Kudlow's Money Politic$ on National Review Online
For those of you who know me, this is what I've been saying for weeks now. It may take years to see new oil but it will take minutes for the market to react. Bush strikes again!! They just can't wait for him to leave!
Tuesday, July 15, 2008
Greatest Hope for the Poor
Here's something that has been bothering me for a while now. Can we all please agree that the greatest hope for the poor is not a free handout, but opportunity for ownership and self-determination? That is to say: Capitalism! It seems these days it's politically incorrect to be an unabashed capitalist. I believe in the free market and I believe that the free market has been proven over and over again. Right now, we are in the midst of a true crisis. The price of oil is skyrocketing and there is no end in sight. The oil companies and their CEO's are being vilified for their huge profits. I am a person who believes that you have to insure the future of your company by maximizing profits. Didn't we learn this with the Enron people? Their company started to go under and they screwed their employees by not telling them to sell their company stock which they had their retirement accounts invested in. Who works at these oil companies? Wealthy oil barons? Sure! But also those men (and women) who work on the oil derricks, those who work in the offices, and a variety of other blue collar/middle class jobs. Do we want their incomes to go away when the demand for oil goes down? Remember, there are lots of oil products that the oil companies produce including jet fuel, kerosene, heating oil, lots of other things that don't power our cars. I realize the idea that demand will go down is a little far fetched, but what about supply? We are constantly being told that we are living on borrowed time with the oil supply. That the poor dinosaurs were in limited supply and we are using their dead carcasses as the fuel for our society. What if that runs out? How will we find more? I think it is only responsible that these oil companies protect their futures by maximizing profits and protecting the jobs of millions worldwide.
Oil companies don't have the right to search for oil wherever they want to. They have to get permission from the governments that own the land and right now there is a ban on drilling offshore and in other areas of the country. So we are dependent on oil from foreign countries. That kind of control is what is causing the prices to skyrocket. We have also not allowed the oil companies to build new refineries which also puts a cap on supply, therefore driving up the price even further. Actually, the oil companies put a lot of the money they make back into the business in the form of Research and Development (R&D). That's why their profit margin is so much lower than other industries. Using information from Business Week and Oil Daily magazines, The Everyday Economist posted a chart comparing the profit margins of the various industries and oil comes in near the bottom! Pharmaceuticals and financial services lead the pack. (It's interesting that the banks have a profit margin almost exactly the same as the interest rate on my credit card. Hmmmm, wonder why that is? But I digress. . .)
So what does this have to do with the poor? Well the oil situation is a good example of what happens when the free market is tampered with. You can demonize the oil companies all you want but the fact is that they are doing what they have to to insure oil for us for the foreseeable future and jobs for them for just as long. The fact of the matter is that businesses, both big and small, provide jobs. And as far as I know, jobs are the only REAL cure for poverty. I think we have to acknowledge that there will always be a certain part of the world's population that will be poor. No matter how much opportunity there is, there are just those who refuse to take advantage of it. Meanwhile, we have been subsidizing the poor to the tune of billions of dollars since the 60's and LBJ's Great Society. If we could just export capitalism to the rest of the world, the number of poor people in the world would drop dramatically, but not disappear altogether. It's time we stop subsidizing the poor, get rid of all those failed government programs, put that money back into the economy so it can grow, embrace those businesses that are trying to provide needed services and jobs and stop letting our representatives in Washington make enemies of those who are just trying to provide real opportunities for the poor! (Oh yeah, and make a quick buck too!)
Oil companies don't have the right to search for oil wherever they want to. They have to get permission from the governments that own the land and right now there is a ban on drilling offshore and in other areas of the country. So we are dependent on oil from foreign countries. That kind of control is what is causing the prices to skyrocket. We have also not allowed the oil companies to build new refineries which also puts a cap on supply, therefore driving up the price even further. Actually, the oil companies put a lot of the money they make back into the business in the form of Research and Development (R&D). That's why their profit margin is so much lower than other industries. Using information from Business Week and Oil Daily magazines, The Everyday Economist posted a chart comparing the profit margins of the various industries and oil comes in near the bottom! Pharmaceuticals and financial services lead the pack. (It's interesting that the banks have a profit margin almost exactly the same as the interest rate on my credit card. Hmmmm, wonder why that is? But I digress. . .)
So what does this have to do with the poor? Well the oil situation is a good example of what happens when the free market is tampered with. You can demonize the oil companies all you want but the fact is that they are doing what they have to to insure oil for us for the foreseeable future and jobs for them for just as long. The fact of the matter is that businesses, both big and small, provide jobs. And as far as I know, jobs are the only REAL cure for poverty. I think we have to acknowledge that there will always be a certain part of the world's population that will be poor. No matter how much opportunity there is, there are just those who refuse to take advantage of it. Meanwhile, we have been subsidizing the poor to the tune of billions of dollars since the 60's and LBJ's Great Society. If we could just export capitalism to the rest of the world, the number of poor people in the world would drop dramatically, but not disappear altogether. It's time we stop subsidizing the poor, get rid of all those failed government programs, put that money back into the economy so it can grow, embrace those businesses that are trying to provide needed services and jobs and stop letting our representatives in Washington make enemies of those who are just trying to provide real opportunities for the poor! (Oh yeah, and make a quick buck too!)
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