-market reforms were largely confined to that country for many years.

By the time of German reunification in 1989, West Germany was an economic power, and East Germany faced many problems because of the collapse of the central planning authority.

India

Unlike Mahatma Gandhi, who supported a village-centric economy, after India's independence in 1947, its first prime minister, Jawaharlal Nehru, promoted industrialization. However, he supported government-controlled development and the bureaucracy that developed stifled innovation. The authors of The Commanding Heights describe this as the British Raj being replaced by a "permit Raj", using a sarcastic term coined by Chakravarti Rajagopalachari. Bribery and delays became common in the Indian economy while many prominent economists studied the country and attempted to finetune its central planning.

By the 1990s, the Indian government began to relax these stringent regulations mainly under the influence of Finance Minister and later Prime Minister Manmohan Singh. The Indian economy bloomed under the effects of exports and outsourcing, and political parties since then have continued to promote those changes. The free-marketer Singh was appointed prime minister when his party won the elections in 2004 although he was not the victorious United Progressive Alliance's stated candidate, and the general expectation was that Sonia Gandhi would take the seat.

South America

Under the influence of dependency theory, a Marxist approach to international economics, many Latin American countries attempted to industrialize by limiting imports of manufactured goods and subsidizing their own industries. However, companies had little incentive to become efficient or innovative in the absence of competition and in the presence of government subsidies. By the 1980s, the economic problems of the countries became obvious, and much of the West's investment was lost.

Chile became an experiment in free markets when Augusto Pinochet called in followers of Friedman to evaluate the economy, the so-called Chicago boys. The authors argue that the economic reforms proved successful, but since Pinochet was a dictator who came to power in a coup and had many political opponents murdered, the whole idea of free-market reform became linked to fascism. Though the authors and Friedman claim that the reforms eventually promoted democracy, they acknowledge that the issue and their interpretation of events are extremely controversial.

Bolivia was hit with hyperinflation as well. During the 1980s, economist Jeffrey Sachs was sent as a consultant and new President Gonzalo Sánchez de Lozada reined in inflation in the 1990s by severely cutting government spending. While Bolivia remained a very poor country, the authors argue that it is better off now because its inflation was curtailed. They also argue that Bolivia's example expunges the bad reputation that free-market economics acquired in Chile as Bolivia's reforms came after a democratic election.

Other countries

The authors argue that Africa's economic development was severely hindered by central planning, socialist ideas, and political dictatorships that promoted warfare and other conflicts.

While Japan was seen for many years as an economic success story as late as the early 1990s, the authors argue that its ongoing recession since then resulted from its governments refusal to stop subsidies to many of its industries and companies (the issue is ongoing).

Poland's free-market reforms pushed by Solidarity and Lech Wałęsa were initially mixed and criticized by its citizens, but by the late 1990s, the Polish economy was doing much better than other former communist states in the Eastern Bloc. One feature of the Polish economy that makes it different from other capitalistic countries is that it is dominated by small business rather than corporations or conglomerates.

China is another major ongoing issue. While Deng Xiaoping, after the death of Mao Zedong, gradually freed the economy, he did not promote civil liberties or other political freedoms, as was demonstrated by his willingness to crush pro-democracy demonstrators. While the authors hope according to Friedman's ideas that free markets would eventually promote a free society, it has not yet happened although China's economy continues to grow.

Documentary

In 2002, PBS aired a six-hour documentary based on the book. This documentary was later sold on DVD and is available to view for free at PBS's website. The documentary is narrated by David Ogden Stiers.

The documentary series consists of three, two-hour episodes:

• Episode 1: The Battle of Ideas Produced and Directed by William Cran.
• Episode 2: The Agony of Reform Produced and Directed by William Cran, Co-Producer Peter Sommer, Co-Director Greg Barker.
• Episode 3: The New Rules of the Game Directed, Written and Produced by Greg Barker.

Appearing several years after the book was released allowed the documentary film to address many of the items that Yergin and Stanislaw missed in their original book, including the collapse of Asian economies, the anti-globalization movement and the September 11 attacks. All told, two of the documentary's six hours (the entire final third) address things that happened since the original book was published. They also include free market solutions to international poverty that were not included in the book, and they interview economist Hernando de Soto, whose book on the subject was not published until after the initial printing of The Commanding Heights.

Like the book, the documentary attracted more support and criticism. One example is the anti-globalization movement, which argued they were portrayed unfairly. In the documentary, James Wolfensohn, then President of the World Bank, is interviewed and says that such protesters are attacking people "who are devoting their lives to addressing the very questions that these people claim to be addressing". The documentary includes a scene of Wolfensohn getting hit in the face with a pie by a protester.

In contrast to the book, the PBS documentary is more wary of the possible end of the current era of globalization. For example, they include a parallel between radio stocks of the 1920s and dot com stocks of the 1990s: both were industries built on new technology that had little capital, but fell prey to a market bubble. Likewise, the documentary makes a comparison between the terrorist attacks of September 11, 2001 and the terrorist assassination of Archduke Franz Ferdinand in 1914. Venture Capitalist Tim Draper appears in the third episode and speaks about his success at the time with Hotmail for email and other early internet investments. This was many years before Draper would go on to invest in many other successful tech companies of the 2000's, including Tesla, Coinbase, and even a large purchase of Bitcoin from a sale of the cryptocurrency after the fall of the Silk Road after 2013.

The production was financed by donations from Electronic Data Systems, FedEx, BP, The Pew Charitable Trusts, John Templeton Foundation, Smith Richardson Foundation, and the Corporation for Public Broadcasting.

Nationalization

From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Nationalization

Nationalization (nationalisation in British English) is the process of transforming privately owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization contrasts with privatization and with demutualization. When previously nationalized assets are privatized and subsequently returned to public ownership at a later stage, they are said to have undergone renationalization. Industries often subject to nationalization include telecommunications, electric power, fossil fuels, railways, airlines, iron ore, media, postal services, banks, and water (sometimes called the commanding heights of the economy), and in many jurisdictions such entities have no history of private ownership.

Nationalization may occur with or without financial compensation to the former owners. Nationalization is distinguished from property redistribution in that the government retains control of nationalized property. Some nationalizations take place when a government seizes property acquired illegally. For example, in 1945 the French government seized the car-maker Renault because its owners had collaborated with the 1940–1944 Nazi occupiers of France.

Economists distinguish between nationalization and socialization, which refers to the process of restructuring the economic framework, organizational structure, and institutions of an economy on a socialist basis. By contrast, nationalization does not necessarily imply social ownership and the restructuring of the economic system. Historically, states have carried out nationalizations for various different purposes under a wide variety of different political systems and economic systems.

Political support

Nationalization was one of the major mechanisms advocated by reformist socialists and social democrats for gradually transitioning to socialism. In this context, the goals of nationalization were to dispossess large capitalists, redirect the profits of industry to the public purse, and establish some form of workers' self-management as a precursor to the establishment of a socialist economic system.

Although sometimes undertaken as part of a strategy to build socialism, more commonly nationalization was also undertaken and used to protect and develop industries perceived as being vital to a nation's competitiveness (such as aerospace and shipbuilding), or to protect jobs in certain industries.

Nationalization has had varying levels of support throughout history. After the Second World War, nationalization was supported by social democratic and democratic socialist parties throughout Western Europe, such as the British Labour Party. In the United States, potentially nationalizing healthcare is often a topic of political disagreement and makes frequent appearances in debates between political candidates. A 2020 poll shows that a majority (63%) of Americans support a nationalized healthcare system.

A re-nationalization occurs when state-owned assets are privatized and later nationalized again, often when a different political party or faction is in power. A re-nationalization process may also be called "reverse privatization". Nationalization has been used to refer to either direct state-ownership and management of an enterprise or to a government acquiring a large controlling share of a publicly listed corporation.

According to research by Paasha Mahdavi, leaders who consider nationalization face a dilemma: "nationalize and reap immediate gains while risking future prosperity, or maintain private operations, thereby passing on revenue windfalls but securing long-term fiscal streams." He argues that leaders "nationalize extractive resources to extend the duration of their power" by using "this increased capital to secure political support."

Economic analysis

Nationalization can have positive and negative effects. In 2019 research based on studies from Greenwich University found that the nationalization of key services such as water, bus, railways and broadband in the United Kingdom could save £13bn every year.

Nationalization may produce other effects, such as reducing competition in the marketplace, which in turn reduces incentives to innovation and maintains high prices. In the short run, nationalization can provide a larger revenue stream for government but may cause that industry to falter depending on the motivations of the nationalizing party.

Nationalization was employed towards the Panama Canal by the Panamanian Government, which came under the Panama Canal Authority in 1999, to internationally positive effect. Likewise, the Suez Canal was nationalized multiple times throughout history. In Germany, the Federal Press [Bundesdruckerei] was nationalized in 2008 with positive revenue and net income since.

Expropriation

"Expropriation" redirects here. For the 1974 Chilean film, see The Expropriation.

See also: Alienation (property law)

Expropriation is the seizure of private property by a public agency for a purpose deemed to be in the public interest. It may also be used as a penalty for criminal proceedings. Expropriation differs from eminent domain in that the property owner is not compensated for the seized property. Unlike eminent domain, expropriation may also refer to the taking of private property by a private entity authorized by a government to take property in certain situations.

Due to political risks that are involved when countries engage in international business, it is important to understand the expropriation risks and laws within each of the countries in which business is conducted in order to understand the risks as an investor in that country.

Trends

Studies have found that nationalization follows a cyclical trend. Nationalization rose in the 1960s and 1970s, followed by an increase in privatization in the 80s and 90s, followed again by an increase in nationalization in the 2000s and 2010s.

Marxist theory

The term appears as "expropriation of expropriators (ruling classes)" in Marxist theory, and also as the slogan "Loot the looters!" ("грабь награбленное"), which was very popular during the Russian October Revolution. The term is also used to describe nationalization campaigns by communist states, such as dekulakization and collectivization in the USSR.

However, nationalization is not a specifically socialist strategy, and Marxism's founders were skeptical of its value. As Engels put it:

Therein precisely lies the rub; for, so long as the propertied classes remain at the helm, nationalisation never abolishes exploitation but merely changes its form — in the French, American or Swiss republics no less than in monarchist Central, and despotic Eastern, Europe.

— Friedrich Engels, Letter from Engels to Max Oppenheim, 24 March 1891

Nikolai Bukharin also criticised the term nationalisation, preferring the term statisation instead.

Free to Choose

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Free_to_Choose

 

Free to Choose: A Personal Statement

Authors	Milton Friedman Rose Friedman
Language	English
Genre	Nonfiction
Publisher	Harcourt
Publication date	1980
Publication place	United States
Media type	Hardback
Pages	xii, 338
ISBN	0-15-133481-1
OCLC	797729203
Dewey Decimal	330.12/2
LC Class	HB501 .F72

Free to Choose: A Personal Statement is a 1980 book by economists Milton and Rose D. Friedman, accompanied by a ten-part series broadcast on public television, that advocates free market principles. It was primarily a response to an earlier landmark book and television series The Age of Uncertainty, by the noted economist John Kenneth Galbraith.

Overview

Free to Choose: A Personal Statement maintains that the free market works best for all members of a society, provides examples of how the free market engenders prosperity, and maintains that it can solve problems where other approaches have failed. Published in January 1980, the 297 page book contains 10 chapters. The book was on top of the United States best sellers list for 5 weeks.

PBS broadcast the programs, beginning in January 1980. It was filmed at the invitation of Robert Chitester, the owner of WQLN-TV. It was based on a 15-part series of taped public lectures and question-and-answer sessions. The general format was that of Milton Friedman visiting and narrating a number of success and failure stories in history, which he attributes to free-market capitalism or the lack thereof (e.g., Hong Kong is commended for its free markets, while India is excoriated for relying on centralized planning especially for its protection of its traditional textile industry). Following the primary show, Friedman would engage in discussion moderated by Robert McKenzie with a number of selected debaters drawn from trade unions, academy and the business community, such as Donald Rumsfeld (then of G.D. Searle & Company) and Frances Fox Piven of City University of New York. The interlocutors would offer objections to or support for the proposals put forward by Friedman, who would in turn respond. After the final episode, Friedman sat down for an interview with Lawrence Spivak.

Guest debaters

Guest debaters included:

• Gregory Anrig (Commissioner of Massachusetts Department of Education) – Episode 6
• Jagdish Bhagwati (economist) – Episode 2
• Samuel Bowles (economist) – Vol. 3 Episode 5
• William H. Brady (Founder and President of W.H. Brady Co.) – Episode 8
• Clarence J. Brown (politician) – Episode 9
• Joan Claybrook (Administrator of the National Highway Traffic Safety Administration) – Episode 7
• Barber Conable (politician, President of the World Bank) – Episode 1
• John Coons (law professor, school choice activist) – Episode 6
• Robert Crandall (Brookings Institution economist) – Episode 7
• Richard Deason (IBEW union leader) – Episode 2
• James R. Dumpson (bureaucrat, social worker, academic) – Episode 4
• Otmar Emminger (President of Deutsche Bundesbank) – Episode 9
• Bob Galvin (CEO of Motorola, Inc.) – Episode 1
• Ernest Green (U.S. Assistant Secretary of Labor) – Episode 8
• Michael Harrington (author, academic, activist) – Episode 1
• Nicholas von Hoffman (journalist, political commentator/columnist) – Episode 3
• Helen Hughes (economist) – Episode 2
• Peter Jay (economist, journalist, diplomat) – Episodes 3, 5
• Robert Lampman (economist) – Episode 4
• Richard Landau (medical professor) – Episode 7
• Robert Lekachman (economist) – Episode 3
• William McChesney Martin (former Chairman of the Federal Reserve) – Episode 9
• Helen Bohen O'Bannon (economist, bureaucrat, social worker) – Episode 4
• Kathleen O'Reilly (Consumer Federation of America consumer advocate) – Episode 7
• Russell W. Peterson (chemist, politician) – Episode 1
• Frances Fox Piven (academic) – Episode 5
• Donald Rumsfeld (politician, President of G. D. Searle & Company) – Episode 2
• Albert Shanker (President of United Federation of Teachers and American Federation of Teachers teachers' unions) – Episode 6
• Thomas Shannon (executive director of the National School Boards Association) – Episode 6
• Thomas Sowell (economist, author, columnist) – Episodes 4, 5
• Beryl Wayne Sprinkel (Executive Vice President of Harris Bank) – Episode 9
• Peter Temin (economist) – Episode 3
• Lynn R. Williams (International Secretary of United Steelworkers) – Episode 8
• Walter E. Williams (economist, political commentator) – Episode 8

1990 rebroadcast

The series was rebroadcast in 1990 with Linda Chavez moderating the episodes. Arnold Schwarzenegger, George Shultz, Ronald Reagan, David D. Friedman, and Steve Allen, each give personal introductions for one episode. This time, after the documentary segment, Milton Friedman sits down with a single discussion participant to debate the points raised in the episode.

Positions advocated

The Friedmans advocate laissez-faire economic policies, often criticizing interventionist government policies and their cost in personal freedoms and economic efficiency in the United States and abroad. They argue that international free trade has been restricted through tariffs and protectionism while domestic free trade and freedom have been limited through high taxation and regulation. They cite the 19th-century United Kingdom, the United States before the Great Depression, and modern Hong Kong as ideal examples of a minimalist economic policy. They contrast the economic growth of Japan after the Meiji Restoration and the economic stagnation of India after its independence from the British Empire, and argue that India has performed worse despite its superior economic potential due to its centralized planning. They argue that even countries with command economies, including the Soviet Union and Yugoslavia, have been forced to adopt limited market mechanisms in order to operate. The authors argue against government taxation on gas and tobacco and government regulation of the public school systems. The Friedmans argue that the Federal Reserve exacerbated the Great Depression by neglecting to prevent the decline of the money supply in the years leading up to it. They further argue that the American public falsely perceived the Depression to be a result of a failure of capitalism rather than the government, and that the Depression allowed the Federal Reserve Board to centralize its control of the monetary system despite its responsibility for it.

On the subject of welfare, the Friedmans argue that the United States has maintained a higher degree of freedom and productivity by avoiding the nationalizations and extensive welfare systems of Western European countries such as the United Kingdom and Sweden. However, they also argue that welfare practices since the New Deal under "the HEW empire" have been harmful. They argue that public assistance programs have become larger than originally envisioned and are creating "wards of the state" as opposed to "self-reliant individuals." They also argue that the Social Security System is fundamentally flawed, that urban renewal and public housing programs have contributed to racial inequality and diminished quality of low-income housing, and that Medicare and Medicaid are responsible for rising healthcare prices in the United States. They suggest completely replacing the welfare state with a negative income tax as a less harmful alternative.

The Friedmans also argue that declining academic performance in the United States is the result of increasing government control of the American education system tracing back to the 1840s, but suggest a voucher system as a politically feasible solution. They blame the 1970s recession and lower quality of consumer goods on extensive business regulations since the 1960s, and advocate abolishing the Food and Drug Administration, the Interstate Commerce Commission, the Consumer Product Safety Commission, Amtrak, and Conrail. They argue that the energy crisis would be resolved by abolishing the Department of Energy and price floors on crude oil. They recommend replacing the Environmental Protection Agency and environmental regulation with an effluent charge. They criticize labor unions for raising prices and lowering demand by enforcing high wage levels, and for contributing to unemployment by limiting jobs. They argue that inflation is caused by excessive government spending, the Federal Reserve's attempts to control interest rates, and full employment policy. They call for tighter control of Fed money supply despite the fact that it will result in a temporary period of high unemployment and low growth due to the interruption of the wage-price spiral. In the final chapter, they take note of recent current events that seem to suggest a return to free-market principles in academic thought and public opinion, and argue in favor of an "economic Bill of Rights" to cement the changes.

Video chapters (1980 version)

1. The Power of the Market
2. The Tyranny of Control
3. Anatomy of Crisis
4. From Cradle to Grave
5. Created Equal
6. What's Wrong with Our Schools?
7. Who Protects the Consumer?
8. Who Protects the Worker?
9. How to Cure Inflation
10. How to Stay Free

Video chapters (1990 version)

1. The Power of the Market – Introduction by Arnold Schwarzenegger
2. The Tyranny of Control – Introduction by George Shultz
3. Freedom and Prosperity (featured only in the 1990 version) – Introduction by Ronald Reagan
4. The Failure of Socialism (original title: "What's Wrong With Our Schools?") – Introduction by David D. Friedman
5. Created Equal – Introduction by Steve Allen