Trump's Road to Socialism

Trump's Road to Socialism

07/24/2018Tho Bishop

Today the Trump administration is announcing a $12 billion bailout plan for farmers impacted by the response from the Trump administration’s tariffs. As Politico reports:

The administration's plan is expected to use two commodity support programs in the farm bill, as well as the Agriculture Department’s broad authority to stabilize the agricultural economy during times of turmoil by buying up excess supply. The plan is also expected to focus on providing aid to the dairy sector in particular, one of the sources said.

The plan has been in the works for months. It seeks to ensure that U.S. farmers and ranchers — a key constituency for President Donald Trump and Republicans — don’t bear the brunt of an escalating trade fight with China, the European Union and other major economies as the administration pursues an aggressive course to rebalance America's trade relationships.

Trump's moves to slap tariffs on imports from some of America‘s largest foreign buyers have prompted retaliation against U.S. farm goods like pork, beef, soybeans, sorghum and a range of fruits. The administration's trade aid plan is also a bid to shore up support among a slice of the rural electorate ahead of the midterm elections.

In spite of the President’s claim that tariffs are “the greatest,” and trade wars are “easy to win,” the economic backlash was easy to foresee. In fact, as the political success Bernie Sanders and Alexandria Ocasio-Cortez have brought “democratic socialism” into the mainstream of the Democratic Party, Trump’s economic nationalism threatens to pave a road to the same destination.

After all, Trump’s tariffs are not only a new tax for Americans, but a policy of directly picking winners and losers in the economy. The interests of steel workers, for example, are being placed above the interest of consumers and farmers. This leads to the government using tax dollars to prop up farmers. Of course this spending means that tax-paying consumers are hit yet again, with their tax dollars being used for this new welfare program.

Government interventionism doesn’t simply stop there. The natural result of these new government barriers is for businesses to seek ways around them, such as Harley’s decision to move some manufacturing to Europe. This, of course, sparked backlash from President Trump, threatening further retaliation for such a move. As we've seen time and time again, the more Trump digs in to his support for protectionism, the more he will seek to interfere with the actions of individual companies.

In Omnipotent Government, Ludwig von Mises wrote:

Present-day protectionism is a necessary corollary of the domestic policy of government interference with business.

The opposite is also true: The domestic policy of government interference with business is a necessary corollary of present-day protectionism.

The result is an economy that increasingly replaces the market with state control. This is precisely why Mises wrote extensively about how escalating economic interventionism led to socialism. As he wrote in Human Action:

All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which-from the point of view of their authors' and advocates' valuations—is less desirable than the previous state of affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it.

Of course defenders of the President will argue that Trump’s tariffs are simply meant as a negotiating ploy designed to give America “better trade deals.” The future is impossible to predict, perhaps that will be the end result. Memes about 4d chess, however, are of little help to those Americans hurt by Trump’s tariff policy. And increasingly the Trump administration has signaled its willingness to embrace a prolonged trade war.

Such policies are, in the long run, as great a threat to the American economy as that posed by the Sanderistas.

Image source:
http://coastguard.dodlive.mil/2017/08/president-trumps-birthday-message-to-the-coast-guard/
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Restaurant Revitalization Fund: Government Remaking American Society

4 hours agoGeorg Grassmueck

The Small Business Administration creation of the Restaurant Revitalization Fund (RFA) under the American Rescue Plan Act is another government program in response to the covid pandemic that has the potential for abuse and misuse, similar to the Paycheck Protection Program (PPP). However, what is even more troubling about the RFA is the increased politicization of the application process through the adding of eligibility criteria on race and gender in a bureaucratic overreach. The RFA is the next step in government re-creating American society in a new image, an image of division based on racial and gender group mentality.

The RFA provides funding to help restaurants and other eligible businesses keep their doors open. The program provides restaurants with funding equal to their pandemic-related revenue loss up to $10 million per business and recipients are not required to repay the funding as long as funds are used for eligible uses. The RFA is another example the “rescuer twice over” policy, in Hoppe’s words, of shutting down businesses over covid fear, saving the general public from the pandemic, while at the same time rescuing businesses from bankruptcy by giving away money at a cost to taxpayer. Even more concerning is the addition of new eligibility criteria based on racial and gender group. It is an attack on the core principle of equality when the restaurant revitalization fund states:

SBA will prioritize awarding funds to small businesses at least 51 percent owned and controlled by individuals who are women, veterans, and/or socially and economically disadvantaged individuals.

The focus of the RFA on prioritizing funding based on business characteristics that have nothing to do with the ability to serve customers is bizarre. How do businesses qualify for the RFA? An applicant must self-certify on the application that they meet eligibility requirements for a socially and economically disadvantaged businesses? According to the SBA website:

  • Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.
  • Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.

According to an article by Inc. the SBA received 266,000 applications requesting $65 billion. About 147,000 applications came directly from women, veterans, and socially and economically disadvantaged business owners, requesting $29 billion.

The core principle of equality is put ad absurdum when a government program creates a priority group for applicants with a clear preference for groups of society over other groups that have nothing to do with the ability to provide services to consumers.

Government officials in the Small Business Administration do not seem to understand competition in a market economy or the role of government should play in the market. Officials in the SBA should read what Mises wrote in Human Action on competition, which offers a clear answer on how the RFA eligibility criteria are counter to a free market. Mises attacks governments’ willingness to interfere in the market when he writes,

[C]atallactic competition is not open to everybody in the same way. The start is much more difficult for a poor boy than for the son of a wealthy man. But consumers are not concerned about the problem of whether or not the men who shall serve them start their careers under equal conditions. They only interest is to secure the best possible satisfaction of their needs. (p. 276)

Consumers only care for good food and good service when frequenting a restaurant or bar. Consumers generally do not care what the ownership structure of the business may or may not be, because as Mises writes about consumers:

They look at the matter from the point of view of social expediency and social welfare, not from the point of view of an alleged, imaginary, and unrealizable “natural” right of every individual to compete with equal opportunity.

In all fairness, the Restaurant Revitalization Program, grants “more fortunate” restaurants that have the misfortune to be owned by more than 50 percent “more fortunate” owners to apply for a grant after the first twenty-one days. So, for example, a restaurant owned by a recent female immigrant to this country that is backed by wealthy investors who strongly believe in her idea to fund her establishment is somehow less desirable than a restaurant owned by a majority of females. How do you even self-certify that you have been subjected to racial or ethnic prejudice or cultural bias or that you are a socially disadvantaged individual? Do government officials truly believe that by prioritizing certain businesses based on the ownership structure, consumers will be better served? By introducing of those eligibility criteria, government only serves political interests at the cost of less fortunate businesses with the “incorrect” ownership structure.

In Profit and Loss Mises attacks the idea of a government bureaucrat interfering in the production decision when he writes:

Entrance into the ranks of the entrepreneurs in a market society, not sabotaged by the interference of government or other agencies resorting to violence, is open to everybody.

But more importantly, Mises makes it clear that businesses providing goods and services demanded by consumers will not have issues with funding:

Those who know how to take advantage of any business opportunity cropping up will always find the capital required. For the market is always full of capitalists anxious to find the most promising employment for their funds and in search of the ingenious newcomers, in partnership with whom they could execute the most remunerative projects.

Bureaucrats at the SBA believe they are far better equipped to make decisions about what businesses should be funded than the market. However, Mises writes that:

The task of the entrepreneur is to select from the multitude of technologically feasible projects those which will satisfy the most urgent of the not yet satisfied needs of the public. Those projects for the execution of which the capital supply does not suffice must not be carried out.

The market is always crammed with visionaries who want to float such impracticable and unworkable schemes. It is these dreamers who always complain about the blindness of the capitalists who are too stupid to look after their own interests.

The SBA and government in general would be wise to follow Mises’s conclusion:

The consumer chooses what, as he thinks, satisfies him best. Nobody is called upon to determine what could make another man happier or less unhappy.

The only question remaining is: Why do government officials feel the need, the right, the obligation to interfere in the market? The answer may be found in Robert Higgs’s book Against Leviathan: Government Power and Free Society. Government bureaucrats have the tendency to take advantage of “emergencies,” in this case, the covid-19 pandemic, to consolidate and grab even more power. Power to reshape the American society to their liking and preconceived ideal world of justice. The Restaurant Revitalization Program may be the first step in the governments’ desire to force individuals and business into a “perfect” society.

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It's Not Just Powell

7 hours agoRobert Aro

As the face of the organization, Federal Reserve Chair Jerome Powell should bear the brunt of anyone’s perturbation over the central bank’s anti-capitalism stance. However, it’s not just Powell who seems to be out of touch with the majority of Americans. On Thursday, the newest Fed Governor, Christopher J. Waller, gave a speech on his outlook and monetary policy at Drexel University.

Housing is becoming less affordable, and that price increase has the biggest effect on low-income individuals and families who have struggled the most since last spring and who are always the most vulnerable to rising rents and home prices.

So far, so good! In fact, it’s refreshing that a central banker acknowledges how those with the lowest incomes have the toughest times amid rising prices. Unfortunately, he follows with:

Prices for lumber and other inputs for housing are skyrocketing, and while that occurrence is not having a significant effect on inflation, it is limiting the supply of new homes and helping feed the house price boom.

Despite acknowledging lumber and other inputs are “skyrocketing,” it’s unclear why he claims they don’t have significant effects on inflation. It’s more troubling he doesn’t seem to understand the Fed’s role in the increase in housing prices. Neither artificially low rates nor many trillions of dollars in mortgage-backed securities and US treasuries owned by the Fed make it into his analysis of the housing market.

He concludes, fortunately, the banking system is “strong and resilient” and that:

Nevertheless, I am watching this sector closely for signs of stress and will continue to do so.

One would think if the banking sector was in good shape, the Fed would no longer need to continue with its highly accommodative policy and various intervention strategies.

The day before the Governor’s Speech Federal Reserve Vice Chair Richard H. Clarida similarly left baffling remarks at an economic symposium in Washington, DC about what the economy faced in 2020:

more than 22 million jobs were lost, wiping out a decade of employment gains; the unemployment rate rose from a 50-year low of 3.5 percent in February to almost 15 percent in April; and inflation plummeted…

Consider the context behind the quote, paying special attention to the phrase: “and inflation plummeted…”

According to Clarida, last year, when 22 million people were out of the workforce (largely due to forced government shutdowns) the prices of goods and services decreased.

To the Vice Chair, it was bad that, in the middle of the greatest economic crisis since the Great Depression, prices went down!

According to his (and the Fed’s) logic, if prices were able to somehow increase, life would have been better for the nation as a whole. Should we use the fallacy of the Phillips Curve? If prices were able to increase more during the crisis, more jobs would have been created. There is a trade off between inflation and employment.

It doesn’t take an advanced degree in economics to understand that for the 22 million people unemployed, the last thing they need are further price increases. As for those fortunate enough to have kept their job during the crisis, a very real question can be asked:

Who, other than central bankers, actually want prices of goods and services to perpetually rise?

College tuition, internet, cable, gas, food, travel, medical, your Netflix subscription to name a few... when one just stops to think, it doesn’t make sense how we live in a world where the unaffordability of life and loss of the dollar’s purchasing power is considered a virtue by society’s best and brightest.

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Biden's Embrace of the Military Establishment

Despite President Biden’s criticism of virtually every aspect of the U.S. establishment he has long been a part of, and whose policies he frequently played a principal part in authoring, as well as his stated intention of enacting sweeping reforms during his presidency, one part of the U.S. establishment is clearly safe from any such revisitation or revision: the military industrial complex.

Even with the country nearing 28 trillion dollars in debt, the administration has not seen fit to reevaluate the Pentagon’s budget, though by its own conservative reporting the Pentagon spends a staggering 1.3 million dollars per hour. In fact, he wants to increase its budget still further.

Biden’s choice for Secretary of Defense, Lloyd Austin, is equally telling of his commitment to the continued preservation of the fiscal-military state. A decorated Army Commander, Austin left the service in 2016 to take a job on the board of Raytheon, a long-standing pillar of the military industrial complex. It is unsurprising, then, that in the hundred days since his tenure began Austin has expressed his commitment to the continued projection of U.S. force abroad, in the South China Sea, Middle East, and Eastern Europe.

In more classic, Orwellian doublespeak Biden’s insistence on democracy promotion at home and in Myanmar has been coupled with simultaneous recommitment to the totalitarian Saudi regime – as well as to the continued tolerance of equally undemocratic regimes around the world in order to preserve U.S. basing rights in places like Egypt, Bahrain, the UAB, Burundi, et cetera. Depending on the definition one uses to describe a “base,” the U.S. maintains approximately 800 foreign military bases according to its count, though this number can be stretched to over 1,000 if smaller communications, refueling, special operations command posts, or other such “lily-pad” installations are included. Apart from the gross violations of human rights these regimes regularly precipitate, simply maintaining these bases costs, again according to its own internal estimates, approximately 25 billion dollars per yearThis to say nothing of the fact that the “forward-presence” of U.S. bases abroad has long served as a focal source of anti-American sentiment, and likely makes us less safe – not more.

Astounding though they are, these are not even the heights of the gross inefficiency of U.S. military spending or impoverished strategic thinking. Apart from systematically overpaying for its procurement of basic items, first exposed in the 1980s by the Packard Commission, as Andrei Martyanov has detailed in his recent detailed survey, the problem of inefficient expenditures extends even to its most important technologies. To take just one example, with a price tag of over 14 billion dollars apiece, a single one of the U.S. Navy’s new Columbia-class submarines costs more than the entire fleet of new Yasen-class Russian submarines, whose capabilities are in the final analysis of stealth and destructive power virtually identical – and this is to make no mention of the vaunted Lockheed Martin F-35 fighter program, one of the greatest boondoggles in corporatist history, with a projected cost now totaling over 2 trillion dollars and operating at a cost of nearly 40k an hour.

Finally, in terms of hypocrisy, with his administration’s insistence on intruding into the lives of U.S. citizens and business owners with Green New Deal-inspired regulations, the U.S. military remains the world’s single largest polluter.

So just so we’re all on the same page: we have no money and need to raise taxes; democracy is very important; and U.S. citizens and business owners need to work a lot harder to save the planet.

Got it. 

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The Role of the Nuclear Family in Western Europe's Economic Development

05/17/2021Ryan McMaken

Though rarely stated the nuclear family—as opposed to the extended family or clan—played a seminal role in the growth of Western capitalism. Success in a modern economy requires us to trust strangers and think creatively. These traits were nurtured by the individualistic ethos of the medieval nuclear family. Not only were nuclear families, child-centered, but there was no obligation for parents to provide children with an inheritance. As such, children were motivated to plan long-term and work hard. Upon transitioning to adulthood, one was expected to exit the family home by relocating elsewhere and acquiring relevant skills.

Moreover, in northwestern Europe working prior to marriage was the norm for both men and women. Because people often pursued marriage at a later age, historians dubbed this development the Western European Marriage Pattern. This idea was popularized by John Hajnal who noted that since the sixteenth century parts of Europe have been characterized by late female marriage, high female celibacy, and the establishment of separate households for married couples resulting in the dominance of nuclear families.

Human capital formation also became an important pillar of the nuclear family. Parents were socially ambitious and wanted their children to eclipse them in status, so investing in education became a priority. Sociologist Brigitte Berger in her pathbreaking text The Family in the Modern Age opines that nuclear families could adapt to changes easier because they were freed from the constraints of the traditional extended family. So, essentially, the flexibility of the nuclear family stimulated creative thought that could unleash innovations.

Without a doubt, the transition to industrial capitalism for Western societies was more efficient, because the prevalence of the nuclear family minimized reliance on clans. Since citizens were no longer beholden to the strictures of the extended family, one had to develop a universal morality transcending loyalty to kin groups. So consequently, trusting strangers was not viewed as unfavorable. By increasing trust, the universal morality engendered by the nuclear family made it profitable to form business relationships with foreigners. Even in contemporary societies tribalism cultivates low outgroup trust and by extension prevents the emergence of pro-market institutions. Taking these factors into account the importance of the nuclear family in generating widespread trust is indeed an achievement.

Similarly, courtesy of economist Avner Greif, there is hard data indicating that medieval societies dominated by kinship groups were less efficient: “Monasteries, fraternities, and mutual-insurance guilds provided social safety nets against famine, unemployment, and disability. Most of the population belonged to such fraternities and guilds, at least in England. Because corporations provided social safety nets that were alternatives to those provided by kinship groups, they enabled individuals to take risks and make other economic decisions without interference by members of such groups. Relative to a society dominated by kinship groups, the nuclear family structure increased capital per worker by encouraging later marriages and fewer children, and it led to a more efficient distribution of labor and knowledge by facilitating migration.”

Interestingly, apart from the role of the nuclear family in fostering impartial norms, anthropologist Peter Frost suggests that evolution may have selected for weaker kinship ties in the west: “In North and West of the Hajnal line, kinship has been a weaker social force in relations since at least the early Middle Ages and at least the Mesolithic. Because of this weaker kinship environment, northwest Europeans more through the lens of universal moral rules. The new mindset eventually developed within the bounds of phenotypic plasticity, but over time it would have been gradually hardwired through selection for independent social orientation and universal rule adherence.”

One cannot appreciate the rise of capitalism in the West without studying its relationship to the nuclear family. Studying the family can yield important insights into the socio-cultural evolution of society and capitalism. Economists commit a massive disservice by de-emphasizing the relevance of the family as an economic institution.

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These Are the Real Effects of a Minimum Wage Law

05/14/2021Dakota Hensley

In recent years, there's been a movement among the American Left to increase the minimum wage to $15 an hour. This is under the assumption that having a minimum wage helps workers and makes corporations pay their fair share. However, this is the opposite effect of a minimum wage, especially one that high. It keeps low-skilled (often black or other ethnic minority) workers from finding employment, forcing them to depend on government, and leads to closures of small businesses (especially black-owned businesses) which benefits corporations. To truly help workers and small businesses, we must abolish the minimum wage.

In 1931 came one of the first minimum wage laws, the Davis-Bacon Act. It required $2,000 (about $35,000 today) for contractors working on public works projects. It was introduced by Pennsylvania Senator and former Secretary of Labor James Davis and New York Congressman Robert Bacon. Davis was a eugenicist and Bacon was a racist who introduced a labor law because a Veterans' Bureau Hospital in his district had been built by black workers. As with Davis' other bill, this act was designed to keep low-skilled workers (mostly black) from being employed. The other Congressmen made it clear this was why they backed Davis-Bacon. Missouri Congressman John Cochran reported that he'd received "numerous complaints in recent months about southern contractors employing low-paid colored mechanics" and his colleague, Congressman Clayton Allgood, said that "cheap colored labor...is in competition with white labor throughout the country." Thirty years later, in the 1960s, minimum wage laws again caused black people to lose their jobs. Farmers were required to pay $1 an hour (about $9 today) instead of the $3.50 a day (about $31 today) they were being paid before. This led to thousands losing their jobs, causing one man's wife to say the dollar meant nothing if her husband didn't have a job.

While minimum wage advocates don't advocate for it for the racist reasons of Davis and Bacon, the effects are still discriminatory towards black people. Black workers tend to occupy low-skilled or semi-skilled trades. Immigrants, inner-city minorities, and young people also make up the majority of low-skilled trades. Making the hiring of these workers more expensive leads to poverty, homelessness, crime, and a host of other societal ills. Without a minimum wage, these low-skilled workers and their employers can agree on a wage and the worker can work as long as he or she wants. Once they have the skills (from, say, attending a trade school) and the work experience, they can move on to greener pastures to find an employer willing to pay them more. A minimum wage puts the employer in control, giving them plenty of reasons not to hire the lower-skilled. Without it, the worker is in control.

If the minimum wage is anti-corporate, why does Amazon, Google, Target, and Hobby Lobby support a $15 an hour minimum wage? It keeps out competition. They can afford almost $30,000 per employee. Small businesses can't. As USA Today notes, "The path would be clear for even more market dominance of big business and Wall Street, gained at the expense of Main Street." People couldn't buy local and corporations could expand their power.

This is especially true of black-owned small businesses. Black businesses have less money to find employees and must often use their own money to fund their business. They have less employees as a result. Imagine if they had to pay $30,000 per employee out of their own pocket. They'd lose the few employees they already have. That would kill black entrepreneurship and doom black communities. This could lead to gentrification where black communities become white and the original black residents are kicked out.

According to the CBO, a minimum wage hike would lift 900,000 out of poverty but put 1.4 million out of work. Young, less educated people account for a disproportionate share of those job losses. These low-skilled workers may not have the skills to get another job. We forget what a low-skilled job is. It's dishwashing, being a retail cashier, being a receptionist, and being a laundry attendant. It's not plumbing or automotive mechanics or carpentry. Those jobs pay tens of thousands. Those jobs require trade school, not just a high school diploma. A minimum wage punishes those who were born poor and weren't given the opportunities to go to trade school or college and get those skills.

The best way to help labor is to allow workers to negotiate the wages they want, not to apply a one-size-fits-all wage. The best way to save small and minority-owned businesses is not to make every employee an expensive commodity. Minimum wage laws hurt low-skilled, often black, workers. Implementing these laws lead to the growth of big business at small business' expense. To be truly pro-labor and anti-corporate, we need to abolish the minimum wage.

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A Synthetic Anarcho-Capitalist Perspective on Public Goods

Among the several misgivings non-anarcho-capitalist people might have with anarcho-capitalism, there is the issue of public goods. Public goods, in fact, are supposed to be those goods which free markets cannot efficiently supply and allocate because of two properties: non-rivalry, i.e., the fact that A’s consumption of (public) good X does not impair B’s consumption of it; and non-excludability, i.e., the fact that A, the owner of (public) good X, cannot prevent B from enjoying it as well.

So, the argument goes, public goods supposedly need to be produced by governments; otherwise, they would be underproduced or overused—that is, free markets would fail to deliver optimal (i.e., desired) quantity and allocation. However, even setting aside historical instances of private provision of alleged public goods,1 it is the theory itself—as well as the alleged necessity for their governmental production—that relies on shaky and fallacious premises, as I will briefly summarize.

First, consider that a truly non-rivalrous good is not even an economic good itself: nobody, indeed, would face the need to economize it. In fact, if both A and B can consume (public) good X without reducing the satisfaction each one of them can derive from it, then X is no longer a scarce means that must be allocated efficiently—i.e., it is no longer an object of economic choice and action. On the contrary, X could be considered a “natural condition of human welfare".2 But, if X is so abundant that neither conflicts nor tradeoffs would arise when both A and B are eager to employ it, then A and B need not worry about any potential underproduction, squandering, or misallocation of X itself. Indeed, X will always be available to A and B for whatever purpose they might need it.

That said, moreover, oftentimes so-called public goods—when scrutinized more carefully—actually feature rivalry: hence, conflicts and tradeoffs are bound to arise when it comes to their employment. Therefore, governments themselves, while allocating such goods, must be guided by some principle. Since such a principle is not (by definition) the free-market price mechanism blamed by public-goods theorists, then governmental production and allocation of public goods would require some ethical principle justifying it—that is, some justification for coerced exchange between subjects and governments, i.e., taxation and government expenditures.3 However, such an ad hoc ethical principle would be outside the realm of value-free economic theory.

Second, what about non-excludability? Here, the anarcho-capitalist answer is straightforward: governments cannot introduce coercive mechanisms preventing the depletion of (rivalrous) non-excludable goods.4 In fact, on what ground could bureaucrats maintain that depleting a scarce resource today is worse than doing so tomorrow—or in one year, in one century, etc.? Of course, they could not do so on the economic-theoretical ground.5 Why? There are two main reasons.

Reason number one: economics does not allow aggregating individual utilities into a social welfare function (utilities are, in fact, unmeasurable, and you cannot perform on them such mathematical operations as additions, averages, etc.). Hence, aprioristic assessments about the social (dis)utility of consuming a (scarce) non-excludable resource today as opposed to tomorrow—or of having a (scarce) non-excludable resource consumed by a group of people rather than a different one—cannot be performed on an economic-theoretical ground.

Reason number two: economics does not allow interpersonally comparing the utility of one person (who, say, is depleting the scarce resource today) with the utility of another one (who, say, is not eligible to deplete the resource today, and hence would be depleting it tomorrow). Thus, economics has nothing to say about the distribution of a (rivalrous) non-excludable resource among individuals—i.e., economists cannot know whether (public) good X is desired more eagerly by A or B, and thus have nothing to say about which one among A or B should be entitled to consume it.

Therefore, again, since public-goods theorists maintain that the free-market price mechanism is not suitable for allocating (scarce) non-excludable resources, then some sort of ethical justification for governmental coercive provision would be required. However, again, this moves us beyond the scope of value-free economic theory. Economic theory, in fact, cannot proffer value-judgements about the allocation, production, consumption, etc., of scarce resources—this being, instead, the realm of ethics and aesthetics.6 Economics can, at most, show the most efficient arrangement to achieve the desired allocation of resources and satisfaction of (given) ends.

Moreover, oftentimes so-called public goods are actually both rivalrous and excludable;7 hence, they can be homesteaded according to Lockean-Rothbardian ethics—i.e., the first one employing (or better: fencing) them is to become their owner. Thus, there is no need for entrusting governments with public goods’ production: the free market, once a just ethical system of assigning property rights is in place, can do that more efficiently—via the price mechanism.

Third, as we already hinted, even if such a thing as pure public goods were to exist, this would not suffice to establish the case for their governmental—i.e., coercive—production.8 In fact, governments can produce public goods only if financed via taxation. But then, what gives governments the right to take away resources from citizens—i.e., taxes—in order to produce public goods? There are, indeed, at least two issues with such an ethical stance legitimizing governmental provision of public goods.

Problem number one: government, in order to produce and allocate public goods, would invade—via taxation—the legitimately acquired property of its subjects. In fact, if I can no longer enjoy my property to the extent I deem fit—but rather government is to barge in, take it away from me, and employ it as it wish—then government becomes (against my consent) the true owner of the resource. But this would be a prima facie theft—and, unless we want to advance an ethics legitimizing theft, aggression, and invasion, we must recognize this option as deeply unethical.

Problem number two: what if the (public) goods that government is supplying are not goods at all for some taxpayer—being “bads” instead? That is, what if government is forcing its subjects to consume goods they actually abhor?9 For instance, I hate watching TV: were government to tax me in order to finance public provision of TV programs, then I would be dissatisfied twice—the first time being deprived of a share of my income, the second time being subjected to junk TV programs.

Fourth, and last: any coerced exchange is always suboptimal with respect to a free one. In fact, why do people (freely) exchange? They do so because they know they are psychically profiting from it. If A performs an exchange with B, then we can conclude that both A and B are happier (after the exchange) than they were beforehand—i.e., they revealed their preference for such a free exchange through their action. But things are totally different when governments are involved in coercively supplying—via taxation—public goods. As Hoppe wrote,10

“the value of the public goods is relatively lower than that of the competing private goods because if one had left the choice to the consumers (and had not forced one alternative upon them), they evidently would have preferred spending their money differently (otherwise no force would have been necessary)”.

Conclusion

Public-goods theory is no compelling argument against anarcho-capitalism. Public goods are, oftentimes, resources that are rivalrous; when they are not, they nonetheless can be oftentimes produced on the free market—and be rendered excludable applying the standard libertarian homesteading principle. Moreover, it is impossible to ethically justify governmental production of public goods—unless we consider as legitimate both theft and coerced dissatisfaction of consumers. Lastly, consumers would always prefer at least one private good—acquired via uncoerced free exchange—over any conceivable governmental public good—produced via coerced taxation.

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An Interview with Vaclav Klaus on Europe's Lockdowns

05/14/2021Claudio Grass

Some readers might enjoy this this interview I conducted conducted with Václav Klaus, the former Prime Minister of Czech Republic, on the current Covid-19 situation and the prospect for human freedom. He has a rich perspective and experience having spent most of his life under a communist system and shares his views freely.

This interview is was conducted as apart of a full length documentary, Planet Lockdown, and is being released in advance of the film for those that wish to learn more about the world and where we are.

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Denying Reality Leads to Tyranny and Societal Failure

05/14/2021Patrick Barron

The common thread that connects failed societies, from Weimar Germany to the Soviet Union, is an almost pathological insistence on denying reality. Weimar Germany denied that masses of printed money would destroy civilized society. The Soviet Union insisted that Soviet Man would emerge spontaneously from the ashes of capitalist society. Weimar Germany spawned Nazi Germany. Nazi Germany was completely destroyed, both physically and politically, by the World War II Allies. Mercifully, the Soviet Union simply collapsed after seventy years of consuming capital to achieve the phantom of the classless society. Today both Nazi Germany and the Soviet Union are synonymous with tyranny and failure. Both nations murdered millions. Both nations no longer exist. True, Germany exists as does Russia, but I contend that both are new nations. Neither is perfect, but neither claims a political heritage to the nation that preceded it.

Pathological policy errors flowed inexorably from a skewed view of reality in both Nazi Germany and the Soviet Union. Once this view of reality was deemed to be above criticism, its champions adopted increasingly tyrannical policies. Nazi Germany's Aryan Supremacy racial theories seemingly justified the murder of the handicapped, Gypsies, those of alternative sexual orientation, Jews, and Slavs. In the name of birthing a new Soviet Man, the Soviet Union murdered anyone who stood in the way of its program to confiscate all businesses, including small farms. When businesses and farms failed, there was no soul searching as to root causes that might lie in Marxism itself. No, the problem had to be saboteurs within society. Reality, you see, was what the Soviet Union's Politburo said it was. As the vanguard of the proletariat, the Politburo stood outside society and saw its flaws. Those who disagreed were blind to this insight and had to be eliminated.

Chasing the Phantoms of Alternative Reality

Today the West especially is adopting policies that flow from alternative realities that, frankly, do not exist. Here I list just a few:

  1. Catastrophic global warming/climate change is caused by man and must be stopped. I prefer to qualify the term "global warming/climate change" by the adjective "catastrophic". Is the world warming? Who knows? Is the climate changing? Probably. But neither global warming nor climate change is "catastrophic". Yet it has become almost an article of faith that the earth is on the precipice of an environmental catastrophe, requiring ever more radical handicaps on our freedoms and the economy.
  1. White privilege in the US is responsible for crimes against minorities and disparities in wealth. This critical race theory has spawned witch hunts for secret and shadowy white supremacist groups especially in the military, which has empowered investigators to find evidence of these groups and root them out. It will be imperative that these investigators actually uncover such groups, whether they exist or not. Critical race theory is the old Marxist class struggle theory in new clothes. The Marxist class struggle theory postulated that we all are born into a class and cannot escape its prejudices. But notice that the Marxist and now the Race theorists consider that they themselves are not susceptible to the prejudices in which all the rest of us are trapped. Very convenient, eh?
  1. Covid-19 is an existential threat to human life on earth. Constitutionally guaranteed human rights may be violated with impunity. Who gets to decide all this? Why, elected officials and government bureaucrats, of course.
  1. Modern Monetary Theory (MMT) explains that government need not moderate its spending. Government can always manufacture more money in order to fund new programs and pay its debts . More government spending can always prevent a drop in aggregate demand. Government debt is irrelevant, because "we owe it to ourselves". MMT gave government elected officials exactly what they always wanted--carte blanche to spend, spend, and spend some more and not worry about justifying or prioritizing spending. As Keynes actually said, pay people to dig holes in the ground and pay others to fill them back up. What could possibly go wrong?

Champions of the above denials of reality refuse to discuss whether their view of reality is accurate. All are articles of faith and cannot be questioned. In fact, to question them is considered to be an admission of ignorance, guilt, or perfidy. One wants to destroy Mother Earth, enslave minorities, kill innocent people, and prevent all in society from enjoying unlimited prosperity. It's the old straw man fallacy on steroids. Furthermore, resources will be expended to pursue these phantoms, and more resources will be expended to protect oneself from being caught in a witch hunt. Society will live in fear--fear of global warming, fear of being branded a racist, fear of contracting a dread disease. Unfortunately, what society does not fear is that our lifetime's savings will be wiped out by inflation made possible by MMT.

The Basics of Reality

Contrast these phantoms with the pragmatic basics of sound economics: namely, that in order to prosper man must face the reality of human existence—primarily scarcity and uncertainty. People's preferences must be accepted at face value. Man acts. This is an irrefutable axiom in that to deny it is to confirm its validity. His action is rational in the sense that he believes that his action will improve his condition. He understands cause and effect. He performs one act at a time. He performs the most important act first; in other words, he ranks his actions in order of importance. Performing an act means that he must sacrifice the execution of others until later; in other words, acting means giving up some other preference, at least until some later time. Man's ordinal ranking of preferences means that the cost of an action is determined by what he eschews until later. No two men have the identical ordinal ranking of preferences; plus, the preferences cannot be assigned a cardinal value in order to compare one man's preferences with another. Man discovers the concept of comparative advantage and adopts the division of labor in order to accomplish more. Through the market process, man adopts a universal medium of exchange (money) in order to break the tyranny of direct barter. Now man can indirectly exchange his specialized production for a universal medium of exchange in order to obtain his real wants. Man invents government as a specialized service in order to protect his person and his property at a lower cost. He invents law in order to adjudicate inevitable disputes.

All this is reality. Peaceful exchange requires social cooperation, which brings about peace and prosperity among men everywhere. As advice columnist Ann Landers used to say, Wake up and smell the coffee!

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The Swiss National Bank's US Stocks: $150 Billion and Counting

05/14/2021Robert Aro

This time last year, the Swiss National Bank (SNB) had US stock holdings of $94 billion. The portfolio of Switzerland’s central bank has grown by $56 billion since, reporting ownership of $150 billion worth of US listed stocks as at Q1 2021. Apple is currently the largest holding, at $8 billion, but the portfolio contains countless smaller publicly traded companies, like GameStop, valued at $25 million at quarter end this year.

At the recent annual general meeting, SNB Chairman Thomas Jordan said:

We would like to live in a world where the interest rates are positive. But in the current situation negative interest rates as well as readiness to intervene in the currency markets are essential.

Per the Chairman, it’s not the bank, the world just isn’t quite right. Apparently, due to the “current situation,” the bank is forced to act accordingly. As reported, despite a recent devaluation of the Swiss franc, the currency is still “highly valued.” For this reason, its appreciation must be moderated via monetary intervention.

Unfortunately, these actions create a few unconventional outcomes: a policy rate of minus 0.75% and the purchase of over 2,000 US publicly traded stocks in order to manage the foreign exchange market. This “essential” intervention has an upside for the SNB, a profit of $23 billion USD for year end 2020, of which nearly half came from foreign currency positions such as stock gains and dividends.

As if manipulation of foreign exchange markets is nothing more than routine policy, Reuters reports:

The SNB spent nearly 110 billion Swiss francs ($120 billion) on currency interventions in 2020…

It seems unfathomable that approximately $120 billion USD was spent by the SNB for the purpose of currency intervention during the year. This money was not the result of profit made from the sale of goods or services; the SNB is not a highly successful investment bank who is simply buying equities from past business dealings. Rather, it's a central bank. The purchases come from money creation for the purpose of buying stocks. This only works because they have a monopoly on one of the most desired currencies in the world. The SNB continues to do what only a handful of central banks can successfully get away with, for now.

Over the course of the year, they never wavered on this most lucrative of devaluation strategies. Their actions led to a hefty profit, money supply expansion of Swiss francs, and Switzerland having the lowest rates in the world. Like most central bank inflationary schemes, there is no end in sight. We are left to wonder what the value of the portfolio will be this time next year.

If this strategy works so well for Switzerland, there’s no reason the USA shouldn’t do the same. After all, the USD is still one of the strongest currencies in the world as well. But if the Fed employed the same strategy, buying $150 billion of stocks and making billions from dividend income, it would most certainly be considered problematic; the same sentiment should exist to the SNB.

It’s concerning why this story is only followed by a limited number of media outlets, and will likely never be important enough for mainstream economists to speak against. Few people in America or Switzerland seem to realize, nor care, what is going on. But it’s important to note the flagrant abuse of power, theft, and inflationist monetary policy that makes our already expensive stock market all the more expensive.

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How Entrepreneurs Serve the Public, Even without Turning a Profit

05/14/2021Raushan Gross

Failure is a misnomer if we are referring to the human action involved in an entrepreneurial pursuit. A commonly held, although misleading notion, is that entrepreneurs often fail within the first few years in the marketplace. Often, I wonder why and how it happens that entrepreneurs fail only after a few years in the market if they envisioned a profitable opportunity where none had existed beforehand and was visually unapparent to others. In a non-metaphorical sense, let us think about this: Entrepreneurs discover and invest in producing and distributing goods for those who demand them the most, thereby creating downward pressures on consumer prices via their purposive action.

With that said, why is it that at one point, the entrepreneur discovers effectual ways to satisfy consumer demands, and only within a few years is the entrepreneur reported to have failed? I do not buy this one bit, and I believe this belief is all wrong. Here is why: Firms measure “success” or "failure" via profit and loss. How do we measure the entrepreneur's contributions? One way we might measure the entrepreneurial function is by their compounding effect on future developments for human flourishing.

Instead of, as some might think, that entrepreneurs quit too soon, the reality is that entrepreneurs are often negatively affected by distortions and interventions in the marketplace. Not to mention, entrepreneurs are subject to the ongoing competition between existing and emerging institutions.

Does Entrepreneurial Success Rest on Personal Characteristics?

Some have said that entrepreneurs do not pick the right people for their team, their purposes are directed toward the wrong endeavor, and somehow, they lack commitment, persistence, and all the rest. I do not buy it. We must look at the effects of various institutional changes, distortions, and interventions, that play such a significant role in the assumed failure of nascent or incumbent entrepreneurs.

It boggles the mind how failure is attributed in many cases only to entrepreneurs' characteristics instead of the distortions and interventions placed in their way that obstruct the signals that are widely used to make decisions. Institutions like money and price act as entrepreneurial signals that reflect the known knowledge needed to produce and distribute consumer goods and services, particularly those economic goods valued most by market participants who consume and are satisfied by them.

Even the thought of an entrepreneur's failure is somehow self-inflicted is utter nonsense. Who would discover a profitable opportunity only to fail at it knowingly? Moreover, the same people who attribute failure to the entrepreneur have the antidote for fixing their failures.

The Public Service Provided by Entrepreneurs

It is no doubt true that sometimes entrepreneurial projects do not cut the mustard. However, according to Murray Rothbard, no one else knows their market and the workings of their market better than the entrepreneur. Therefore, there must be some external factors creating situations conducive to failure. As we have seen, commentary about entrepreneurial failures seems to face inward – failure is the entrepreneurs' fault – of course. I beg to differ. Firms may fail, but in at least one sense, entrepreneurs do not. Entrepreneurs shape our future only by adding to the entrepreneurial stock of knowledge. The steamboat, airplane, vehicles, ice manufacturing, light bulbs, umbrellas, pens, food and food processing, digital apps, just technology, in general, are all outcomes of an accumulation of knowledge from previous entrepreneurs that took place over decades and in some cases even centuries.

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