Power & Market
Yesterday's terrible fire at the Notre-Dame Cathedral reminds us how quickly centuries of accumulated "cultural capital" can be destroyed. Oak timbers dating from the 1200s in the roof and spire were lost forever; some priceless stained glass windows appear to have suffered damage. As the saying goes, France is the heart of the West, Paris is the heart of France, and Notre Dame is the heart of Paris—and as such the sight of the iconic church ablaze makes an uneasy if simplistic metaphor for the decline of the West.
"Cultural capital" here of course means something far broader than economic definitions of capital as financial wealth or factors of production. Even the broader Austrian view of capital as heterogeneous production goods, what Rothbard termed an "intricate, delicate, interweaving structure of capital goods," can't capture the sum of wealth in a society. Capital ultimately is measurable, reducible to units, while the value of Notre Dame to Catholics around the world cannot be measured. We cannot quantify the cost of its damage or destruction in purely economic terms. But we can recognize a loss. Hundreds of years of wealth bound up in the beauty of Notre Dame's roof and spire are now lost to us forever.
The blogger Bionic Mosquito reminds us that civilizational wealth compounds over time, and thus wealth can be material, cultural, spiritual, even civilizational:
...Think of wealth not just on a balance sheet, but wealth in terms of culture, accumulated wisdom and knowledge, the captured savings of time.
Accumulation and time are key. Healthy societies build and preserve wealth, which is to say they are made up of individuals who strive to create more than they consume. The people who built Notre Dame over two centuries, using rudimentary pulleys and scaffolding, certainly did not expect to see the end results of their work. In fact no single Pope, architect, financier, mason, artist, laborer, or French monarch saw the project through from start to completion. But they built something lasting, something of incalculable benefit to future generations. They created wealth lasting far beyond their lifetimes.
All healthy societies do this. The notion of being concerned with things beyond one’s lifetime is innately human. Humans are hardwired to build societies, and the most ambitious humans have always sought to build lasting monuments and modes of living. That’s not possible unless people work toward a future they will not enjoy themselves.
This was especially true for our ancient primitive ancestors, who lived very short and difficult lives. We can imagine how much they wanted to have lasting forms of sustenance: food, water, clothing, shelter — instead of having to produce that sustenance day after day.
In fact, this trait perhaps more than any other is the hallmark of civilization. We can call it many things, but we might just say healthy societies create capital. They consume less than they produce. This capital accumulation creates an upward spiral that increases investment and productivity, making the future richer and brighter. Capital accumulation made it possible for human populations to develop beyond subsistence misery. It made the agricultural, industrial, and digital revolutions possible.
Technical know-how, artistry, and craftsmanship also represent forms of wealth which can be lost over time, and apparently have been. This article questions whether Notre Dame really can be rebuilt in quite the same way:
While architects have enough detailed information about the cathedral to pull off a technically very precise reconstruction, the craftsmanship is unlikely to be the same. Today, the stone that makes up the cathedral would be cut using machinery, not by hand by small armies of stonemasons as in the 12th century. "Nineteenth-century and 20th-century Gothic buildings always look a little dead, because the stone doesn't bear the same marks of the mason's hand," Murray told Ars Technica.
Civilization is far more than just economics, but it needs economics. Mises cautions us that it "will and must perish if the nations continue to pursue the course which they entered upon under the spell of doctrines rejecting economic thinking." So when we consider the sad spectacle of Notre Dame burning, we should ask ourselves whether the politics and economics of our age encourage or discourage building wealth for future generations. Even if one reduces the inheritance of western countries today to material well-being, the threat of losing what makes us rich certainly concerns us all. Short-term political thinking, coupled with demand-driven mania in fiscal and monetary policy, can consume our future just as fire consumed the roof of Notre Dame.
New York Gov. Andrew Cuomo just approved a $175.5 billion budget, boasting it as the “broadest, most sweeping state plan that we have done.”
Hoping to spend $19.6 billion on Medicaid and healthcare alone, a 3.6 percent raise from last year, New York’s lawmakers also passed a new “mansion tax,” targeting properties worth more than $2 million. In addition, the state added a new online sales tax to the books, which officials hope will raise enough revenue to allocate $320 million to help with New York City’s transit system, a new vape pen tax, and a ban on plastic shopping bags, which gives counties the freedom to charge 5-cent fees on paper bags.
But are all these efforts enough?
New York, out of all states, should have learned its lesson once affluent residents packed up and left. After all, it was Cuomo himself who announced the state’s income tax revenue had plummeted by $2.3 billion since his budget plan was announced. But despite the backlash, Cuomo doubled down, dismissing the loss in tax-based cash as a product of the 2017 federal tax reform and its $10,000 limit on state-and-local tax (SALT) deductions.
Prior to President Trump, there were no limits on SALT deductions. Naturally, Cuomo believes New Yorkers suffered greatly with the cap imposition. But the problem goes way beyond the change imposed by Trump, as SALT’s goal is to help relieve residents of high-tax states. If local taxpayers didn’t have to deal with such a high tax burden in the first place, there would be no reason to leave.
As The Wall Street Journal editorial board put it, averting more damage is the best anyone can hope for — in the time being. In the long run, however, unwinding the state’s bureaucracy is the only solution to the Empire State’s problems.
Taxation: Beneficial Only to the Politician
As Frank Chodorov wrote in the classic Income Tax: The Root of All Evil , the U.S. government hit the jackpot when it succeeded in making an “obnoxious” law, such as the temporary taxation of income, a feature of the American way of life, effectively turning the country’s founding principles into a “collectivistic doctrine.”
After that, everything became fair game.
As explained by Chodorov, when 42 states ratified the tariff bill featuring an income-tax amendment in 1913, the 16th Amendment became part of the U.S. Constitution, “[reducing] the American citizen to a status of subject, so much so that he is not aware of it; [enhancing] Executive power to the point of reducing Congress to innocuity; and [enabling] the central government to bribe the states, once independent units, into subservience.”
As Cuomo exemplifies with his never-ending campaign to destroy the New York state economy, income tax (or any tax for that matter) only benefits politicians. As the idea of taxing those who have property appeals to those who do not have any or at least as much as others.
It is “political ambition and the sin of covetousness,” as Chodorov put it, that help to perpetuate the idea that government has a right to confiscate property in the name of the common good. And politicians bank on it, using it to boost political clout.
Let's talk about Econ 101, scientism and modern economics.
At Bloomberg, Noah Smith argues that Greg Mankiw's Principles of Economics textbook is out of date because academic economists are more concerned with empirics and wealth inequality.
Furthermore, Smith pushes the view that economic theory itself is outdated. Not only because academic economists no longer study it or care about it, but supposedly because empirics have proven the laws of economics to be out of touch with reality.
He purports that Mankiw proposes theoretical insights that are skewed against redistribution because of his "libertarian political slant." This just seems to be another way of saying that it avoided most Keynesian mathematics and empiricism and focused on the foundational theory.
Many libertarians derive their views on economics from the Austrians. It's worth noting that Mankiw admittedly never read any Austrian economists in undergrad or grad school and only first read Hayek and added a note on Hayek to the 4th edition of his text in the mid-to-late 2000's. If you're conflating politics with economics, Mankiw is far from an Austrian or Austro-libertarian.
Smith neither addresses Mises' a priori defense of economic theory, or praxeology, nor Hayek's criticism of the scientism of the social sciences.
Smith also doesn't address the obvious: economic incentives explain the rise in empiricism in academia. And the politicization of the economy and growth in government explains why the economics professions have shifted politically left and focused their efforts on income distribution.
Smith states that new empirical methods prove that the assumption that economic actors are perfectly rational is false and uses this insight to disparage economists and libertarians relying on insights derived from the foundations of economics.
Disparaging Mankiw's lessons as skewed by libertarian thought ignores the fundamentals of Austro-libertarian economics. Mises did not rely on a view of perfect rationality to arrive at economic conclusions or to confirm the laws of economics. As Mises stated in Theory and History:
The sciences of human action starts from the fact that man purposefully aims at ends he has chosen. It is precisely this that all brands of positivism, behaviorism, and panphysicalism want either to deny altogether or to pass over in silence.
I will conclude with Mises' address to this very debate:
Economic statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification and falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts. They are a necessary requirement of any intellectual grasp of historical events.
While Mankiw is no Austrian, we should not let Smith dictate the discussion or get away with wrongly conflating various economic and political views given that he's completely ignoring long-standing economic explanations that address his criticism of foundational economic insights.
Recently, 2020 Democratic presidential contender Andrew Yang appeared on Fox News . During the segment, Yang asserted that the increase in the amount of technology in the private sector, e.g., artificial intelligence, has lead to an increase in unemployment. Like the other candidates in the Democratic primary, Yang embodies the same principles of economic interventionism, though attempting to differentiate his views from those of his counterparts on the left. Unlike the other, however, he has allocated considerable attention to entertaining the notion that if artificial intelligence is not hindered in its progression, it will soon displace millions of Americans from jobs.
Yang has given the impression that he is the “reasonable” and most pragmatic candidate among all presidential contenders, garnering praise from both the left and the right. The entrepreneur is seen as a man of bold new ideas, particularly in regards to his economic protocols. But in essence, Yang’s arguments hearken back to the Technocrat movement of the 1930’s. These ideas seem to be correct superficially, but underscore a severe misunderstanding of the basic economic principles that guide human action.
Henry Hazlitt’s famous book Economics in One Lesson addresses the point raised by Yang, that machines are displacing humans, particularly the chapter titled “The Curse of Machinery”. Hazlitt reduces the problem to simple economic principles. He first asserts that if machines create unemployment, it follows that every technological innovation to this day has done so by improving the manufacturing process, gradually displacing jobs. This logic would lead to the conclusion that to achieve maximum employment, all the technological progression of the past millennia would have to be reversed.
While it may be true that in the short run a machine may displace jobs upon being introduced to a sector, the creation of the machine itself would bring in new jobs. The economizing entrepreneur would only adopt the machine if he sees it as an integral component in expanding his profits. These new profits could be used for expanding his operations, or his own personal consumption. If the former, the entrepreneur could invest in new machinery, in turn creating new jobs, and if the latter, money spent in any given industry would lead to an increase in employment in that industry.
Another point to consider is that goods produced in one industry could be used as capital in another industry. For example, a firm may use machines to create bolts at a faster rate. While this may lead to an initial decrease in the number of jobs in the bolt industry, it would lead to an increase in jobs in another industry. For example, car manufacturers may need to use these bolts, and so they now have more capital to use in manufacturing cars. This would lead to an increase in the amount of jobs in the automotive industry.
The view that jobs would be displaced by a rise in technological innovation is really rooted in the view that the economy is a fixed pie. Only so much wealth exists and only so many people can have it. This is a fallacy. It is the dynamic nature of the economy that leads to the constant expansion of industries, which in turn leads to the expansion of other industries who rely on goods produced by these industries. And as this process guides economic progress, new industries come about. This process of economic progression will never end, so long as we continue demanding goods, which will only lead to an increase in the quality of living.
A female supporter of Bernie Sanders is advertising on Twitter the fact that she went 226,000 in debt to get a college degree in speech pathology.
Those who posted the video apparently believe that this ought to be interpreted as a convincing example of how hard it is to pay for college these days.
There is no doubt that a college education is not free. But publicly admitting that one owes nearly a quarter of a million dollars for (apparently) just a four year degree will hardly be convincing for anyone familiar with the actual cost of attaining a college degree.
After all, according to the US Department of Education, "annual current dollar prices for undergraduate tuition, fees, room, and board were estimated to be $16,757 at public institutions."
That's an annual amount. So, rounding up to $17,000 and multiplying by four, we get $68,000. This, mind you, includes tuition, fees, room, and board. It's an all inclusive package. So, assuming a student does virtually no outside wage work at all during his or her college career, the student would still get fed, and still have a place to live, while attending school full time.
But, let's say that this amount is low for many areas. Let's look at a higher-cost region of the country. According to the institution's website, an education at the University of Colorado at Boulder is estimate to cost $28,750 for a year's worth of tuition, room, board, books, and fees. Over four years, that's $115,000. (CNN estimates a four-year degree, plus room and board, costs $105,000.)
As most people know, however, paying for on-campus room and board is often more expensive than living with roommates off campus. And it's certainly far more expensive than living at home and commuting to work. But, since living at home isn't an option for everyone, many people share housing and take on part time work to off-set the cost of school.
In other words, a $115,000 price tag (and resulting debt) for an all-inclusive education is at the high end of what a total debt load would be for a reasonable person. It also reflects a situation in which a person spends all four years at a costly four-year institution.
In real life, of course, a college education doesn't require four years in cases outside the most difficult degrees. Many states employ "guaranteed" transfer programs which enable secondary students to take basic courses at community colleges at lower tuition rates. Freshmen can also knock out 30 or so credit hours and enter the more expensive four-year school as a sophomore. (In-state community college tuition is around half the price of tuition at a public research university.) And, of course, there are numerous programs which allow students to test out of courses through AP credit, CLEP exams, and more.
Some critics of my analysis here might say "Well, what if I want to go to a private school? Won't that cost more?" It certainly will.
According to the Department of Education, an all-inclusive year of (a non-profit) private school costs $43,065. (For-profit institutions are cheaper.) A full four years at one of these places is likely to cost over $170,000. Tuition alone at a posh second-tear private college like Bowdoin College is a whopping $50,000 per year. (Note the case of this woman who has 100K of debt for her women's studies degree at NYU.)
Indeed, the private school option appears to be the only way one might end up with $226,000 in student loans. Either that, or a student transfers around to various schools, starting from scratch each time.
But why should those people be taken seriously when they complain about their tuition and debt? People who attend private school already have countless tax-subsidized options available to them. Instead, they choose to attend a private school, and want the taxpayers to subsidize their debt instead. (Most private schools are also subsidized with a variety of grants, but that's another issue.) And then we're supposed to feel sorry for them when they end up with a lot of debt.
This is especially unconvincing when we consider that the data on college degrees and earnings shows that where one attains a degree has little effect on earnings. In other words, the extra expense incurred to attend Picturesque University in some charming Midwest town does nothing to actually increase earning potential.
The educational benefits of taking on these additional costs, however, are negligible.
Meanwhile, of course, more responsible consumers attend what the Europeans call a "polytechnic" where students attend to get degrees and quickly and painlessly as possible. The publicly subsidized versions of these schools exist to allow students with real responsibilities to get degrees and get on with their lives at a manageable cost. In other words, taxpayers are already paying for the college educations of students at public universities. They don't need to be lectured on how they ought to pay even more so little Johnny or little Susie can also get a designer education at a private school as well.
There are real reasons to be concerned about the cost of higher education. Student loans have actually been a significant part of the problem by making students less price sensitive, thus pushing up prices for everyone.
It might also be helpful to weigh the costs and benefits of cost-saving measures used by Europeans, such as larger class sizes, longer wait times, and fewer amenities at colleges.
But it's not at all convincing when we're told that we ought to be subsidizing higher education even more for those students who choose to spend far and above what the average cost of what is an already-subsidized higher education.
In November, Harvard economists Valentin Bolotnyy and Natalia Emanuel published a new working paper titled "Why Do Women Earn Less Than Men? Evidence from Bus and Train Operators."
In the study, Bolotnyy and Emanuel study unionized bus and train operators to determine whether or not a gender pay gap exists, and what its causes might be.
The use of unionized workers was helpful to the researchers because the rigid union rules meant that few pay decisions were left up to managers who might otherwise be blamed for bias in these cases.
As it is, the union rules provided clear rules for how seniority affects pay and setting of work hours.
This allowed the researchers to focus on the behavior of the workers themselves while largely ignoring the role of supervisor decisions.
The researchers did find that a gap existed:
The gap of $0.89 in oursetting, which is 60% of the earnings gap across the United States.
But, the gap
can be explained entirely by the fact that, while having the same choice sets in the workplace, women and men make different choices. Women use the Family Medical Leave Act (FMLA) to take more unpaid timeoff than men and they work fewer overtime hours at 1.5 times the wage rate. At the root of these different choices is the fact that women value time and flexibility more than men. Men and women choose to work similar hours of overtime when it is scheduled a quarter in advance,but men work nearly twice as many overtime hours than women when they are scheduled theday before. Using W-4 filings to ascertain marital status and the presence of dependents, we show that women with dependents – especially single women – value time away from work more than men with dependents.
the earnings gap can be explained in our setting by the fact that men take48% fewer unpaid hours off and work 83% more overtime hours per year than women. Thereason for these differences is not that men and women face different choice sets in this job.Rather, it is that women have greater demand for workplace flexibility and lower demand for overtime work hours than men. These gender differences are consistent with women taking on more of the household and childcare duties than men, limiting their work availability in the process. ... When overtime hours are scheduled three months in advance, men sign up for about 7%more of them than women. When overtime is scheduled the day before or the day of thenecessary shift, men work almost twice as many of those hours as women.
Women with dependents – single women in particular – are considerably less likely than men with dependents to accept an overtime opportunity. This is especially the case during weekends and after regular work hours, times when there are fewer childcare options available.
These insights are helpful in seeing some specific of how men and women behave in the workplace. They also help to highlight the fact that even when men and women have the same job title and the same job description, the work they do is not homogenous. A worker who works at odd hours (and thus makes more overtime pay because of it) simply isn't doing the same work as a person who requires extremely regular hours. Similarly, a worker who requires sizable chunks of time off every several years (for maternity leave or childcare needs) is also not doing the same work as a worker who rarely takes time off.
If one of the workers is available nearly all the time, but the other one has a far more inflexible schedule, don't have the same job when it comes to actual executions of duties.
Yet, we still continue to hear that "women are paid less to do the same work," presumably because of gender bias. This latest study should help to expose, yet again, that this is an empirically untrue statement, and does not describe the nature of workplace behavior in the real world.
Moreover, this study found a pay gap in a single industry between workers doing similar work. How much more does the heterogeneity of work and workers explain an overall, nationwide "pay gap"? Nationwide, differences in work span across thousands of industries, jobs, and working conditions. The many differences in these cases are uncountable.
Leftists, of course, may see this data and argue that this shows women are still at a disadvantage because single women with children (which are more common than single men than children) are constrained in their choice of hours by childcare needs. Therefore, we need government policies to equalize this situation.
This is true, but only in the sense that, when it comes to earnings, people who work fewer hours are at a "disadvantage" compared to people who work longer hours. It is possible that policies forcing "equality" between people who can work longer, odder hours, and those who can't, could help those who aren't flexible. This, of course, would come at the expense of those who work odder hours right now.
But this is not at all a situation in which "women are paid less to do the same work." And we should stop pretending that it is.
In fact, in a variety of settings, women earn more than men. As Andrew Syrios has noted:
When comparing never-married women with never married-men, the wage gap doesn’t just disappear, it flips. As far back as 1971, never-married women in their thirties have earned slightly more than similar men. 2 In 1982, never-married women on the whole earned 91 percent of what men do. 3 Today, among men and women living along from the age twenty-one to thirty-five, there is no wage gap. And among unmarried college-educated men and women between forty and sixty-four, men earn an average of $40,000 a year and women earn an average of $47,000 a year! 5
And when all of this is taken into account, the wage gap all but disappears, as many studies have found:
- A study by the CONSAD Research Corp. for the US Department of Labor found that once they controlled for the variables, there was “an adjusted gender wage gap that is between 4.8 percent and 7.1 percent.” 6
- A study by June and Dave O’Neill for the National Bureau of Economic Research found that “… the gender gap largely stems from choices made by women and men concerning the amount of time and energy devoted to a career.”
- Warren Farrell conducted a thorough study reported in his book Why Men Earn More and found no evidence of a wage gap.
- A 1983 study by Walter E. Williams and the aforementioned 1981 study by Walter Block discredit the idea that the wage gap is caused by discrimination.
- Carrie Lukas notes that “In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts.”
But what if you want to know the place with the most overall freedom? In other words, what is the most libertarian place to live based on both economic liberty and personal liberty?
If you don’t mind a bit of travel, the answer is New Zealand.
For those who prefer to stay in the United States, Will Ruger and Jason Sorens periodically crunch numbers to calculate Freedom in the 50 States.
This 2018 edition of Freedom in the 50 States presents a completely revised and updated ranking of the American states on the basis of how their policies promote freedom in the fiscal, regulatory, and personal realms. …More than 230 policy variables and their sources are now available to the public on a new website for the study. …the 2018 edition provides annual data on economic and personal freedom and their components back to 2000. …Freedom in the 50 States is an essential desk reference for anyone interested in state policy and in advancing a better understanding of a free society.
The publication is loaded with data, as you’ll see from the following charts.
To put all this data in context, the report separately calculates fiscal freedom, regulatory freedom, and personal freedom.
We’ll start with the fiscal section, which includes variables about taxes and spending, as well as other measures such as debt and government employment.
For those interested, the report has plenty of analysis and explanation about the variables that are used and the weights that are assigned.
Most of us, though, simply want to see which states get good scores and which ones get bad scores.
I assume nobody is surprised to see New York in last place.
Now let’s shift to regulatory policy and see where the burden of red is most onerous.
This part of the ranking covers a range of issues, most notably controls on land use and restrictions on the use of markets in health care.
But there are other important variables, including the extent and burden of occupational licensing.
Indeed, before getting to the overall rankings for regulation, I want to share those scores because it is so galling and upsetting that politicians impose barriers that limit the freedom of people to earn income.
Colorado deserves hearty applause for being at the top, edging out Idaho by a narrow margin. And even though Vermont was near the bottom of the fiscal rankings, it merits a mention for being good on the issue of occupational licensing.
California deserves hearty condemnation for being in last place. And I’m not surprised to see states like Illinois and New Jersey near the bottom.
I’m very disappointed, however, that Texas and Florida have such a dismal record.
But let’s not fixate on just one of the variables. If we look at the rankings for all regulatory issues, Kansas is in first place, followed by Nebraska and Idaho.
The worst states (hardly a surprise) are New York, New Jersey, and California.
Now let’s combine fiscal policy and regulatory policy and see the report’s ranking for overall economic freedom.
Florida is in first place by a comfortable margin, followed by three other zero-income-tax states (though the absence of a state income tax does not guarantee a good score, as you can see from the poor performance of Alaska, Wyoming, and Washington).
New York wins the Booby Prize by a large margin.
Hawaii and California also stand out in a bad way.
The above table tells us which state enjoys the most economic liberty, but that doesn’t tell us where to live if you want the maximum amount of overall freedom.
To identify the nation’s most libertarian state, we also need to look at rankings for personal liberty.
This means, in part, whether people are harassed and persecuted for victimless crimes, but it also includes measures of educational freedom and gun rights.
Speaking of which, I can’t resist sharing the data on which states most respect the 2nd Amendment.
Kansas gets the best score, followed by Vermont(!), Arizona, Idaho, and Mississippi.
Hawaii is the worst state by a significant margin and we (again) find California near the bottom.
Another issue which is near and dear to my heart is asset forfeiture.
I am nauseated and disgusted that governments are allowed to steal property from people who have not been convicted of any wrongdoing.
So let’s applaud New Mexico, Nebraska, and New Hampshire for putting limits on this awful practice.
And let’s heap unending score on Rhode Island for having the nation’s worst track record on this issue.
But what happens when we combine all issue relating to personal freedom?
Well, that’s exactly what the authors did, which means we get a comprehensive ranking for personal freedom. I’m not surprised that Nevada, Colorado, and New Hampshire are in the top 5, but I’m surprised to see that Maine leads the pack.
Likewise, I guess I’m not too surprised that Texas and other bible-belt states are socially conservative.
But Hawaii next to last?!?
In any event, the report combines economic freedom and personal freedom and tells us which state could be considered the most libertarian.
And the winner is the Sunshine State of Florida, followed by New Hampshire, Indiana, Colorado, and Nevada. I’m surprised that Florida does so well, though some of the other high-scoring states make sense (especially when I look at data on who reads these columns).
By contrast, the most dirigiste state is New York. That doesn’t surprise me, and I’m also not shocked by some of the other bottom dwellers.
I’m tempted to end here since we’ve already surveyed so much information.
But there’s one final chart which hopefully should be very fascinating.
We just looked at the data on how states currently rank for overall liberty.
This final selection tells us which ones have been moving in the right direction and wrong direction since the turn of the century.
Kudos to Oklahoma for adopting a lot of good reform. Same for New Mexico. And it’s also interesting to see that several states from the Great Lakes region boosted their scores (with Illinois being a laggard, of course).
Vermont has the dismal distinction of having moved the fastest in the wrong direction (No wonder it’s the Moocher State).
Originally published at International Liberty
Last week the United States, Mexico, and Canada agreed to replace the North American Free Trade Agreement (NAFTA) with a new United States-Mexico-Canada Agreement (USMCA). Sadly, instead of replacing NAFTA’s managed trade with true free trade, the new USMCA expands government’s control over trade.
For example, under the USMCA’s “rules of origin,” at least 75 percent of a car’s parts must be from the US, Canada, or Mexico in order to avoid tariffs. This is protectionism designed to raise prices of cars using materials from outside North America.
The USMCA also requires that 40 to 45 percent of an automobile’s content be made by workers earning at least 16 dollars per hour. Like all government-set wages, this requirement will increase prices and decrease employment.
The USMCA also requires Mexico to pass legislation recognizing the “right of collective bargaining.” In other words, this so-called free trade agreement forces Mexico to import US-style compulsory unionism. If the Mexican legislature does not comply, the US and Canada will impose tariffs on Mexican goods.
The USMCA also requires the three countries to abide by the International Labour Organization (ILO) standards for worker rights. So, if, for example, the bureaucrats at the ILO declared that Right to Work laws violate “international labor standards”’ because they weaken collective bargaining and give Right to Work states an unfair advantage over compulsory unionism states and countries, the federal government may have to nullify all state Right to Work laws.
The USMCA also obligates the three countries to work together to improve air quality. This sounds harmless but could be used as a backdoor way to impose costly new regulations and taxes, such as a cap-and-trade scheme, on America.
This agreement also forbids the use of currency devaluation as a means of attempting to gain a competitive advantage in international trade. Enforcement of this provision will be difficult if not impossible, as no central bank will ever admit it is devaluing currency to obtain a competitive advantage in international trade. Of course, given that the very act of creating money lowers its value, the only way to stop central banks from devaluing currency is to put them out of business. Sadly, I don’t think the drafters of the USMCA seek to restore free-market money.
The currency provision will likely be used to justify coordination of monetary policy between the Federal Reserve and the Mexican and Canadian central banks. This will lead to region-wide inflation and a global currency war as the US pressures Mexico and Canada to help the Fed counter other countries’ alleged currency manipulation and challenges to the dollar’s reserve currency status.
A true free trade deal would simply reduce or eliminate tariffs and other trade barriers. It would not dictate wages and labor standards, or require inter-governmental cooperation on environmental standards and monetary policy. A true free trade deal also would not, as the USMCA does, list acceptable names for types of cheeses.
Those of us who support real free trade must not let supporters of the USMCA get away with claiming the USMCA has anything to do with free trade. We must also fight the forces of protectionism that are threatening to start a destructive trade war. Also, we must work to stop the government from trying to control our economic activities through regulations, taxes, and (most importantly) control of the currency through central banking and legal tender laws.
The “libertarian socialists” have struck again.
It began when a state Libertarian Party chapter posted a link to a court decision about an employer that did not allow its employees to have dreadlocks.
This was “discrimination,” the suit against it alleged.
Not so, said the court. The “race-neutral grooming policy,” it declared, was not discriminatory, since a hairstyle, unlike a racial identity, is not an “immutable physical characteristic.” Therefore, an employer is at liberty to enforce such a requirement.
Now that isn’t quite how a libertarian would argue the question, since the crux of the matter is that no contract should be entered into unless both sides agree to its terms, period. The employer may offer terms, and the employee may offer terms. If one side offers terms the other opposes, then they go their separate ways and find people willing to engage with them on terms they prefer.
This is also how we deal with the notorious “bake the cake” case. If the baker prefers not to bake the cake, that ends the discussion. Violently forcing him to bake the cake is out of the question. The Supreme Court may spend its time tying itself in knots analyzing whether cakes themselves are endorsements of relationships, or just the icing on them, or whether a cake is a form of expression, or whatever. We libertarians don’t need any of that nonsense.
All the same, the court reached the correct decision in the dreadlocks case from a libertarian point of view. Not a “right-wing libertarian” point of view, mind you, but a plain-vanilla libertarian one.
Now enter one of the two or three spokesmen for a group calling itself “libertarian socialists” that wants to get a foothold within the Libertarian Party.
He is not happy about this decision at all.
Let’s go one passage at a time.
“This is an affront to the principle of equal liberty. Using financial leverage to compel another human to change their [sic] hair is an initiation of coercive fraud, and the lie is that hair has anything to do with job performance whatsoever.”
Well, whatever “the principle of equal liberty” is, it sure ought to mean that every person is equally entitled to make offers to any other person. It surely cannot mean that any person must be compelled to accept another person’s offer, because that compulsion would violate the former’s “equal liberty.”
Next sentence: “Using financial leverage to compel another human to change their [sic] hair is an initiation of coercive fraud.” (As opposed to voluntary fraud?) By “financial leverage,” the libertarian socialist (we’ll call him LS) means that workers are helpless and without options, and employers wield a kind of coercion over them by threatening not to employ them. This is not really how libertarians view what happens on the market, though it is the way Marxists look at it.
Then LS insists that dreadlocks have no effect on job performance. Irrelevant, of course. People are free to make whatever offers they want, and other people are free to accept or reject those offers. That is the bottom line.
It is not reasonable to expect LS to be able to vet everybody’s job requirements to see if they win his approval. Some requirements have obvious connections to the work involved, and some have more obscure connections that may be more difficult to articulate. But even if the employer should demand that all employees wear a funny hat, that demand is perfectly compatible with libertarianism.
Then we read:
“Libertarians build our viewpoints around maximizing individual liberty, not who holds a magic piece of paper that purports to give them power over others in the name of state-sanctioned economic order. This is a gross violation of the individual and a racist one at that.”
Well, that’s nice: an employment contract is being sniffed at as a “magic piece of paper” that “purports to give [employers] power over others.” Oh, and by “a state-sanctioned economic order” (this is supposed to scare us because the word “state” appears) LS means the state’s occasional defense of private property. So private property and labor contracts are to be viewed as unnatural, and in upholding and defending them the state is violating the natural order (as opposed to doing what would occur anyway in the absence of the state, which is how libertarians look at it).
LS then says a condition for employment involving hair is “a gross violation of the individual.” Forcibly requiring the company to amend its employment requirements, however, would evidently not be a violation, since companies have no rights.
He concludes with this:
“I am sad and embarrassed, but not really surprised to see right-wing ‘libertarians’ celebrating white supremacy openly in the name of markets.”
(Man, what constitutes “white supremacy” sure has come down a few pegs, hasn’t it? It’s almost like hysterical people use the term to refer to just about anything.)
It isn’t “right-wing libertarians” who are “celebrating” this ruling. First, I think the ruling is too wimpy, so “celebrating” is too strong a word. More importantly, all libertarians believe in mutual consent, which means we are all free to offer whatever we like to anyone we’d like to offer it to, and that party is in turn at liberty to accept or reject our offer.
We do not favor threatening people with physical force just because we do not approve of the terms they are offering.
Unfortunately, this is the kind of confusion that so-called “libertarian socialists” are seeking to introduce into more or less everything.
And note well: the word property appears nowhere in the LS complaint. Probably not a coincidence.