Crom Carmichael Discusses the Nature of Free Markets, Competition, and Federalism


Live from Music Row Wednesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. –  host Leahy welcomed the original all-star panelist Crom Carmichael to the studio.

At the end of the second hour, Carmichael broke down the concepts of free markets, competition, and federalism in relation to the concept of nationalizing public policy which he claimed would be a disaster if people weren’t allowed to experiment with ideas.

Leahy: It’s Thanksgiving week. And in-studio the original all-star panelist Crom Carmichael. Crom, we were talking a little bit about our country in the importance of what we have to give thanks for. One of the things I give thanks for Crom is our Constitution. And there are two foundational concepts in the Constitution. One is the separation of powers and the other is a concept called federalism. And federalism is important because it has a key role in the promotion of free markets.

Carmichael: Yes, and let me talk a little bit. First of all Michael,  I’m going to start from the end and go backward. And that is sometimes I’ll talk about the nature of a thing. And so what is the nature of markets? And what is it that only markets can provide? And let me answer that question by telling a really quick story. Years ago I sat next to an AT&T executive just at the same time that AT&T was broken up.

And but nothing had happened yet. It’s just been broken up. This AT&T executive said that prices for telecommunications we’re going to go through the roof because AT&T was the most efficiently run company in the world. And I said listen with all due respect, I don’t know anything about telecommunications, but I do know that AT&T has a monopoly.

And I said, how can you know that it’s the most efficiently run company in the world when you have nothing to compare it to? Well, all he did was get mad. And so and so the nature of markets. Let’s say you’re a merchant your merchant a and there’s a merchant down the street who is a competitor called merchant b. And I come in with a product from merchant a. Merchant a decides that merchant a’s customers are not going to be interested in my product. And so they don’t buy it.

Now they don’t buy it not because they want to hurt me but because they don’t think that their customers will want it. So I go down to merchant b and merchant B says, you know what I’ll give that a try. I’ll buy six of them and see if my customers like them. And low and behold the customers like them. And merchant a notices that merchant b’s customers like the product that he did not buy from me. Well, what will he do?

Leahy: He’ll get the product.

Carmichael: He’ll pick up the phone and say I made a mistake, please come see me again. I’d like to buy your product. And so what the market did there was it provided information. And that’s the key. It provides information. That’s what markets do. So let’s now take that to federalism. Now the state of Oregon has passed a law.

Leahy: Federalism in the Constitution gives certain powers to the national government.

Carmichael: All the rest to the state.

Leahy: All the other powers reserved for the state the 10th amendment and the ninth maybe they all address that to the state and to the people.

Carmichael: Oregon has just changed the law to make the possession of heroin and cocaine legal within the state. Now it doesn’t make it legal to deal in it but it makes it legal to have small amounts of it. Now, I don’t know if that’s a good idea or a bad idea. My sense of it is I’m a little bit like merchants a. I don’t think it’s a good idea. But if Oregon wants to try it guess what? In a few years, we’ll be able to see whether or not that’s a good idea or a bad idea.

So I’m not opposed to it as I’m living in Tennessee, that the people in Oregon might want to try that. Because they’re trying to reduce their prison population and they’re trying to reduce crime. I don’t know that it will do that. But they think it will and more power to them for trying. Now if it fails my guess is a fella just like my next story is in Stockton California. Stockton, California is actually a city within California.

So this even goes lower than the state. Well a few years ago Stockton, California elected a thirty-year-old mayor name, Mr. Tubbs. Mr. Tubbs was a Black man and still is. And he was very very liberal. Stockton is a very poor town. It’s 20 percent white. 20 percent live in poverty. Nearly twice as many as statewide. And only half as many people have a bachelor’s degree.

A little over 17 percent compared to statewide at 33 percent. He put in two policies. One was a $500. cash a month guaranteed wage for low-income people. $500. a month they got and he tried to raise some money from philanthropists because there a lot of billionaires in California who say they want to help low-income people. And then the other thing he wanted he did was he actually paid violent offenders not to commit crimes.

Leahy: (Chuckles) What could go wrong?

Carmichael: Well as it turns out neither initiative worked. Violent crime hasn’t decreased in fact homicides are up 40 percent. And so Mr. Lincoln who’s a Latino Marine he runs for mayor against Mr. Tubbs, and he beats Mr. Tubbs by 12 percent. So this is an example of the voters in the local community voting for somebody who had some ideas that some people wanted to try. We see that the idea has failed and so they changed horses and elected a former Marine. Now here in the United States, the worst thing we could do is to nationalize public policy. Because then you have no way of comparing it to see whether or not it works or not.

Leahy: You could have a bad idea at the national level. And you could spread it throughout the country and you’d be stuck with a bad idea.

Carmichael: And we’ve had lots of those.

Leahy: A lot.

Carmichael: The Great Society programs. Now looking back if we had known then what we know now we never would have passed it.

Leahy: Utter failures.

Carmichael: Utter failures and they’ve hurt the very people they’re supposed to help. Now my last example is the Buckeye state in Ohio.

Leahy: Ohio.

Carmichael: Yeah, they have just increased the eligibility for vouchers in the state to 250 percent of the poverty line. This now raises the number of people and families that are eligible for vouchers to 50 percent of the school-age population. Now the voucher is only worth $4,500., but that $4,500. still gives families from lower-income families the opportunity to find a school other than the failing school. What’s interesting about Ohio is where the vouchers have been implemented the most. The government-run schools in those areas have gotten better because they had to compete.

Leahy: Competition.

Carmichael: And they realized the principals and the teachers realized if we don’t do a better job our schools are going to disappear. And that’s the nature of competition. That’s the nature of markets. That’s the nature of federalism. And that’s what we need to hold dear to. And I don’t care whether you’re Democrat or Republican. If you want things to get better, then you ought to let people experiment with ideas in ways that don’t affect the entire country so that you can find out if they’re good or bad. If they’re good they’ll proliferate. If they’re bad they’ll die. And that’s what we want bad ideas to do.

Listen to the full second hour here:

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Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio

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