One of the sacred cows of statism is the idea that government needs to protect us from predatory price-cutting. Large corporations, according to this argument, have big advantages in the marketplace. They can cut prices, drive out their competitors, then raise prices later and gouge consumers. Antitrust laws are needed, so the argument continues, to protect small businesses and consumers from those corporations with large market shares in their industries.

The story of Herbert Dow, founder of Dow Chemical Company, is an excellent case study for those who think predatory price-cutting is a real threat to society. Dow, a small producer of bromine in the early 1900s, fought a price-cutting cartel from Germany. He not only lived to tell about it; he also prospered from it.

. . . .

For Dow Chemical to become a major corporation, it had to meet the European challenge. The Germans in particular dominated world chemical markets in the 1800s. They had experience, topflight scientists, and monopolies in chemical markets throughout the world. For example, the Germans, with their vast potash deposits, had been the dominant supplier of bromine since it first was mass-marketed in the mid-1800s. Only the United States emerged as a competitor to Germany, and then only as a minor player. Dow and some small firms along the Ohio River sold bromine, but only within the country.

About 30 German firms had combined to form a cartel, Die Deutsche Bromkonvention, which fixed the world price for bromine at a lucrative 49 cents a pound. Customers either paid the 49 cents or they went without. Dow and other American companies sold bromine in the United States for 36 cents. The Bromkonvention made it clear that if the Americans tried to sell elsewhere, the Germans would flood the American market with cheap bromine and drive them all out of business. The Bromkonvention law was, “The U.S. for the U.S. and Germany for the world.”

Dow entered bromine production with these unwritten rules in effect, but he refused to follow them. Instead, he easily beat the cartel’s 49-cent price and courageously sold America’s first bromine in England. He hoped that the Germans, if they found out what he was doing, would ignore it. Throughout 1904 he merrily bid on bromine contracts throughout the world.
A Visit from the Cartel

After a few months of this, Dow encountered in his office an angry visitor from Germany—Hermann Jacobsohn of the Bromkonvention. Jacobsohn announced he had “positive evidence that [Dow] had exported bromides.” “What of it?” Dow replied. “Don’t you know that you can’t sell bromides abroad?” Jacobsohn asked. “I know nothing of the kind,” Dow retorted. Jacobsohn was indignant. He said that if Dow persisted, the Bromkonvention members would run him out of business whatever the cost. Then Jacobsohn left in a huff.

. . . .

Dow, however, was determined to compete with the Bromkonvention. He needed the sales, and he believed his electrolysis produced bromine cheaper than the Germans could. Also, Dow was stubborn and hated being bluffed by a bully. When Jacobsohn stormed out of his office, Dow continued to sell bromine, from England to Japan.

Before long, in early 1905, the Bromkonvention went on a rampage: it poured bromides into America at 15 cents a pound, well below its fixed price of 49 cents and also below Dow’s 36 cents. Jacobsohn arranged a special meeting with Dow in St. Louis and demanded that he quit exporting bromides or else the Germans would flood the American market indefinitely. The Bromkonvention had the money and the backing of its government, Jacobsohn reminded Dow, and could long continue to sell in the United States below the cost of production. Dow was not intimidated; he was angry and told Jacobsohn he would sell to whomever would buy from him. Dow left the meeting with Jacobsohn screaming threats behind him. As Dow boarded the train from St. Louis, he knew the future of his company—if it had a future—depended on how he handled the Germans.

On that train, Dow worked out a daring strategy. He had his agent in New York discreetly buy hundreds of thousands of pounds of German bromine at the 15-cent price. Then he repackaged and sold it in Europe—including Germany!—at 27 cents a pound. “When this 15-cent price was made over here,” Dow said, “instead of meeting it, we pulled out of the American market altogether and used all our production to supply the foreign demand. This, as we afterward learned, was not what they anticipated we would do.”

Dow secretly hired British and German agents to market his repackaged bromine in their countries. They had no trouble doing so because the Bromkonvention had left the world price above 30 cents a pound. The Germans were selling in the United States far below cost of production, and they hoped to offset their U.S. losses with a high world price.

Instead, the Germans were befuddled. They expected to run Dow out of business; and this they thought they were doing. But why was U.S. demand for bromine so high? And where was this flow of cheap bromine into Europe coming from? Was one of the Bromkonvention members cheating and selling bromine in Europe below the fixed price? The tension in the Bromkonvention was dramatic. According to Dow, “The German producers got into trouble among themselves as to who was to supply the goods for the American market, and the American agent [for the Germans] became embarrassed by reason of his inability to get goods that he had contracted to supply and asked us if we would take his [15-cent] contracts. This, of course, we refused to do.”

. . . .

More Price-Cutting

The confused Germans kept cutting U.S. prices—first to 12 cents and then to 10.5 cents a pound. Meanwhile, Dow kept buying cheap bromine and reselling it in Europe for 27 cents. These sales forced the Bromkonvention to drop its high world price to match Dow and that further depleted the Bromkonvention‘s resources. Dow, by contrast, improved his foreign sales force, often ran his bromine plants at top capacity, and gained business at the expense of the Bromkonvention and all other American producers, most of whom had shut down after the price-cutting. Even when the Bromkonvention finally caught on to what Dow was doing, it wasn’t sure how to respond. As Dow said, “We are absolute dictators of the situation.” He also wrote, “One result of this fight has been to give us a standing all over the world. . . . We are . . . in a much stronger position than we ever were.” He added that “the profits are not so great” because his plants had trouble matching the new 27-cent world price. He needed to buy the cheap German bromides to stay ahead, and this was harder to do once the Germans discovered and exposed his repackaging scheme.

The bromine war lasted four years (1904–08), when finally the Bromkonvention invited Dow to come to Germany and work out an agreement. Since they couldn’t crush Dow, they decided to at least work out some deal so they could make money again. The terms were as follows: the Germans agreed to quit selling bromine in the United States; Dow agreed to quit selling in Germany; and the rest of the world was open to free competition. The bromine war was over, but low-priced bromine was now a fact of life.

Dow had more capital from the bromine war to expand his business and challenge the Germans in other markets. For example, Dow entered the dye industry and began producing indigo more cheaply than the dominant German dye cartel. (Read more from thefreemanonline.org)

I’m also categorizing this under war on commerce, because government run insurance kills business opportunities for entrepreneurs who might insure profitably by actually measuring risk.

In Wilkinson County, Miss., a home has been flooded 34 times since 1978.

Extraordinary as the damage may be, even more extraordinary is that an insurer has paid claims every time, required no flood proofing, never raised premiums after a claim and vowed to continue insuring the house. Forever.

The home’s value is $69,900. Yet the total insurance payments are nearly 10 times that: $663,000.

It’s no surprise that the insurer faces huge financial problems.

The insurer? The federal government. (Read more from usatoday.com)

Bureaucratic management at its finest. I can hear the rebuttal of my socialist friends now: “If we don’t like the way the government does flood insurance, we can vote them out. If it’s a corporation, we’re stuck.”

FOX & ABCNNBBCBS: MOSQUE AT GROUND ZERO! MOSQUE AT GROUND ZERO! THE EERANIANS AR COMIN TO GIT YOU!

It’s hardly unusual to hear small-business owners gripe about licensing requirements or complain that heavy-handed regulations are driving them into the red.

So when Multnomah County shut down an enterprise last week for operating without a license, you might just sigh and say, there they go again.

Except this entrepreneur was a 7-year-old named Julie Murphy. Her business was a lemonade stand at the Last Thursday monthly art fair in Northeast Portland. The government regulation she violated? Failing to get a $120 temporary restaurant license.

Turns out that kids’ lemonade stands — those constants of summertime — are supposed to get a permit in Oregon, particularly at big events that happen to be patrolled regularly by county health inspectors.

“I understand the reason behind what they’re doing and it’s a neighborhood event, and they’re trying to generate revenue,” said Jon Kawaguchi, environmental health supervisor for the Multnomah County Health Department. “But we still need to put the public’s health first.”

[The only thing this bureaucrat is protecting is her job.]

. . . . After 20 minutes, a “lady with a clipboard” came over and asked for their license. When Fife explained they didn’t have one, the woman told them they would need to leave or possibly face a $500 fine.

Surprised, Fife started to pack up. The people staffing the booths next to them encouraged the two to stay, telling them the inspectors had no right to kick them out of the neighborhood gathering. They also suggested that they give away the lemonade and accept donations instead and one of them made an announcement to the crowd to support the lemonade stand.

That’s when business really picked up — and two inspectors came back, Fife said. Julie started crying, while her mother packed up and others confronted the inspectors. “It was a very big scene,” Fife said.

Technically, any lemonade stand — even one on your front lawn — must be licensed under state law, said Eric Pippert, the food-borne illness prevention program manager for the state’s public health division. But county inspectors are unlikely to go after kids selling lemonade on their front lawn unless, he conceded, their front lawn happens to be on Alberta Street during Last Thursday.

“When you go to a public event and set up shop, you’re suddenly engaging in commerce,” he said. “The fact that you’re small-scale I don’t think is relevant.”

Kawaguchi, who oversees the two county inspectors involved, said they must be fair and consistent in their monitoring, no matter the age of the person. “Our role is to protect the public,” he said.

The county’s shutdown of the lemonade stand was publicized by Michael Franklin, the man at the booth next to Fife and her daughter. Franklin contributes to the Bottom Up Radio Network, an online anarchist site, and interviewed Fife for his show.

Franklin is also organizing a “Lemonade Revolt” for Last Thursday in August. He’s calling on anarchists, neighbors and others to come early for the event and grab space for lemonade stands on Alberta between Northeast 25th and Northeast 26th. (Read more from oregonlive.com)

* Dollar continues to decline.
* US continues to follow misguided Keynesian stimulus philosophy.
* GM (government motors) spends bailout money to buy sub-prime-like auto loan business.
* GM bailout was actually bailout of auto workers union.
* The most interesting part of this video begins at 6:00. He talks about how Goldline, a gold selling company, has abused customers by selling overprices antique coins. Peter predicts that this will be leveraged to attack all gold dealers. Remember, tyrants have always hated gold.

* 7th week in a row of declining value of the dollar.
* Propagandists say that the U.S. will not be like Japan. Peter argees only in a perverse way: the U.S. will suffer much, much more than Japan did in the 80’s.
* GDP is bullshit. It’s recent increase is completely attributable to debt and deficit spending.
* Politicians claiming credit for the abomination that was the auto bailout. They will need another bailout soon.
* The 2008 crisis was a UNITED STATES crisis. The world was exposed to it because they had loaned us so much money, but don’t believe the propaganda of the U.S. getting caught up in a world crisis.
* Expect people to begin fleeing the dollar, and U.S. assets. Expect gold to make another run, despite some talking heads claiming that it’s about to crash.
* No sign of a stricter Federal Reserve. As November elections approach, all incumbent politicians will fight for more easy money — which will be like drinking more booze to avoid a hangover.

Billy Raye, a 51-year-old unemployed bike courier, is looking for work.

Fortunately for him, the Mid-Atlantic Regional Council of Carpenters is seeking paid demonstrators to march and chant in its current picket line outside the McPherson Building, an office complex here where the council says work is being done with nonunion labor.

. . . . the union hires unemployed people at the minimum wage—$8.25 an hour—to walk picket lines. Mr. Raye says he’s grateful for the work, even though he’s not sure why he’s doing it. “I could care less,” he says. “I am being paid to march around and sound off.”

. . . . In California, one group is offering to pay $10 and up per hour to activists to hold signs in demonstrations against foam cups and plastic bags. (Read more from online.wsj.com)

@ 5:30, the Chairman of BB&T talks about how they refused to participate in eminent domain endeavors, and “pick-a-payment” mortgages, even though such mortgages were sellable on secondary markets. He then offers a fantastic, insider look at TARP. Because the Fed didn’t want to let the public know which banks had gotten into trouble, they forced ALL big banks to accept TARP.

@ 24:30, A libertarian asks a question which points to the divide between Randian Objectivists and libertarians. The guy’s defence of Rand’s war on altruism is rather feeble.

FYI, I favor 95% of Rand’s Objectivism.

@ 27:00, there is a great discussion of fish pedicures, and a psychopathic, parasitic legislator who wants to outlaw the practice (unless you can sterilize the fish).

@ 36:30, I think there’s a good question about the state’s role in preventive legislation, like laws which regulate distracted driving, which poses threats to other people’s liberty. I guy from Reason Magazine who took the question answered well — as well as you can answer if you believe in the state. However, I think the correct response is the anarcho-capitalist line, that roads should be privatized, and regulated by their private owners.

@ 41:30, there is a wonderful chart correlating sales of Atlas Shrugged with expansions of the U.S. government.

Seven children selling lemonade were told by police they had to close up shop — because they didn’t have a permit.

Cops went sour on a group of kids after a resident in the Haverford Township, Pa., neighborhood sicced police on the youngsters for selling lemonade on a residential street.

Police told the kids, including 5-year-old triplets, that they were violating the law, according to the Philadelphia Inquirer.

Selling lemonade in the township requires a permit — which was news to the mother of four of the children, Dana Kleinschmidt, as well as the rest of the police department.

. . . .

After a little research by fellow officer Sgt. Joe Hagan, it was discovered that selling lemonade is legal — for children under the age of 16. (Read more from nbcphiladelphia.com)

Jump to 5:10 for the foreign brokerage issue.

As Congress debates the new rules of the road for the U.S. banking industry, some lawmakers have an ambitious proposal: They want to cut ATM fees.

Last week, a trio of Democratic senators led by Iowa’s Tom Harkin proposed capping automated teller machine fees at just 50 cents. (Read more from )

Very interesting analysis.

Zoning laws are a violation of property rights. They destroy the sense of community in neighborhoods, increase crime, increase traffic congestion, contribute to urban and suburban air pollution, contribute to poverty, contribute to reliance in government — and, thus, reduce self-reliance — and contribute to the ruin of our schools. Most of our urban and suburban problems arose with zoning and other antiproperty laws, to which welfare programs and public housing projects have contributed. Each of these policies came out of the idea that society could and should be engineered from the top down to give rise to efficiency, community, and prosperity. What in fact resulted was the opposite outcome.

I. Neighborhoods and Communities

With zoning laws, commercial, industrial, and residential areas are separated from each other. The result is blocks of houses, industrial parks, and strips of stores and restaurants. People have to drive miles to go to the store, to work, or even to the park. It is rare to go to the store and see anyone you know.

But imagine a neighborhood without zoning laws. It would then be possible to have, say, a small grocery store on the corner where you could buy fresh fruits and vegetables, bread, and meat. That store would likely be within walking distance, be owned by one of your neighbors, and be designed to serve the neighborhood.

. . . .

Conclusion

Zoning laws and other laws that restrict what people can do with their property do more harm than good. People argue that “I don’t want someone building a factory in my neighborhood,” but the fact is that nobody wants to build a factory in your neighborhood. They want to build a factory where it is easy to get supplies in and products out, and where there’s plenty of room for employees to park. That’s not your neighborhood. And in an increasingly post-industrial economy, that argument is mostly irrelevant.

I am arguing for allowing natural organization of communities and neighborhoods. I am arguing for healthier neighborhoods and communities.

The elimination of such anti-property-rights laws will allow this. It will make people more self-reliant and thus less dependent on government, meaning there will be more people contributing to the economy, to society, and to their neighborhoods and communities. People will also be healthier, happier, and less stressed.

Social engineering only works to destroy communities and make people more reliant on government programs. (Read more from mises.org)

Most people know about the individual mandate in the new health care bill, but the bill contained another mandate that could be far more costly.

A few wording changes to the tax code’s section 6041 regarding 1099 reporting were slipped into the 2000-page health legislation. The changes will force millions of businesses to issue hundreds of millions, perhaps billions, of additional IRS Form 1099s every year. It appears to be a costly, anti-business nightmare.

Under current law, businesses are required to issue 1099s in a limited set of situations, such as when paying outside consultants.

. . . .

Basically, businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. For the $14 trillion U.S. economy, that’s a hell of a lot of 1099s. When a business buys a $1,000 used car, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small shop owner pays her rent, she will have to send a 1099 to the landlord and IRS. Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS. (Read more from cato-at-liberty.org)

This is the most exciting discussion about accounting I’ve ever heard.

There is a confluence of interest leading to:

- our surrendering the power to establish accounting standards to an international body
- top down enforcement of standardized accounting standards
- devilish details which will tax businesses even more — Obama’s budget already project over $50 billion in increased tax revenue
- less transparency for international corporations — which will likely be an excuse for the government to take an even bigger policing role in the future
- even more obstacles for small businesses who want to compete with big corporations
- a lower standard of living

The interests are as follows:

- Academics who like things standardized and centralized, and think, like Lenin, that the entire world should be run like the post office
- International accounting firms who will make a bundle as the world
- The government who will be able to wrest even more wealth from the people who actually produce things
- International corporations who will have yet another government-imposed advantage over small businesses

(Listen at RadioFreeMerket.com)

I think this illustrates the advantages of the libertarian (vs. socialist) solution to the problem we generally agree on, that food is often dangerous and unhealthy.

This article demonstrates how the government contributes to the problem. Yes many of my socialist-leaning friends call for increased government involvement to help solve it.

Of all the sneaky tactics practiced in Washington D.C., this recent action by Congressman Henry Waxman (D-CA) is one of the most insidious: While no one was looking, he injected amendment language into the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173) that would expand the powers of the FTC (not the FDA, but the FTC) to terrorize nutritional supplement companies by greatly expanding the power of the FTC to make its own laws that target dietary supplement companies.

This is a little-known secret about the FTC and the nutritional supplements business: The FTC routinely targets nutritional supplement companies that are merely telling the truth about their products. Some companies are threatened by merely linking to published scientific studies about their products.

For example, here’s an important article that describes how to FDA criminally extorts money out of supplement companies: http://www.naturalnews.com/024567_health_the_FDA_websites.html

The FTC does much the same thing. They target a particular company that’s having success in the natural products marketplace, then they accuse that company of “inferring” that their products have some health benefit. From there, the FTC demands that the company engage in paying a massive fine to the FTC, which the FTC calls “consumer redress” even though none of the money actually goes to the consumers.
(Read more from naturalnews.com)