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Posts Tagged ‘Free Market’

Why “Stakeholder Capitalism” Is a Disaster for Entrepreneurs | Mises Wire

Posted by M. C. on February 25, 2021

We cannot take for granted that the heart of a peaceful and prosperous economic system is respect for private ownership of property by individuals. Private property rights need to be strictly delineated in an objective and absolute way. When ownership of property is shared with “society,” as in stakeholder capitalism, there will be inexorable conflict. Because stakeholder capitalism is built on a collectivist version of property rights, free market advocates should fully denounce it.

https://mises.org/wire/why-stakeholder-capitalism-disaster-entrepreneurs

Thomas Spain

During the 1990s there was a legal and philosophical idea, championed by Milton Friedman among others, that a corporation exists to serve the interests of the shareholders, being that they are the rightful owners of the corporation. Progressive thought leaders responded with the countertheory of stakeholder capitalism. Under stakeholder theory the shareholders have a stake in the success of the firm, but the firm also has a competing obligation to other entities deemed “stakeholders.” Stakeholders are employees, customers, suppliers, and the community. While this theory is presented as a commonsense truism, it has one specific foundational flaw: it dilutes and undermines the principle of private property.

To own a thing in principle is to have control over its use. An owner of a company, in a market system, has ultimate discretion over and responsibility for how the assets of the company are used. In a joint-stock company, the decision-making is shared by the various owners of shares. But in stakeholder capitalism, all of the stakeholders have influence in company decisions. Therefore, stakeholders are de facto joint owners of the corporation, and advocates of stakeholder capitalism would seek to make this ownership a legal reality.

When stakeholder capitalism is expounded by its advocates, it’s easy to believe that it is not as much a social theory as simply good advice. Businesses seek to develop mutually beneficial relationships that will last into the long term. As a means to that end, it is good business practice to maximize the contentedness of your employees, deal honestly with your suppliers, survey the needs of your customers, and keep a good image in the community. However, stakeholder capitalism goes beyond good practice by putting government power on the side of the stakeholders.

We can see what the joint ownership of stakeholders looks like in practice. For employee stakeholders, control would mean union representation on the corporate board. For supplier stakeholders, industry oversight associations would oversee contracts, making them impossibly difficult to terminate while outlawing any market choice. Customers would be represented by consumer protection bureaus. And community stakeholders would mean democratic approval of business actions by government committees.

While in the free market stakeholders vote directly with their dollars, in stakeholder capitalism the nominal stakeholders never exercise their ownership stake directly. Rather they are represented indirectly or bureaucrats are imbued with the authority to interpret their desires. The driving force behind the stakeholder capitalism philosophy is precisely that it creates opportunities for political actors to assert disproportionate control over the economy’s resources. Rather than create real wealth for society, politicians and bureaucrats use their social ownership of companies to extort economic resources for their purposes.

In such an environment, entrepreneurial decisions are reduced to a political process. The entrepreneur is made impotent to improve the status quo, because any intrepid decision will be vetoed by political stakeholders who fear to lose. Prices can never rise. Wage rates must always rise. Risk must be averted. Nothing must be allowed that would inconvenience the community or make anyone uncomfortable.

Recently, the most dangerous aspect of stakeholder capitalism has been its amalgamation with the climate change agenda. Any minute decision a business makes will infinitesimally affect the climate for people all over the globe. Therefore, the concept of a community stakeholder is expanded to the entire world, eliminating individual and local sovereignty. Under a climate change regime, decisions as small as remodeling an office building will be as politically charged as the ongoing Keystone Pipeline fiasco.

Clearly, many of the principles of stakeholder capitalism have been implemented in different ways for a long time, including politicized unions, regulatory schemes, and extortion of campaign contributions. But the threat to private property has also worsened in the US in recent years. In particular, politicians openly extort corporations with the threat of targeted regulation, like the Big Tech companies are facing over fake news and censorship. Socialist bureaucracies have unaccountable authority to investigate and persecute businesses, like suing petroleum companies for vague climate change damages. Large investment firms use their customers’ accounts as leverage to push politically driven reforms that are not in the financial interest of the account holders, like divesting from fossil fuels. Not to mention corporate leaders are swarming to affirm every social justice fad.

We cannot take for granted that the heart of a peaceful and prosperous economic system is respect for private ownership of property by individuals. Private property rights need to be strictly delineated in an objective and absolute way. When ownership of property is shared with “society,” as in stakeholder capitalism, there will be inexorable conflict. Because stakeholder capitalism is built on a collectivist version of property rights, free market advocates should fully denounce it.

Author:

Thomas Spain

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Marxism In Africa: Why So Many African Economies Failed After Independence | Mises Wire

Posted by M. C. on November 5, 2020

According to Joseph Schumpeter, Marxism is a sort of religion whereby goods are distributed to believers by an all-knowing state. This differs from capitalism, where each individual in a society is held as absolute end in himself. Marxism, like Nazism, fascism, tribalism, communism, and all other socialist theories of nationalism, is based on the principle of collectivism that overrides the free decisions of individuals.

https://mises.org/wire/marxism-africa-why-so-many-african-economies-failed-after-independence?utm_source=Mises+Institute+Subscriptions&utm_campaign=85a2a0582e-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-85a2a0582e-228343965

Eric Coffie

“As far as I am concerned, I am in the knowledge that death can never extinguish the torch which I have lit in Ghana and Africa. Long after I am dead and gone, the light will continue to burn and be borne aloft, giving light and guidance to all people.” ~ Dr. Kwame Nkrumah

September 21 marks the birthday of Kwame Nkrumah, Africa’s Marxist revolutionary and first president of the republic of Ghana. The day is celebrated as a public holiday in Ghana to commemorate the significant role Nkrumah played to free the Gold Coast from colonial rule. Nkrumah was born on September 21, 1909, at Nkroful, in what was then the British-ruled Gold Coast, the son of a goldsmith. After his graduation from Achimota College in 1930, he traveled to the United States to pursue his master’s degrees at Lincoln University and the University of Pennsylvania, where he was influenced by Marxist ideologies and pan-Africanist ideas, and especially Marcus Garvey, the black American nationalist leader of the 1920s. Eventually, Kwame Nkrumah came to describe himself as a socialist and a Marxist, a leading proponent of African socialism, the offshoot of pan-Africanism.

He returned to Ghana in late 1947 under invitation of the United Gold Coast Convention (UGCC), the first political party in Ghana. Nkrumah served as the general secretary to the party but due to his Marxist tendencies broke away from the conservative UGCC party to form his own socialist political party, the Convention People’s Party (CPP), which won the 1951 general elections. Kwame Nkrumah became prime minister of Ghana and later president of the new republic in 1960. He was the winner of Lenin Peace Prize in 1962. Nkrumah founded numerous state-run companies, launched the construction of a huge dam for the generation of hydroelectric power, built schools and universities, and backed liberation movements in African colonies that had yet to achieve independence.

In 1964, faced with economic crises caused largely by his Marxist economic policies, Nkrumah’s proposed solution was to tighten government control. He declared Ghana a one-party communist state with himself as president for life. Nkrumah was accused of actively promoting a cult of his own personality (Nkrumahism), which eventually led to his overthrow in 1966 by military coup d’état. He died in Bucharest, Romania, after six years in exile in Guinea, at age sixty-two. In the year 2000, Nkrumah was voted Africa’s “Man of the Millennium” by BBC listeners as a “Hero of Independence” and an “international symbol of freedom as the leader of the first African country to shake off the chains of colonial rule.”

“Nkrumah’s primary concern really was the good of the nation,” noted German political scientist Christian Kohrs, but the path he chose was dangerous both for himself and for the people of independent Africa. Like Nkrumah, many other African leaders—namely Julius Nyere of Tanzania, Modibo Keita of Mali, Léopold Senghor of Senegal, and Sékou Touré of Guinea, among others—also took the socialist path in the struggle for African independence. This resulted in the rise of despots and a series of military coups d’état in most African countries and had a devastating effect on the social and economic life of Africa. Though some of these African socialists did not align themselves with Marxism like Nkrumah did, their brand of socialism was not different from the collectivist principles of Marxism. Senghor, for example, claimed that “Africa’s social background of tribal community life not only makes socialism natural to Africa but excludes the validity of the theory of class struggle.” On the surface, socialism might appear natural to African tribal community life, as with many other economies of the world, but according to America-based Ghanaian economist professor George Ayittey, “Africa has had a long history of free market economies dating back to precolonial times.”

According to Joseph Schumpeter, Marxism is a sort of religion whereby goods are distributed to believers by an all-knowing state. This differs from capitalism, where each individual in a society is held as absolute end in himself. Marxism, like Nazism, fascism, tribalism, communism, and all other socialist theories of nationalism, is based on the principle of collectivism that overrides the free decisions of individuals. It is only capitalism that allows the individual to be free and pursue his interests, which at the end will serve the common good.

The brutal rejection of capitalism in favor of socialism by African politicians at independence was largely due to a deep-seated misconception that equates capitalism to colonialism. In fact, according to Lenin, capitalism was the extension of colonialism and imperialism. For this reason, African leaders at the time of independence didn’t want anything to do with capitalism. Nkrumah said, for example, “We need socialism to fight off the imperialists.” Nyere said: “Capitalism encourages individual acquisitiveness and competition. We don’t want that. We need socialism.” This led African leaders to adopt the socialist ideology of Marxism. By that they mean complete ownership of all the means of production by the state. In the end, the socialist experiment was economic failure.

Insanity is said to be the inability to correlate causes and effects. Wherever Marxism/socialism has been practiced, it has meant slavery and death for the majority. It’s no surprise that Marxism failed in Africa just as it has done in many other nations. Throughout history, there has been a lot of evidence showing that capitalism works and socialism is a failure. The results of socialism are poverty and tyranny. Despite all these failures and atrocities committed under national socialism by Marxist dictators, there is a majority that still believes socialism is the way to African social and economic prosperity. The truth is that socialism is not about economics. Socialism is about competition for political power that results in the destruction of wealth and prosperity.

Unfortunately, Africa currently is largely under the influence of Marxism because of the political ideologies of its founding fathers, learned from anticapitalist intellectuals in the West, especially in the United States. As I am writing this article, many African nations are starving and deeply in debt as a result of the socialist programs that have been pursued by their governments. According to the World Bank, 416 million Africans still live in extreme poverty, 210 million of whom are in fragile and conflict-affected countries. African development partners continue to think the solution to these challenges is more political than economic, so they keep on pouring money to support big government programs in Africa as a way of reducing poverty and social injustice. The only real solution to Africa’s long-standing challenges is economic freedom. Africa needs less and less government control and more capitalistic control of the economy. This will make competition for political power unattractive and give people more freedom to exercise their right to individual initiatives, which is the only way to peace and prosperity. Author:

Eric Coffie

Eric Coffie is the founder and president of the Economic Freedom Institute in Ghana. Email him at email ecoffie@efighana.org

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Jefferson on the Family and Liberty | Mises Wire

Posted by M. C. on August 17, 2020

Jeff Deist argues in a similar vein:

It scarcely needs to be said that family has always been the first line of defense against the state, and the most important source of primary loyalty—or divided loyalty, from the perspective of politicians. Our connection with ancestors, and our concern for progeny, forms a story in which the state is not the main character. Family forms our earliest and hence most formative environment—and at least as an ideal, family provides both material and emotional support. Happy families actually exist.

But government wants us atomized, lonely, broke, vulnerable, dependent, and disconnected. So of course it attempts to break down families by taking kids away from them as early as possible, indoctrinating them in state schools, using welfare as a wedge, using the tax code as a wedge, discouraging marriage and large families, in fact discouraging any kind of intimacy not subject to public scrutiny, encouraging divorce, etc. etc.

https://mises.org/wire/jefferson-family-and-liberty

Thomas Jefferson has valuable things to say about two key criticisms of the free market. I learned about these from reading C. Bradley Thompson’s America’s Revolutionary Mind (Encounter Books, 2019) Thompson has done an immense amount on research on the thought of the leading figures of the American Revolution, and I urge everyone to read this excellent book.

Many critics of the free market say that it is unfair that some people are much wealthier than others. Isn’t it largely a matter of luck how well you do? If so, shouldn’t the state take steps to benefit those who aren’t successful? This is a line of thought I’ve often written about, so I’ll just give one example of it. The late G.A. Cohen states the position in this way, in his Rescuing Justice and Equality (Harvard University Press, 2008):

People with greater-than-average talents and abilities should not in justice receive more wealth and income than others, even if their work is more productive and valuable than their less-fortunately-endowed coworkers. People do not deserve the abilities by which they surpass others, and my own animating conviction…[is] that an unequal distribution whose inequality cannot be vindicated by some choice or fault or desert on the part of (some of) the relevant affected agents is unfair, and therefore, pro tanto, unjust, and that nothing can remove that particular injustice.

Jefferson does not agree. People have a natural right to benefit from their industry and talents, and it is wrong for the state to take money from the rich to help the poor. He says,

To take from one, because it is thought that his industry…has acquired too much, in order to spare to others who…have not exercised equal liberty or skill, is to violate arbitrarily the first principle of association, the guarantee to everyone of a free exercise of liberty, and the fruits acquired by it.

Someone might object to Jefferson in this way: Aren’t there some people who are so badly off that they need help in order to survive? Shouldn’t they be guaranteed at least a minimum by the state?

Again, Jefferson doesn’t agree. Rights in his view are purely negative. Someone’s being poor does not give him a right to the labor or property of others. Further, “the forced sharing of property would likewise cause all generosity, benevolence, and charity to wither on the vine. If such ‘noble principles’ were destitute of objects and exercise,’ Jefferson added, they would ‘forever lie dormant’” (quoted in Thompson, America’s Revolutionary Mind).

What I’ve said so far describes a familiar libertarian position, but now I’d like to turn to something more controversial. One of the standard criticisms of the free market point of view is that it treats individuals as isolated atoms who view other people only as means to the pursuit of their selfish ends. You can certainly find people who do adopt this view, but Mises and Rothbard do not. Lew Rockwell notes in Against the Left:

Today, the fundamental threat to liberty comes from leftist programs to promote absolute equality. In this chapter, we will first describe egalitarianism in general terms and then discuss one of its main, and most dangerous, manifestations. This is the attempt to destroy the traditional family, the hallmark of civilization….In order to maintain a free society, it is essential that the traditional family, i.e., the union of one man and one woman in marriage, in most cases to raise a family, be preserved. Ludwig von Mises offers some profound insights on this matter.

Jeff Deist argues in a similar vein:

It scarcely needs to be said that family has always been the first line of defense against the state, and the most important source of primary loyalty—or divided loyalty, from the perspective of politicians. Our connection with ancestors, and our concern for progeny, forms a story in which the state is not the main character. Family forms our earliest and hence most formative environment—and at least as an ideal, family provides both material and emotional support. Happy families actually exist.

But government wants us atomized, lonely, broke, vulnerable, dependent, and disconnected. So of course it attempts to break down families by taking kids away from them as early as possible, indoctrinating them in state schools, using welfare as a wedge, using the tax code as a wedge, discouraging marriage and large families, in fact discouraging any kind of intimacy not subject to public scrutiny, encouraging divorce, etc. etc.

On this issue, Jefferson supports the family rather than the atomized individual. Here I need to confess a deception. I truncated a passage I quoted earlier from Jefferson, not to give a false idea of its contents, but rather to hold in reserve something I wanted to emphasize later. The full quotation from Jefferson is

To take from one, because it is thought that his industry and that of his fathers has acquired too much, in order to spare to others who, or whose fathers have not exercised equal liberty or skill, is to violate arbitrarily the first principle of association, the guarantee to everyone of a free exercise of liberty, and the fruits acquired by it. (emphasis added)

In his second inaugural address, Jefferson said:

With those, too, not yet rallied to the same point, the disposition to do so is gaining strength; facts are piercing through the veil drawn over them; and our doubting brethren will at length see, that the mass of their fellow citizens, with whom they cannot yet resolve to act, as to principles and measures, think as they think, and desire what they desire; that our wish, as well as theirs, is, that the public efforts may be directed honestly to the public good, that peace be cultivated, civil and religious liberty unassailed, law and order preserved; equality of rights maintained, and that state of property, equal or unequal, which results to every man from his own industry, or that of his fathers. (emphasis added)

Jefferson’s view would get him into trouble with contemporary egalitarians. They think it is especially “arbitrary from the moral point of view” that some people have advantages because of their family. Jefferson sees matters differently.

Author:

Contact David Gordon

David Gordon is Senior Fellow at the Mises Institute, and editor of The Mises Review.

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Privatize the Government Police Monopoly – LewRockwell

Posted by M. C. on June 9, 2020

https://www.lewrockwell.com/2020/06/thomas-clark/privatize-the-government-police-monopoly/

By

Many Americans think that public demonstrations and protests are the solution to ending police brutality and the murder of non-convicted civilians.

I maintain that private municipal security guards, operated for profit, would be a far more effective way to protect lives and property, and a far more effective way to deter police originated racial discrimination.

With that in mind, I propose a more radical approach:  Privatize the government police monopoly.

How would privatization work?

Each local municipality would solicit proposals from private, for profit security firms to patrol neighborhoods and to apprehend criminals as needed.  The current system of criminal and civil courts could be maintained. Private residences and privately-owned businesses would supplement with their own security measures, both in person and surveillance.

Would the current policemen and women be out of work?  Not at all.  The experienced service of the vast majority good ones would remain much in demand. Instead of working for the government, they would instead work for the citizens.  Each local municipality would contract with a private security firm.

Competition is superior to monopoly

The force of competition would increase and ensure the quality of law enforcement and decrease cost, as with all products and services now provided by the free market.

Any private constable who abuses his or her authority, or who is negligent, to the detriment of citizen satisfaction, would face swift disciplinary action and termination.  This would be a much stronger incentive for performance than the current system, where it is often very cumbersome to remove a wayward government police officer.

Would you like a satisfaction guarantee?

As with most free market services, it would soon become the norm for private security firms to offer a satisfaction guarantee.  If they fail to protect a home or a business location from damage, they would be obligated to cover all costs.

The private sector has a built-in motivation to avoid racial discrimination.  Discrimination costs money.  I will go out on a limb here and say…beating up and killing customers of any race is not good business.  Customer satisfaction will prevail and negate bigotry any day of the week and twice on Sunday.

Privatize the government police monopoly and we will all be safer and happier.

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What Are ‘Essential Services’? – LewRockwell

Posted by M. C. on April 3, 2020

As Mr. Read pointed out, even the production of a “simple” pencil is beyond the capabilities of one person or one firm to plan and implement. It requires an incredibly complex market coordination of land, labor, and capital. A pencil requires graphite and iron miners, trucks, rubber for the tires for the trucks, rubber plantations, workers at the rubber plantations, paint producers, lumberjacks, sawmills, employees for the operation of the sawmills and for all the associated factories, tool manufactures to make the tools used in the various associated industries, and maintenance personnel to keep all the facilities running.

https://www.lewrockwell.com/2020/04/david-hathaway/what-are-essential-services/

By

Arizona Governor Doug Ducey recently issued an Executive Order requiring residents to “stay home.” The Governor said that only businesses providing “essential services” could remain open. When hit with a barrage of questions, he told Arizonans to not worry because “grocery stores and pharmacies” would remain open and their employees would be allowed to leave their homes and go to work. As I considered what an “essential service” is in the free market, I was reminded of Leonard Read’s brilliant essay “I, Pencil.”

As Mr. Read pointed out, even the production of a “simple” pencil is beyond the capabilities of one person or one firm to plan and implement. It requires an incredibly complex market coordination of land, labor, and capital. A pencil requires graphite and iron miners, trucks, rubber for the tires for the trucks, rubber plantations, workers at the rubber plantations, paint producers, lumberjacks, sawmills, employees for the operation of the sawmills and for all the associated factories, tool manufactures to make the tools used in the various associated industries, and maintenance personnel to keep all the facilities running. There is also a myriad of ancillary industries that produce and provide a huge number of items used in the various businesses that produce components in the higher orders of production to make the pencil; things like ink, paper, clothing for the workers, and oil pumping and refinery equipment to keep fuel flowing to all the associated vehicles and industries. The interconnected web of cooperating firms and individuals is almost infinite.

If producing a pencil is complicated and requires the complex coordination and invisible hand of the free market that is well beyond the planning capabilities of any person or any firm, we can only imagine the exponential level of complexity needed to keep a Wal-Mart store open. If a Wal-Mart store is considered to be providing an “essential service” and is allowed to stay open in a “stay at home” state, how can it possibly do so without the invisible market cooperation of an unfathomable number of actors, each being influenced individually by price signals?

Can a Wal-Mart store stay open without wholesalers and producers? Can the producers stay in business without other producers of sub-components? Can the sub-components be produced without raw material producers? Can meat make it to a Wal-Mart store if the rancher and farmer have to stay home and can’t drive around to various properties and check on water and feed sources for his animals? Can the farmer take care of his farm if his tractor is broken and needs maintenance from the mechanic? Has the mechanic been deemed essential? Does the farmer or the mechanic need a special waiver from the Governor? What about the roving livestock wranglers, fruit pickers, well and pump maintenance workers that are needed by the farmer or rancher on irregular schedules?

What if the farmer or the truck driver has broken his glasses? Can he go to his eye doctor? If the eye doctor can stay open, can the glasses producer go to work to make the glasses for the truck driver or the farmer? If the farmer’s cell phone breaks and he can’t communicate with the meat buyer or feed producer, will the cell phone store be designated an “essential service” and remain open to sell him a new one? Can billboard companies operate so that the public can know which facilities are open and providing services in the midst of the closure order? Can graphics designers produce the signs for the billboard companies? Can newspaper employees drive to work and drive around town to take pictures so that the public stays informed? Are the banks an essential service to provide physical cash to those that want it and need it?

Can a Wal-Mart store arrange for its garbage and waste to be hauled off? What about the contractor that keeps the freezers and refrigerators running at Wal-Mart – is he essential? What about the producer and supplier that provides refrigerant to the freezer maintenance contractor – is he essential? I was told by a police officer that people would be pulled over and told to go home if they weren’t on their way to buy groceries. I don’t know what the charge would be if the driver refused to go home since the legislature hasn’t defined a law that is being broken. Current political actions definitely run contrary to the trite John Adams quote, “We are a government of laws not of men.”

Besides Mr. Read’s great essay, this situation brings to mind Henry Hazlitt’s little book “Economics in One Lesson;” the “one lesson” being that politicians will cause harm when they make mandates because they can only consider the effects on a small part of the overall economy. There will be broad ramifications and unintended consequences throughout the economy whenever an activity is expanded or restricted through political action. In short, central planning can never work because it can never consider the full interrelation of all aspects of the economy. Central planners can only consider specific hoped-for outcomes on limited segments of the economy when making decisions.

I don’t see how this magical candy-land enabled by court intellectuals and run by executive branch authoritarians is going to be managed through central planning.  Next thing, prices will go up, gouging will be alleged and more central planning will “be needed to control prices.” We are also all being told to “work at home.”  Wow, what a deal. We will stay home and produce nothing except for internet data shooting back and forth and all the stuff will magically get produced and the shelves will get stocked.  Why didn’t we think of this sooner? “Essential services.” What a nifty idea. Let’s all take a vacation, or better yet, retire. The government has got this under control.

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From “I, Pencil” to “I, Smartphone”: The Moral Limits of ...

 

 

 

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Coronacrisis and Leviathan | Mises Institute

Posted by M. C. on March 14, 2020

First, we can expect that government controls on travel and assembly will tighten.

The second likely long-term effect is ideological. Already we’re seeing the meme that the crisis has been caused (or at least exacerbated) by “neoliberalism”—that thanks to pervasive (?) libertarian ideology public health agencies were “hollowed out” and thus unable to respond in force:

Of course, we know that in the US the CDC initially prevented private labs from testing or developing new tests without FDA approval. More generally, public (and private) health in the US, as in most countries, operates within a tangled web of federal, state, and local regulations, subsidies, restrictions, and other controls.

https://mises.org/power-market/coronacrisis-and-leviathan?utm_source=Mises+Institute+Subscriptions&utm_campaign=2a2bbe83dc-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-2a2bbe83dc-228343965

Peter G. Klein

In his magisterial Crisis and Leviathan, Robert Higgs shows that the growth of government in the twentieth century can largely be explained by patterns of crisis and response. These crises can be real (World Wars I and II, the Great Depression, stagflation) or imagined (inequality, the various isms). In either case new government programs, agencies, and policies are established, purportedly as temporary responses to the perceived emergency. But, as Higgs shows with rich historical detail, most of the temporary measures become permanent—either explicitly or in a revised form based on the original.

As I summarized Higgs’s thesis in an earlier paper:

Higgs (1987) noted that the expanded role taken on by the state during the New Deal period remained largely in place once the crisis passed, leading to a “ratchet effect” in which government agencies expand to exploit perceived short-term opportunities, but fail to retreat once circumstances change. Higgs (1987) suggests that government officials (regulators, courts, and elected officials), as well as private agents (such as business executives, farmers, and labor unions) developed capabilities in economic and social planning during crisis periods and that, due to indivisibilities and high transaction costs, tend to possess excess capacity in periods between crises. To leverage this capacity, they looked for ways to keep these “temporary” measures in place. Indeed, many New Deal agencies were thinly disguised versions of World War I agencies that had remained dormant throughout the 1920s—the War Industries Board became the National Recovery Administration, the War Finance Corporation became the Reconstruction Finance Corporation, the War Labor Board became the National Labor Relations Board, and so on. In many cases the charters for the New Deal agencies were mostly copied verbatim from World War I predecessors. Higgs’ (1987) ratchet effect illustrates that excess capacity in organizational capabilities isn’t necessary leveraged as soon as it is created, leading to smooth, continuous organizational growth, but may remain dormant until the right economic, legal, or political circumstances arise, leading to sudden, discontinuous jumps in organizational size or scope.

How will leviathan expand—temporarily and then permanently via the ratchet effect—in response to COVID-19? It’s too early to make any definite predictions, but we can make educated guesses based on experience and our knowledge of how governments work.

First, we can expect that government controls on travel and assembly will tighten. Whether via legislative approval, unilateral executive action, or judicial decree, the principle that governments must control movement and gatherings of people to prevent the spread of disease has been clearly established (or reestablished). As we know from Higgs’s work, the additional capabilities in this area acquired by the Centers for Disease Control and Prevention (CDC) and other agencies will likely be retained and put to use long after the crisis has abated. And further government intervention in the biomedical and healthcare sectors is virtually guaranteed.

The second likely long-term effect is ideological. Already we’re seeing the meme that the crisis has been caused (or at least exacerbated) by “neoliberalism”—that thanks to pervasive (?) libertarian ideology public health agencies were “hollowed out” and thus unable to respond in force:

Of course, we know that in the US the CDC initially prevented private labs from testing or developing new tests without FDA approval. More generally, public (and private) health in the US, as in most countries, operates within a tangled web of federal, state, and local regulations, subsidies, restrictions, and other controls.

It is impossible to know how a free market medical system would handle something like corona. But we will be told that there are no free market enthusiasts during a pandemic (and that, at best, those of us who favor property rights, markets, and prices should embrace “state capacity libertarianism”). The case for markets will have to be made, as Mises would say, ever more boldly.

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PPT - RUSSIAN ECONOMY PowerPoint Presentation - ID:1666640

 

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Bernie And Elizabeth’s Politics Of Envy – An INDEPENDENT Mind

Posted by M. C. on February 24, 2020

Politicians tap into envy for political ends. Politicians manipulate people to support policies which feed their primitive desire to strike down the rich and successful. This is why envy politics can be so destructive to society—it divides us rather than brings us together; it tears us down.

It makes you question their motives especially when you examine the record of capitalism and free markets. It has only been in the past 200 of the 100,000 years or so of human history that we have escaped mass poverty. If you think about it, poverty has been the natural condition of mankind since we evolved large brains and opposing thumbs.

The magic that happened was what we call capitalism or the free market system: individual liberty, private property, free markets, free trade, capital, entrepreneurship, and tolerance. These forces literally rocketed us into prosperity.

https://anindependentmind.com/2019/11/05/bernie-and-elizabeths-politics-of-envy/#more-979

Bernie Sanders and Elizabeth Warren are angry critics of free markets and rich people. They paint a bleak picture of America as a population of downtrodden, defeated people subjugated by billionaires and capitalism. The record is just the opposite, so one wonders why they and their supporters have this view of our world. The answer is that their anger is driven by envy and a desire to deprive successful people of the fruits of their success, a thing the envious have never achieved. Politicians exploit this primitive emotion for their own political ends which is the power to control us.

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“Envy” is “to wish that you had a quality or possession that another person has”. In psychological terms, it refers to an emotion which “occurs when a person lacks another’s [perceived] superior quality, achievement, or possession and either desires it or wishes that the other lacked it“. All major religions condemn envy (as in one of Christianity’s seven deadly sins).

The Wikipedia article cites envy as a major source of unhappiness (“It begins with the almost frantic sense of emptiness inside oneself…”). It is a powerful human emotion and it has the potential to motivate one to harm those who are the object of one’s envy.

The most interesting aspect of envy is that it changes and diminishes with age as we are more accepting of who we are, except for one thing: money. It was the only envious trait that increased with age.

Politicians tap into envy for political ends. Politicians manipulate people to support policies which feed their primitive desire to strike down the rich and successful. This is why envy politics can be so destructive to society—it divides us rather than brings us together; it tears us down.

The leading Progressive presidential candidates are scrambling over each other to exploit envy. To make sure I was not exaggerating their positions, I just read all of Elizabeth Warren and Bernie Sanders’ policies. Almost every issue they addressed was based on envy.

The core of their Progressive beliefs is that the game is rigged in favor of the rich and biased against workers, women, people of color, veterans, LGBTQ+, native Americans, convicts, immigrants, tenants, homeowners, the poor, students, farmers, the sick, and the aged. I might have missed some interest groups.

The problem, they say, is greedy capitalists whose debt-fueled corporations produce shoddy, overpriced products, and exploit underpaid, overworked, abused, and mistreated workers. These capitalists, a mere 1% of the population, have a stranglehold on Washington and use their political power to grab 99% of the wealth and squeeze the other 99% of honest hardworking people who futilely struggle against this corrupt system. Capitalists, they say, don’t want you to make a decent living, get an education, receive good medical care, have good housing, have economic security in your old age, or live in a clean environment.

Their solution is that the government, through a vast river of social programs funded by taxing the rich, can cure these problems and create a just, fair economic and political system (which, obviously, isn’t capitalism). As a corollary, they wish to confiscate and redistribute the wealth of the corrupt and disgusting “ultra-rich”.

If you doubt my summation of their programs and policies, go to Bernie and Elizabeth’s web sites and see for yourself.

Here is a snippet from Bernie’s website:

For too long, these greedy corporate CEOs have rigged the tax code, killed market competition, and crushed the lives and power of workers and communities across America. Year after year we’ve seen wages slashed and thousands of workers laid off, all while the richest corporate CEOs pay themselves huge bonuses.

These people hate capitalism, entrepreneurs, successful corporations, and rich (i.e., successful) people. Every one of their policies assumes an evil strawman (capitalism, billionaires, corporations) and imposes draconian rules to control this “corrupt” behavior.

Everything they say about capitalism is wrong. Perhaps you might think this is an arrogant, absurd thing to say, but their analysis of society, the economy, and capitalism is based on falsehoods, statistical manipulation, incorrect historical analysis, and theories that have been proven wrong throughout mankind’s history. Their Progressive policies will destroy our dynamic economy and condemn us to stagnation and poverty.

It makes you question their motives especially when you examine the record of capitalism and free markets. It has only been in the past 200 of the 100,000 years or so of human history that we have escaped mass poverty. If you think about it, poverty has been the natural condition of mankind since we evolved large brains and opposing thumbs.

The magic that happened was what we call capitalism or the free market system: individual liberty, private property, free markets, free trade, capital, entrepreneurship, and tolerance. These forces literally rocketed us into prosperity.

It is a myth that poverty is caused by capitalism, billionaires, and corporations. They are the fount of progress. Wealth is created by entrepreneurs like Steve Jobs who start enterprises that succeed in the marketplace. Jobs didn’t become a billionaire because he forced us to buy iPhones.

It is also a myth that progress is confined to the 1%. The belief that inequality is the cause of poverty is a myth. The whole concept of inequality in a free market society is irrelevant. Everyone in a capitalist society has benefited, even those at the bottom. There would be nothing more destructive to our economic well-being than eliminating billionaires: those who have become successful by meeting the needs of consumers and who have accumulated capital that feeds growth, innovation, and well-being.

Progressive politicians would have you believe that they have the wisdom, knowledge, and ability to govern us and radically change society for the good. All they ask is the power to do that. They assume that we in the private sector are fallible human beings, more prone to error than success. Yet somehow, we are fallible but they aren’t. You would have to be a college professor to believe that.

Here are some things to ponder. There has never been a regime with the powers as vast as those demanded by our Progressive politicians that has eliminated poverty and “inequality”. There has never been a regime with the powers as vast as those demanded by our Progressive politicians that has not degenerated into some form of economic malaise or totalitarianism.

It is important to see Progressive politicians like Bernie and Elizabeth for what they are: angry, envious people. Theirs is a story repeated often in history to the detriment of mankind: a messianic utopian vision that can only be accomplished by the coercive power of government. The more power they have, the less freedom and prosperity we have. If you don’t believe that then it would be hypocritical to not crush your smart phone.

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Another EV Exemption – EPautos – Libertarian Car Talk

Posted by M. C. on February 18, 2020

Interestingly, the proposed exemption would include electric cars manufactured by car companies that also build non-electric cars – a legislative nudge clearly meant  to “encourage” them to build more electric cars since they’d be able to sell them directly, too.

Which will also nudge these manufacturers in the direction of closing their dealerships and – eventually – selling only EVs.

They are very difficult to sell on a level playing field.

So the field must be tilted – in the direction of the EV.

https://www.ericpetersautos.com/2020/02/15/another-ev-exemption/

By eric

It’s apparently not enough to pay people to buy EVs – using other people’s money. EVs must be given additional artificial advantages – so that they may “compete” even more unfairly with non-electriccars.

Because, of course, they can’t compete on the merits.

The state of Colorado – which is becoming very much like the state of California, due to all the Californians who’ve fled California but brought California ideas with them to places like Colorado – is pushing to grant EVs an exemption from state law requiring new cars be sold through new car dealerships.

Such laws have been in force for decades and are favored by new car dealers – who don’t want to have to compete directly with the manufacturers, including the brands they sell themselves. A Ford dealership, for example, doesn’t want you to be able to buy a new Ford from Ford.

These must-buy-at-a-dealer laws are obnoxious, but granting an exemption just for electric cars is even more so.

If the exemption is granted, it would give EV manufacturers like Tesla an enormous advantage over other car manufacturers – who would still be required by law to sell their cars through a dealer network, with all the costs that involves.

Which would make it harder for them to sell non-electric cars.

Clearly – if you believe in the idea of a free market – every car maker ought to be free to sell its cars however it likes. Or rather, however buyers like. If people are willing to purchase directly from a manufacturer – and by doing so, pay less for it – why should they be prohibited by law from making the transaction?

The argument is that people need the assistance of dealership sales staff to help them figure out what to buy, to deal with the transaction itself – and to “prep” the car prior to delivery (i.e., remove the plastic from the seats and so on).

But people are allowed – loathsome term but an accurate term – to buy practically everything else online, from electronics to food to furniture.

Why should cars be any different?

Well, because of state laws – like the one which is still in force in Colorado – which forbid new cars to be sold this way.

 

Unless they’re electric cars.

Interestingly, the proposed exemption would include electric cars manufactured by car companies that also build non-electric cars – a legislative nudge clearly meant  to “encourage” them to build more electric cars since they’d be able to sell them directly, too.

Which will also nudge these manufacturers in the direction of closing their dealerships and – eventually – selling only EVs.

Consider it the Harrison Begeroning of non-electric cars. Like the eponymous character in Kurt Vonnegut’s short story, non-electric cars are too good. Electric cars can’t compete with them on any level except virtue-signaling and brief bursts of speed – paid for by long waits to recharge. They are very difficult to sell on a level playing field.

So the field must be tilted – in the direction of the EV.

First, by regulations that serve as de facto EV manufacturing requirements. The big one being “fleet average” miles-per-gallon minimums that force a car company that builds popular models like trucks and SUVs that don’t meet the minimums to build EVs – which use no gas – to up their “fleet average” numbers, in order to avoid fines for not meeting the MPG minimums.

Second by outright EV manufacturing quotas – a legal requirement that a certain percentage of every car company’s model lineup be electric or else they’re not allowed (that word, again) to sell any cars at all.

California has just such a requirement.

Third, pay people to buy electric cars – using other people’s money.

But even that hasn’t been enough – because electric cars are still not good enough to overcome what’s bad enough about them. In Colorado, only 25,000 EVs are put-putting (and waiting). This is less than 1 percent of all the cars registered in the state.

Enter the new exemption.

“I really feel like we needed to have parity for all EV manufacturers,” says Colorado State Senator Chris Hansen, one of the exemption’s main advocates.

He means an advantage for all EVs – at the expense of all non-EVs, which will cost comparatively more under this scheme because what you pay for one at the dealership will necessarily – by law – include the cost of the dealership. The building, the staff – the taxes – recouped in part by what the dealer earns by selling the cars.

Direct-selling of EVs eliminates all those costs, artificially reducing the cost of the EV – at the expense of non-EVs, which become more expensive to sell, in order to make up for the money not being made selling EVs through the dealership.

It’s just another means by which people who don’t want an electric car are being forced to pay for someone else’s electric car.   

With the end goal being that you won’t be able to buy anything other than an electric car – directly or otherwise.

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Ayn Rand’s Greatest Mistake – LewRockwell

Posted by M. C. on December 28, 2019

As I finally began to realize, business people, Rand’s heroic figures notwithstanding, generally aren’t the champions of laizze-faire and free market voluntary exchange many libertarians tend to assume. Often, quite the contrary. Assuming otherwise was Ayn Rand’s greatest mistake.

Merchants using government to stifle the competition etc. is nearly as old as government itself. Like this “seven or eight hundred years’” effort to stifle competition from rural textile production and early trading for example – – –

https://www.lewrockwell.com/2019/12/l-reichard-white/ayn-rands-greatest-mistake/

By

It was those heady early days of the Libertarian Movement. Icons like David Nolan, Murray Rothbard and James Libertarian Burns still walked the earth — and L. Neil Smith was just getting up a head of steam.

That’s when I got my first clue to Ayn Rand’s greatest mistake, though, as often happens, I failed to understand it at the time. It came as Larry Moser and I gave a talk to the Las Vegas Junior Chamber of Commerce (the “JCs“).

We presented two libertarian issues; heroin decriminalization to demonstrate civil liberties and voluntary exchange in free markets to demonstrate economic freedom. Since JCs are business folks, we figured we’d get static on decriminalization, but if we addressed the free-trade issues last, we would leave them happy.

Sure enough, immediately after the decriminalization presentation one JC stood up and in no uncertain terms told us we were crazy to propose such a thing. Before we could answer, another JC said, “Sit down Bob. They’re right.”

There was a murmur of assent from the rest of the thirty or so, presumably conservative, business folks in the audience.

Larry and I looked at each other amazed. We figured we were over the hump.

After our free market presentation, however, there was dead silence. We felt a chill. Someone murmured something like “You can’t have that sort of thing going on.” Another murmur of assent. What was going on here?

My second clue came a few years later at the Colorado LP Presedential Nominating Convention just outside Denver where Bill Huncher was squaring off against Ed Clark. It came in a story related to me by a libertarian, let’s call him “Jim,” running for office in Colorado.

Jim had managed to get an appointment with Adolph Coors Jr., purportedly a libertarian sympathizer himself. During small-talk, Coors expressed admiration and support for the Libertarian Party and its “bold pro-freedom platform” about which he proved himself well informed. However when Jim asked for a campaign contribution, Mr. Coors declined.

If you were elected, you’d eliminate the ICC (Interstate Commerce Commission) wouldn’t you?” he asked. Jim responded that, in accordance with the LP Platform, indeed he would.

Mr. Coors explained that because of a regulatory technicality, Coors trucking subsidiaries didn’t have to “dead-head” and could bring their trucks back loaded, something ICC didn’t permit other trucking companies to do at the time.

ICC literally defined a truck returning full as “illegal competition” with the railroads. Coors Jr. forth-rightly told Jim that elimination of the ICC would thus weaken Coors’ competitive advantage and so he couldn’t justify supporting Libertarian candidates.

And another clue: In the late 1970s, developers in Lake Tahoe wanted to build a hotel/casino they were calling “The Park Tahoe,” but an environmental organization calling itself approximately “The Society to Preserve Lake Tahoe” (SPLT) blocked them every step of the way.

The main movers and shakers behind SPLT weren’t, however, environmentalists; they were Harrah’s, Harvey’s, Barney’s, Sahara Tahoe, and the other hotel/casino operators already established in the Stateline-South Shore area. Had all these casino organizations suddenly become environmentally conscious?

Shortly after the grand opening of Park Tahoe — which later became Caesar’s Tahoe — a local rancher applied for permits to build yet another hotel/casino across the street. Would you care to guess the identity of the newest environmentally conscious member of SPLT who zealously led the fight against this newest environmental hazard?

Park Tahoe of course!

As I finally began to realize, business people, Rand’s heroic figures notwithstanding, generally aren’t the champions of laizze-faire and free market voluntary exchange many libertarians tend to assume. Often, quite the contrary. Assuming otherwise was Ayn Rand’s greatest mistake.

Merchants using government to stifle the competition etc. is nearly as old as government itself. Like this “seven or eight hundred years’” effort to stifle competition from rural textile production and early trading for example – – –

“(h) The countryside was cut out of trade in the Middle Ages.
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‘Up to and during the course of the fifteenth century the towns were the sole centers of commerce and industry to such an extent that none of it was allowed to escape into the open country’ (Pirenne, _Economic and Social History_, p.169). ‘The struggle against rural trading and against rural handicrafts lasted at least seven or eight hundred years’ (Heckscher, _Mercantilism_, 1935, Vol. I, p. 129). ‘The severity of these measures increased with the growth of ‘democratic government‘ . . . . ‘All through the fourteenth century regular armed expeditions were sent out against all the villages in the neighborhood and looms or fulling-vats [in which cloth was dyed] were broken or carried away.’ (Pirenne, op.cit., p. 211).” -Karl Polanyi, The Great Transformation. (Boston: Beacon Press 1957), p. 277

You have to admit a century of loom-stealing and fulling-vat smashing shows persistence and dedication. And notice the connection to ‘democratic government.’

Seminal Austrian-school economist Ludwig von Mises completely understood the broader context of vested economic interests using government for their own ends, which of course, has been quite thoroughly perfected today – – –

The consumers do not care about the investments made with regard to past market conditions and do not bother about the vested interests of entrepreneurs, capitalists, land-owners, and workers… It is precisely the fact that the market does not respect vested interests that makes the people concerned ask for government interference. –Ludwig von Mises, Human Action

So, when vested interests ask for government interference — to protect themselves from markets and competition — they have to do it in cahoots with politicians.

To make this work, they regularly disguise the interference as “regulation.” They pretend “regulation” is to protect us “consumers” from businesses instead of the other way around.

You can catch a surprising glimpse of just how remarkably successful vested interests are at using politicians to get their disguised and bogus protective “regulation” here:

UNCOMMON SENSE: What government regulation is REALLY used for

HERE for updates, additions, comments, and corrections.

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How Government-Guaranteed Student Loans Killed the American Dream for Millions – Foundation for Economic Education

Posted by M. C. on December 4, 2019

The government’s backing of student loans has caused the price of higher education to artificially rise; the demand would not be so high if college were not a financially viable option for some.

He is talking about Fed (“government”) money.

https://fee.org/articles/how-government-guaranteed-student-loans-killed-the-american-dream-for-millions/

n Basic Economics, Thomas Sowell wrote that prices are what tie together the vast network of economic activity among people who are too vastly scattered to know each other. Prices are the regulators of the free market. An object’s value in the free market is not how much it costs to produce, but rather how much a consumer is willing to pay for it.

Loans are a crucial component of the free market because they allow consumers to borrow large sums of money they normally would not have access to, which are later paid back in installments with interest. If the borrower fails to pay back the loan, the lender can repossess the physical item the loan purchased, such as a house or car.

Student loans are different. Education is abstract; if they’re not paid back, then there is little recourse for the lender. There is no physical object that can be seized. Student loans did not exist in their present form until the federal government passed the Higher Education Act of 1965, which had taxpayers guaranteeing loans made by private lenders to students. While the program might have had good intentions, it has had unforeseen harmful consequences.

The Problem with Government-Backed Student Loans

Millennials are the most educated generation in American history, but many college graduates have tens of thousands of dollars in debt to go along with their degrees. Young Americans had it drilled into their heads during high school (if not earlier) that their best shot—perhaps their only shot—at achieving success in life was to have a college diploma.

This fueled demand for the higher education business, where existing universities and colleges expanded their academic programs in the arts and humanities to suit students not interested in math and sciences, and it also led to many private universities popping up to meet the demands of students who either could not afford the tuition or could not meet the admission criteria of the existing colleges. In 1980, there were 3,231 higher education institutions in the United States. By 2016, that number increased by more than one-third to 4,360.

Secured financing of student loans resulted in a surge of students applying for college. This increase in demand was, in turn, met with an increase in price because university administrators would charge more if people were willing to pay it, just as any other business would (though to be fair, student loans do require more administration staff for processing).  According to Forbes, the average price of tuition has increased eight times faster than wages since the 1980s. In 2018, the Federal Reserve estimated that there is currently $1.5 trillion in unpaid student debt. The Institute for College Access and Success estimates that in 2017, 65 percent of recent bachelor’s degree graduates have student loans, and the average is $28,650 per borrower.

The government’s backing of student loans has caused the price of higher education to artificially rise; the demand would not be so high if college were not a financially viable option for some. Young people have been led to believe that a diploma is the ticket to the American dream, but that’s not the case for many Americans.

Financially, it makes no sense to take out a $165,000 loan for a master’s degree that leads to a job where the average annual salary is $38,000—yet thousands of young people are making this choice. Only when they graduate do they understand the reality of their situation as they live paycheck-to-paycheck and find it next-to-impossible to save for a home, retirement, or even a rainy-day fund…

How to Fix the Problem

There are two key steps to addressing the student loan crisis. First, there needs to be a major cultural shift away from the belief that college is a one-size-fits-all requirement for success. We are beginning to see this as many young Americans start to realize they can attend a trade school for a fraction of what it would cost for a four-year college and that they can get in-demand jobs with high salaries.

Second, parents and school systems should stress economic literacy so that young people better understand the concepts of resources, scarcity, and prices. We also need to teach our youth about personal finances, interest, and budgeting so they understand that borrowing a large amount of money that only generates a small level of income is not a sound investment.

Finally, the current system of student loan financing needs to be reformed. Schools should not be given a blank check, and the government-guaranteed loans should only cover a partial amount of tuition. Schools should also be responsible for directly lending a portion of student loans so that it’s in their financial interest to make sure graduates enter the job market with the skills and requirements needed to get a well-paying job. If a student fails to pay back their loan, then the college or university should also share in the taxpayer’s loss. Only when the demand for higher education decreases will we witness a decrease in its cost.

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