Imperial lessons

Patriotism

by Herbert Spencer (1820-1903)


Were anyone to call me dishonest or untruthful he would touch me to the quick. Were he to say that I am unpatriotic, he would leave me unmoved. “What, then, have you no love of country?” That is a question not to be answered in a breath.


The early abolition of serfdom in England, the early growth of relatively-free institutions, and the greater recognition of popular claims after the decay of feudalism had divorced the masses from the soil, were traits of English life which may be looked back upon with pride. When it was decided that any slave who set foot in England became free; when the importation of slaves into the Colonies was stopped; when twenty millions were paid for the emancipation of slaves in the West Indies; and when, however unadvisedly, a fleet was maintained to stop the slave trade; our countrymen did things worthy to be admired. And when England gave a home to political refugees and took up the causes of small states struggling for freedom, it again exhibited noble traits which excite affection.


But there are traits, unhappily of late more frequently displayed, which do the reverse.Contemplation of the acts by which England has acquired over eighty possessions – settlements, colonies, protectorates, &c. – does not arouse feelings of satisfaction. The transitions from missionaries to resident agents, then to officials having armed forces, then to punishments of those who resist their rule, ending in so-called “pacification” – these processes of annexation, now gradual and now sudden, as that of the new Indian province and that of Barotziland, which was declared a British colony with no more regard for the wills of the inhabiting people than for those of the inhabiting beasts – do not excite sympathy with their perpetrators. Love of country is not fostered in me on remembering that when, after our Prime Minister had declared that we were bound in honour to the Khedive to reconquer the Soudan, we, after the re-conquest, forthwith began to administer it in the name of the Queen and the Khedive – practically annexing it; nor when, after promising through the mouths of two Colonial Ministers not to interfere in the internal affairs of the Transvaal, we proceeded to insist on certain electoral arrangements, and made resistance the excuse for a desolating war.*


Nor does the national character shown by a popular ovation to a leader of filibusters, or by the according of a University honour to an arch-conspirator, or by the uproarious applause with which undergraduates greeted one who sneered at the “unctuous rectitude” of those who opposed his plans of aggression, appear to me lovable. If because my love of country does not survive these and many other adverse experiences I am called unpatriotic – well, I am content to be so called.


To me the cry – “Our country, right or wrong!” seems detestable. By association with love of country the sentiment it expresses gains a certain justification. Do but pull off the cloak, however, and the contained sentiment is seen to be of the lowest. Let us observe the alternative cases.

Blueprints from city-hall planners.

California’s Secret Government

Redevelopment agencies blight the Golden State.

By Steven Greenhut

In Sacramento, Governor Jerry Brown is planning to close California’s $26.6 billion structural deficit through spending cuts and tax extensions. Opposition has been spirited but less contentious than expected, probably because of the size of the budget hole. But one item of Brown’s plan—something that would save about $1.7 billion annually—has generated heated debates between local officials and the new administration. The governor has proposed eliminating California’s approximately 400 redevelopment agencies (RDAs).

In theory, RDAs spearhead blight removal. In fact, they divert billions of dollars from traditional services, such as schools, parks, and firefighting; use eminent domain to seize property for favored developers; and run up California’s debt to pay those developers to construct projects of dubious public value, such as stadiums and big-box stores. Most Californians have long been unaware that these agencies exist. As the activist group Municipal Officials for Redevelopment Reform puts it, RDAs constitute an “unknown government” that “consumes 12 percent of all property taxes statewide,” is “supported by a powerful Sacramento lobby,” and is “backed by an army of lawyers, consultants, bond brokers and land developers.”

As of late March, the outcome of Brown’s battle against the RDAs was in question, with the state legislature lacking the votes to approve it. Too bad. It’s high time that the agencies were shut down.

California’s redevelopment agencies got their start in 1945, when the state legislature authorized their creation to combat urban decay. At the time, politicians nationwide touted urban-renewal projects as a way to jump-start development in impoverished inner cities. Today, many urbanists recall these projects as a national travesty, a failed experiment in top-heavy government and liberal social engineering that obliterated neighborhoods, eroded property rights, gave developers downtown land on the cheap, uprooted city dwellers, and exacerbated urban problems.

Something has to give

The Compensation Monster Devouring Cities

The real battle over public workers’ pay is happening in city halls, not state capitols.

By Steven Malanga

New Haven mayor John DeStefano has had a good relationship with his city’s municipal unions through most of his 17 years in office. But lately, those ties have frayed, thanks to the Democratic mayor’s claim that city workers’ wages and benefits—many granted by DeStefano himself in plusher years—have become dangerously unaffordable. DeStefano describes New Haven’s rising worker costs as “the Pac-Man of our budget, consuming everything in sight,” and he is laying off employees and exploring outsourcing to reduce expenses. The mayor’s actions brought angry police into the streets, blocking traffic and blaring sirens in protest. Members of a custodians’ union stormed out of a recent arbitration meeting, outraged by a mayoral proposal to save money. City unions even imported celebrity demagogue Al Sharpton to agitate for their cause.

DeStefano’s plight will be familiar to mayors, city managers, city councils, and boards of education across America. The national media (as well as many policy experts) have focused on state budget battles, like the one in Wisconsin between Governor Scott Walker and public-employee unions. But the truth is that America’s problem with government-worker costs is disproportionately a local issue. Compensation, including wages and benefits, accounts for just 30 percent of state general-fund expenditures, the National Governors Association reports—which makes sense, since states also spend money on programs in which worker pay isn’t the main expense, such as Medicaid. In the typical city, town, or school district, by contrast, compensation costs generally range from 70 to 80 percent of the budget.

Those compensation costs have soared over the years, as politicians made overgenerous promises to local government workers—not just pay but also the right to retire on full pensions at age 50 or 55, annual cost-of-living increases to those pensions, and full health care for life. These concessions haven’t merely resulted in big deficits; they have pushed many localities to the edge of fiscal ruin. Without substantial reform—soon—local taxpayers are likely to face a lethal combination of major tax increases and crumbling services.

They will never learn

Noam Chomsky denounces old friend Hugo Chávez for 'assault' on democracy

Renowned American intellectual accuses the Venezuelan leader of concentrating too much power in his own hands

by R. Carroll

Hugo Chávez has long considered Noam Chomsky one of his best friends in the west. He has basked in the renowned scholar's praise for Venezuela's socialist revolution and echoed his denunciations of US imperialism.

Venezuela's president, who has revealed that he, has had surgery in Cuba to remove a cancerous tumor, turned one of Chomsky's books into an overnight bestseller after brandishing it during a UN speech. He hosted Chomsky in Caracas with smiles and pomp. Earlier this year Chávez even suggested Washington make Chomsky the US ambassador to Venezuela.

The president may be about to have second thoughts about that, because his favourite intellectual has now turned his guns on Chávez.

Speaking to the Observer last week, Chomsky has accused the socialist leader of amassing too much power and of making an "assault" on Venezuela's democracy.

"Concentration of executive power, unless it's very temporary and for specific circumstances, such as fighting world war two, is an assault on democracy. You can debate whether [Venezuela's] circumstances require it: internal circumstances and the external threat of attack, that's a legitimate debate. But my own judgment in that debate is that it does not."

Chomsky, a linguistics professor at Massachusetts Institute of Technology, spoke on the eve of publishing an open letter (see below) that accuses Venezuela's authorities of "cruelty" in the case of a jailed judge.

The self-described libertarian socialist says the plight of María Lourdes Afiuni is a "glaring exception" in a time of worldwide cries for freedom. He urges Chávez to release her in "a gesture of clemency" for the sake of justice and human rights.

The best path to a longer life

Economic Freedom Extends Life Expectancy

By M. Perry

Following the recent post on life expectancy and economic growth in Chile, here's a more comprehensive analysis in the chart above of the relationship between: a) economic freedom measured by the Heritage Foundation, on a scale from 1 (repressed) to 100 (free), and b) life expectancy for 176 countries in 2009.

 The regression line in the chart above shows a clear and positive relationship between economic freedom and life expectancy, with higher levels of economic freedom being associated with longer life expectancies.  Specifically, from the regression equation we can say that every 10 point increase in the economic freedom index is associated with a 4.6 year increase in life expectancy.  

Bottom Line:

As Larry Kudlow reminds us all the time, "Free market capitalism is the best path to prosperity," and I'll add "the best path to a longer life." There's nothing more precious than human life, and the evidence shows that economic freedom will sustain, nurture, conserve and extend human life, while economic repression does the opposite: it stifles and squashes the human spirit and shortens life expectancy.  

The Real Atlas

Driving to Delusionville

Obama’s former auto czar is in deep denial about the government’s failed bailout

by Shikha Dalmia 

The former Obama auto czar, Ron Bloom, was on Capitol Hill last week telling Congress what a grand bargain the auto bailout has turned out to be for taxpayers. 

The story that Bloom told, and that President Obama is making the signature theme of his re-election campaign, goes like this: If the administration hadn’t infused $80 billion into GM and Chrysler, the companies would have hemorrhaged to death. Financial markets, themselves in panic mode, would not have given them the funds necessary to restructure through Chapter 11 bankruptcies and stay in business. Hence, they would have had to shut their factories, sell their assets for scrap and liquidate. And this would have bankrupted auto parts suppliers, shut down dealerships, laid off 1 million workers—whose pension and unemployment benefits taxpayers would have had to foot -- and devastated entire communities. GM and Chrysler may never repay taxpayers in full. But any loss is less than the cost of this economic Armageddon.

This narrative would make for a great horror movie. But any resemblance to real world events is purely coincidental.

For starters, many experts suspect that at least GM could have obtained private bankruptcy financing if it had presented a credible restructuring plan addressing the cause of its malaise: the uncompetitive costs of its unionized work force. If it couldn’t, then the government could have offered guarantees to private lenders for the amounts they loaned, which likely would have been smaller than the bailout.

But the administration took matters in its own hands, using taxpayer dollars to commandeer the bankruptcy process to protect key constituencies, while giving short shrift to others. It gave Chrysler’s secured creditors, who would have had priority in a normal bankruptcy, 29 cents on the dollar. Chrysler’s unions, on the other hand, got more than 40 cents, even though they are equivalent to low-priority lenders. This made a mockery of longstanding bankruptcy law, something that will make credit markets wary of lending to political sacred cows in the future.

The administration favored union workers not only over creditors, but also other workers. All United Auto Workers retirees at Delphi, GM’s auto supplier, got 100 percent of their pension and retirement benefits. But 21,000 nonunion, salaried employees lost up to 70 percent of their pensions, and all of their life and health insurance. The Treasury could have covered 93 percent of the benefits of all employees for the same funds it spent on full union benefits, testified Bruce Gump, a representative of the Delphi Salaried Retirees Association.

Even for GM and Chrysler, the bailout constitutes a missed opportunity, not a second chance. They didn’t get nearly the kind of relief from labor costs that they would have in a normal bankruptcy. Not only are they on the hook for most of their legacy costs, they still pay union workers $58 per hour including benefits. This wouldn’t be so bad if Toyota, whose costs are $56 per hour, were setting the industry’s cost curve. But that’s no longer the case. Hyundai and Kia, with $40-an-hour costs, do that. The bailout prepared GM and Chrysler to compete with the industry leaders of yesterday, not tomorrow.

Absent the bailout, these companies would have survived, but they would have looked very different. They might have merged into one, pooling resources and slashing excess capacity from the industry. Alternatively, entrepreneurs might have purchased their more viable brands and run them as independent companies, breaking up the industry’s big vertically-integrated players into myriad smaller ones. Either way, the labor and capital squeezed out from the industry would have been more productively deployed elsewhere. History offers examples: A bankruptcy-triggered reorganization of the steel industry three decades ago led to an 18 percent increase in employment in the plastic industry, which replaced steel for some uses. The auto bailout has entrenched the status quo, strangling new possibilities.

Worse, it has unleashed a systemic moral hazard. GM had accrued $70 billion in losses in the two years before the bailout and debt 24 times its market capitalization. By contrast, Ford had eliminated money-losing brands and mortgaged all its assets -- including its logo, the Blue Oval—raising funds to weather the economic downturn. By bailing out GM, the administration rewarded its recklessness and penalized Ford’s prudence. Every company that feels it is too big to fail, or is a national icon or major regional employer, will wonder whether it makes more business sense to save for a rainy day or simply hold out for taxpayer assistance. And just as the Wall Street bailout became a justification for the auto bailout, the auto bailout will become a justification for the bailout of future reckless players.

The administration is casting GM as an Atlas-like figure carrying the economy on its shoulders. 


In fact, the real Atlases are the taxpayers and creditors carrying GM—and they got screwed by the bailout.

Fatal Choices

India's Great Free-Market Economist

by Chandrasekaran Balakrishnan

Soon after India's political independence, a broad public debate revolved around the type of economic system that should be adopted and followed. Three proposals emerged: the Gandhian model, based on village economy and trusteeship; the Bombay Plan, which posited that the economy could not grow without government intervention and regulation, especially in capital-goods production; and the Nehruvian model, which was premised on a socialistic pattern of society and shunned every possible avenue for the private enterprise.

Ultimately, what prevailed for the next 40 years was the Nehruvian model. During this period, India tried to develop a mixed economy. Nonetheless, in the process of practicing this system, the government controlled the entry and expansion of private enterprises, often without understanding the consequences of these policies.

The "Licence Raj" thrived very quickly: government permission was needed for everything from starting a new enterprise to expanding an existing firm to determining the quantity of goods to be produced and exported. The economy was akin to the proverbial frog in a deep well that jumps three steps up only to slip two steps down! Instead of helping the economy to grow, the government virtually stamped out choices and competition in the name of licenses, import substitutions, restricted exports, prohibition of commodities, quantitative ceilings for bulk exports, reservations for small-scale industries, etc.

This controlled regime of 40 years caused an accumulation of systemic crises, which forced the country to open up the economy and integrate with the global market. All these events were foreseen by one great economist and professor, B.R. Shenoy, who wrote many books and published famous articles in national and international newspapers and scholarly journals. His contemporaries made the country pay a heavy price by rejecting his practical policy solutions. But now his ideas rule a liberalized India.

After a decade of economic reforms, Indian economist S.B. Mehta wrote in 2001,

“The 1991 economic crisis led us to beg finance from IMF which levied almost similar conditions which Prof. Shenoy was suggesting since 1957. But the then Finance Minister (during 1991) was criticized by many that we were mortgaging our sovereignty to IMF. This author wrote to him that he should declare that we were following the policy that Shenoy hinted for twenty long years and not following the conditions of IMF. No politician or economist, however, uttered the name of Shenoy or quoted from his voluminous writings in support of the free market system. Thus, it seems, we neglected the sound advice of Shenoy during his life-time, as also from 1991 … when our policies leaned more towards free market.[1]”

India's economic-reform era is actually an era of a revolution of choices created by markets. In fact, many now believe that choice and competition are the ultimate antidote to many economic problems in the country. The process of liberalization and globalization has virtually ended government-created artificial scarcities for even basic goods like telephones, motorcycles and scooters, cooking-gas connections, etc.

Foreseeing all this, Shenoy advocated that private enterprises should be allowed to compete both at home and abroad in most of the sectors except defense, roads, and railways. It is sad that nobody remembers him even now, even after two decades of opening up the economy to trade goods and services globally. This is particularly true of the present ruling government, which is said to have initiated the economic reforms and is now likely to proceed further with second-generation reforms. A journalist said, "the person who saw the writing on the wall a good three decades before the rest of his contemporaries is now a forgotten man."

No Comment

Zombie Economics

GET YOUR HANDS ON THE GOVERNMENT’S PLAYBOOK

By SIMON BLACK

In this bubblicious world of trillion dollar deficits, sovereign bailouts, and fiscal stimulus measures of historical proportions, there is one economist whose theories and underlying philosophy underpin the foundation of modern macroeconomics.

His name is John Maynard Keynes, and his most famous work, The General Theory of Employment, Interest and Money (1936) has become the playbook from which politicians and central bankers are making their trillion dollar decisions.

Just about every politician knows the name Keynes. Most would consider themselves “Keynesian” in that they believe in government spending as a means to maintain economic stability. Few have actually read his book. And yet even fewer realize that Keynes was a major advocate of Soviet-style central planning.

Among the many fascist viewpoints in his General Theory, Keynes argued that:

1) A high rate of interest which encourages saving is bad for society.  Consumption and borrowing must be promoted. In fact, high interest rates are to blame for why “the world after several millennia of steady individual saving, is so poor…”

2) Consequently, the government should make money cheap, controlling interest rates with a target level of zero. Further, the government should never deliberately increase rates as inflation will not set in “until unemployment has completely disappeared.”

3) Even if inflation should happen to appear, it’s likely due to the “arbitrary and inequitable distribution of wealth and incomes…” As such, the better solution to control prices and keep the boom going is to simply impose high income and death taxes in order to make a more economically just society.

4) If the boom starts to fade and low interest rates aren’t doing the job, it is the role of the government to step in and ‘invest’ obscene amounts of money to stimulate growth. Only the government is capable of doing this, as “the duty of ordering the current volume of investment cannot safely be left in private hands.”

5) As Keynes favored “a somewhat comprehensive socialization of investment,” he recognized that such complex decisions of investing other people’s money would be “above the heads of the vast mass of more or less illiterate voters.”

6) Not to worry, though, these key decision makers of the state-run economy will have the right “moral position,” so it’s just a question of making sure that the right people are directing the economy.

7) In the event of a crisis, the answer is simple. A government should simply borrow and spend more. In a 1934 article for Redbook magazine entitled “Can America Spend Its Way into Recovery,” Keynes opened with “Why, obviously!”

8 ) If the crisis doesn’t abate after substantial spending an interest rate cuts, Keynes blames these continued problems on not following his advice closely enough: “[A]uthorities of the world have lacked the courage or conviction at each stage of the decline to apply the available remedies in sufficiently drastic doses.”

I could go on, but I don’t want to spoil the ending where the entire global financial system collapses as a result of following these ridiculous policies.

In terms of economic philosophy, very little separated Keynes from Lenin. Keynes even praised Lenin when he wrote, “Let us not belittle these magnificent experiments or refuse to learn from them… the Five Year Plan in Russia, the Corporative state in Italy…”

And yet, this is the man who is held up by world leaders as the architect for economic bliss. Politicians and central bankers are calling his plays almost verbatim– enormous stimulus packages where volume and quantity are all that matter, quality counts for nothing; interest rates at zero; spending your way out of recession; borrowing your way out of debt…

It’s absolutely mind-boggling how modern governments have built such an apparatus to control their economies and run them into the ground. Ironically, each time a crisis occurs, these regulatory agencies, central banks, and executive powers are granted even more authority. This only makes things worse.

Sure enough, in the “Seventh Quarterly Report” that President Obama’s Council of Economic Advisors released on Friday (right before a long weekend, naturally), the numbers show that the administration’s Keynesian stimulus spending has saved 2.4 million jobs at a cost of $666 billion. That’s a total of $278,000 per job, all at taxpayer expense.

In the world of Keynes where debt does matter and inflation doesn’t exist, this number is completely acceptable, right comrades? In the real world, it’s further evidence of how horrific misallocations of capital are bankrupting the economy.

To Keynes, people who work hard to create value cannot be entrusted with their own money. It must be confiscated by politicians for them to invest with the utmost objectivity and expertise, all for the benefit of society as they define in their sole discretion. And if they falter, we must reward them with even more power to tax, print, borrow, and spend.

This is the underlying philosophy of the man whose ideas have driven global macroeconomics for the last 60+ years… and continue to create inflation, bubbles, and economic ruin.

Everybody is entitled to his own facts

Politics Versus Reality

By Thomas Sowell

It is hard to understand politics if you are hung up on reality. Politicians leave reality to others. What matters in politics is what you can get the voters to believe, whether it bears any resemblance to reality or not.

Not only among politicians, but also among much of the media, and even among some of the public, the quest is not for truth about reality but for talking points that fit a vision or advance an agenda. Some seem to see it as a personal contest about who is best at fencing with words.

The current controversy over whether to deal with our massive national debt by cutting spending, or whether instead to raise tax rates on "the rich," is a classic example of talking points versus reality.

Most of those who favor simply raising tax rates on "the rich" -- or who say that we cannot afford to allow the Bush "tax cuts for the rich" to continue -- show not the slightest interest in the history of what has actually happened when tax rates were raised to high levels on "the rich," as compared to what has actually happened when there have been "tax cuts for the rich."

As far as such people are concerned, those questions have already been settled by their talking points. Why confuse the issue by digging into empirical evidence about what has actually happened when one policy or the other was followed?

The political battles about whether to have high tax rates on people in high income brackets or to instead have "tax cuts for the rich" have been fought out in at least four different administrations in the 20th century -- under Presidents Calvin Coolidge, John F. Kennedy, Ronald Reagan and George W. Bush.

The empirical facts are there, but they mean nothing if people don't look at them, and instead rely on talking points.

The first time this political battle was fought, during the Coolidge administration, the tax-cutters won. The data show that "the rich" supplied less tax revenue to the government when the top income tax rate was 73 percent in 1921 than they supplied after the income tax rate was reduced to 24 percent in 1925.

Because high tax rates can easily be avoided, both then and now, "the rich" were much less affected by high tax rates than was the economy and the people who were looking for jobs. After the Coolidge tax cuts, the increased economic activity led to unemployment rates that ranged from a high of 4.2 percent to a low of 1.8 percent.

But that is only a fact about reality -- and, for many, reality has no such appeal as talking points.

The same preference for talking points, and the same lack of interest in digging into the facts about realities, prevails today in discussions of whether to have a government-controlled medical system.

Since there are various countries, such as Canada and Britain, that have the kind of government-controlled medical systems that some Americans advocate, you might think that there would be great interest in the quality of medical care in these countries.

The data are readily available as to how many weeks or months people have to wait to see a primary care physician in such countries, and how many additional weeks or months they have to wait after they are referred to a surgeon or other specialist. There are data on how often their governments allow patients to receive the latest pharmaceutical drugs, as compared to how often Americans use such advanced medications.

But supporters of government medical care show virtually no interest in such realities. Their big talking point is that the life expectancy in the United States is not as long as in those other countries. End of discussion, as far as they are concerned.

They have no interest in the reality that medical care has much less effect on death rates from homicide, obesity, and narcotics addiction than it has on death rates from cancer or other conditions that doctors can do something about. Americans survive various cancers better than people anywhere else. Americans also get to see doctors much sooner for medical treatment in general.

Talking points trump reality in political discussions of many other issues, from gun control to rent control. Reality simply does not have the pizzazz of clever talking points.

A self-defeating joke

Proof that the Government is tilting at windmills

The policy on which our national energy strategy is now centered is a ludicrously expensive, self-defeating joke

By C. Booker

In the week when it was reported that 20 per cent of the EU's fast-soaring, trillion-euro budget may soon be spent on "fighting climate change", it was timely that Britain's energy companies should have met with the Department of Energy and Climate Change to raise one of the best-hidden secrets of our Government's obsession with wind power.

Centrica and other energy companies last week told DECC that, if Britain is to spend £100 billion on building thousands of wind turbines, it will require the building of 17 new gas-fired power stations simply to provide back-up for all those times when the wind drops and the windmills produce even less power than usual.

We will thus be landed in the ludicrous position of having to spend an additional £10 billion on those 17 dedicated power stations, which will be kept running on "spinning reserve", 24 hours a day, just to make up for the fundamental problem of wind turbines. This is that their power continually fluctuates anywhere between full capacity to zero (where it often stood last winter, when national electricity demand was at a peak). So unless back-up power is instantly available to match any shortfall, the lights will go out.

Two things make this even more absurd. One, as the energy companies pointed out to DECC, is that it will be amazingly costly and wildly uneconomical, since the dedicated power plants will often have to run at a low rate of efficiency, burning gas but not producing electricity. This will add billions more to our fuel bills for no practical purpose. The other absurdity, as recent detailed studies have confirmed, is that gas-fired power stations running on "spinning reserve" chuck out much more CO2 than when they are running at full efficiency – thus negating any savings in CO2 emissions supposedly achieved by the windmills themselves.

Is there no longer anyone around at DECC who is familiar with these very basic practical points? The policy on which our national energy strategy is now centered is a ludicrously expensive, self-defeating joke, which will achieve no benefits whatever – even if you are among the diminishing number of people who still believe that man-made CO2 is causing catastrophic climate change.

The Road to Serfdom

Stiglitz Calls for Socialism on the Installment Plan

by R. Wenzel

Finding a balance between government regulation and market forces is key to improving a country's economy, but there is not just one way to achieve this, according to Joseph Stiglitz .

"We now recognize that especially after the crisis, unregulated markets cannot work. We need both government and markets," said Stiglitz, Nobel Laureate in Economic Sciences and professor at the Columbia University.

He made the remarks at the 16th World Congress of the International Economic Association held at Tsinghua University in Beijing, China.

Attempting to find a way between free markets and total control of the economy may be a new concept to Stiglitz, but, it has been a concept floating around for a very long time.

Ludwig von Mises discussed the myth of a third way during a speech he delivered in 1950 at the University Club of New York.:

The middle-of-the-road policy is not an economic system that can last. It is a method for the realization of socialism by installments....if the trend of this policy will not change, the final result will only in accidental and negligible points differ from what happened in the England of Attlee and in the Germany of Hitler.

During his speech Mises showed how a simple interventionist step can ultimately lead to total control of the economy:

The interventionists emphasize that they plan to retain private ownership of the means of production, entrepreneurship and market exchange. But, they go on to say, it is peremptory to prevent these capitalist institutions from spreading havoc and unfairly exploiting the majority of people. It is the duty of government to restrain, by orders and prohibitions, the greed of the propertied classes lest their acquisitiveness harm the poorer classes. Unhampered or laissez-faire capitalism is an evil. But in order to eliminate its evils, there is no need to abolish capitalism entirely.

It is possible to improve the capitalist system by government interference with the actions of the capitalists and entrepreneurs. Such government regulation and regimentation of business is the only method to keep off totalitarian socialism and to salvage those features of capitalism which are worth preserving. On the ground of this philosophy, the interventionists advocate a galaxy of various measures.

Let us pick out one of them, the very popular scheme of price control.The government believes that the price of a definite commodity, e.g., milk, is too high. It wants to make it possible for the poor to give their children more milk. Thus it resorts to a price ceiling and fixes the price of milk at a lower rate than that prevailing on the free market. The result is that the marginal producers of milk, those producing at the highest cost, now incur losses. As no individual farmer or businessman can go on producing at a loss, these marginal producers stop producing and selling milk on the market. They will use their cows and their skill for other more profitable purposes. They will, for example, produce butter, cheese or meat. There will be less milk available for the consumers, not more.

This, or course, is contrary to the intentions of the government. It wanted to make it easier for some people to buy more milk. But, as an outcome of its interference, the supply available drops. The measure proves abortive from the very point of view of the government and the groups it was eager to favor. It brings about a state of affairs, which( again from the point of view of the government) is even less desirable than the previous state of affairs which it was designed to improve.

Now, the government is faced with an alternative. It can abrogate its decree and refrain from any further endeavors to control the price of milk. But if it insists upon its intention to keep the price of milk below the rate the unhampered market would have determined and wants nonetheless to avoid a drop in the supply of milk, it must try to eliminate the causes that render the marginal producers' business unremunerative. It must add to the first decree concerning only the price of milk a second decree fixing the prices of the factors of production necessary for the production of milk at such a low rate that the marginal producers of milk will no longer suffer losses and will therefore abstain from restricting output.

But then the same story repeats itself on a remoter plane. The supply of the factors of production required for the production of milk drops, and again the government is back where it started.

If it does not want to admit defeat and to abstain from any meddling with prices, it must push further and fix the prices of those factors of production which are needed for the production of the factors necessary for the production of milk. Thus the government is forced to go further and further, fixing step by step the prices of all consumers' goods and of all factors of production (both human, i.e., labor, and material) and to order every entrepreneur and every worker to continue work at these prices and wages.

No branch of industry can be omitted from this all-round fixing of prices and wages and from this obligation to produce those quantities which the government wants to see produced. If some branches were to be left free out of regard for the fact that they produce only goods qualified as non-vital or even as luxuries, capital and labor would tend to flow into them and the result would be a drop in the supply of those goods, the prices of which government has fixed precisely because it considers them as indispensable for the satisfaction of the needs of the masses.

But when this state of all-round control of business is attained, there can no longer be any question of a market economy.

No longer do the citizens by their buying and abstention from buying determine what should be produced and how.

The power to decide these matters has devolved upon the government.

This is no longer capitalism; 

it is all-round planning by the government, it is socialism.

When Stiglitz says,"We now recognize that especially after the crisis, unregulated markets can not work. We need both government and markets."

He is proving Mises point. It was central bank intervention (money printing) that was at the core of the recent financial crisis, supported by FDIC creation of moral hazard which caused depositors to be unconcerned about the investments made at the banks where they deposited their money, and this was all intensified by government programs to direct investments in the direction of the housing market.

And so because of these three interventions, which caused the crisis, Stiglitz, as an interventionist, is doing exactly what Mises predicted. He is calling for more intervention in the economy. Where does it stop? It won't stop, until the entire economy is controlled. It is socialism developing on the installment plan. Mises saw it coming decades ago.

... harass our people, and eat out our substance.

The American Nosedive

by Jim Goad

Reading the Declaration of Independence 235 years after it was written, it’s kidney-punchingly obvious that the United States government has become precisely the sort of bloodsucking tyrant against which the Founding Fathers revolted.

These days our primary financial and political mechanisms, as well as every jot and tittle of rhetoric that dribbles from our politicians’ mouths, all lurch toward centralized global codependency, whereas the Declaration of Independence encourages “separation,” “liberty,” and “dissolving political bands.”

The Declaration bemoans the fact that the King of England had blocked many of the colonies’ laws, whereas today the feds’ judicial henchmen routinely overrule the American electorate’s will in matters such as immigration, gay marriage, and anything else that obstructs its agenda’s steamrollering path.

The Declaration protests the fact that the King had created a “multitude of New Offices…to harass our people, and eat out our substance.” Today, America employs more people in government than in manufacturing. It lost a full third of its manufacturing jobs in the last decade alone while adding nearly two million government jobs.

The Declaration endorses such terms as “common kindred” and “consanguinity,” whereas today such sentiments are confined to a despised cattle pen of cultural “extremism,” but only if you’re similarly hued to the Founding Fathers. It’s a ghastly irony that America’s primary modern cultural demons are precisely the sort of people who made America.

The Declaration complains that King George “excited domestic insurrections amongst us” and encouraged “merciless Indian Savages,” whereas today the feds file their nails while violently anti-white mobs stalk urban streets. A mere five-minute walk from where the Declaration was signed, here’s what Philadelphia looks like these days. And like King George, today’s feds encourage a culturally antagonistic alien onslaught, this time from our southern border by those who, mistakenly or not, consider themselves the common kin of the aforementioned “merciless Indian Savages.”

Although one of the Declaration’s main grievances involved taxation without consent, I cannot name one of the hydra-headed taxes I’m forced to pay—under threat of imprisonment—about which I’ve ever been consulted, much less to which I’ve consented. And taxes now are absurdly higher than they were in 1776.

And the modern federal government is obstinately deaf to George Washington’s warnings about foreign entanglements and Thomas Jefferson’s grave distrust of bankers.

If the Founding Fathers were alive today, they’d kick us in the balls. They’d also say we deserve everything we have coming. And believe me, it’s coming.

It’s grimly ironic that the first installment of Edward Gibbon’s The Decline and Fall of the Roman Empire was published in 1776. The USA originally defined itself as a rebel against the British Empire, gradually became its successor, and now is certain to shrivel and implode.

One of Gibbon’s reasons for Rome’s decline was that it had overreached itself militarily, only to be gradually ground down and pushed back by the Persians. As one modern writer puts it, “Roman victories in Iraq were transitory and self-defeating.” Sound familiar? Gibbon also said that much of Rome’s military had fallen into the hands of barbarian mercenaries who gradually turned against their employer. Nowadays our insanely self-loathing and suicidal notions of tolerance have allowed our military to be infiltrated with openly hostile Islamic extremists. And our virtually nonexistent southern border is now patrolled by a Hispanic majority rather than an Anglo one.

Gibbon also blamed Rome’s increasingly fragmented demographics for its fall. Fifty years ago, nine of ten Americans were of European descent. In around thirty years, they will constitute a minority. Gibbon pointed out that the Eastern and Western Roman empires split along linguistic lines, with Greek spoken in the East and Latin in the West. A similar trend is emerging in America today with English and Spanish.

Other historians note that Rome suffered from an increasingly devalued currency that led to financial collapse. The American dollar is currently worth only four percent of what it was 100 years ago. This year, Standard & Poor’s downgraded America’s long-term credit outlook from “stable” to “negative,” and the IMF predicted that China’s GDP will surpass America’s in a mere five years. We’ve rapidly plummeted from the world’s largest creditor to its biggest debtor. Despite Democratic myths to the contrary, the national debt has been gradually swelling for decades. As with Rome, our unproductive, dole-gobbling masses are temporarily kept fat and complacent with bread and circuses—but only temporarily. Fiat currency never lasts.

We’ve fallen from the top perch in education, wealth, infrastructure, and life expectancy. Every cultural icon and historical conquest that was once deemed a matter of pride is now designated as cause for shame and perpetual self-flogging. Uncle Sam has been recast as a creepy relative who molests you. But to protest any of these ongoing cultural inversions is to invite scorn, to be labeled paranoid and stuck in the past.

Never mind that the past seems far better than the present. My father didn’t graduate from high school but was able to pay off a mortgage and buy a new car every three years by toiling at dirty blue-collar jobs such as plumber and oil-rig foreman. I have a college degree (summa cum laude, thank you very much), have rented all my life, and have never owned a new car. Forgive me, if you can, for noticing that things have changed for the worse. I can only despise a government that risked my father’s neck in WWII and my brother’s in Vietnam yet insists I remain quiet while it downgrades the long-term prognosis for my son.

The upper left signature on the Declaration of Independence is that of Button Gwinnett, a representative from Georgia. Yesterday while driving in wilting heat through the Georgia county named after Gwinnett, my Georgia-born wife and I passed endless short brown herds of Mesoamericans and one Spanish-language sign after the next. “This feels like another country,” she said. I looked at her and nodded. We are choking to death on our own niceness.

Our second president and cosigner of the Declaration of Independence, John Adams, wrote that “democracy never lasts long. It soon wastes, exhausts, and murders itself. There is never a democracy that did not commit suicide.” It appears that American democracy has swallowed a bottleful of sleeping pills, and it’s only a matter of time before they kick in.

And so today, July 4, 2011, I declare my independence from the United States of America. For now my gesture is entirely symbolic, and unlike 1776, there appears to be no frontier to which I can flee, at least not on this planet. But if anyone can suggest a viable exit strategy, I’ll consider it more seriously than I do anything currently being spewed by our unforgivably traitorous government.

Big Fish

Who’s really fibbing about Fukushima?

The way greens tried to play up the accident was far more shocking than ministers’ attempts to ‘play it down’.

By Rob Lyons

Last week’s revelation that UK government departments were in touch with nuclear energy companies about how to handle public discussion of the accident at Fukushima has been greeted with loud cries of ‘collusion’ by sections of the media and critics of nuclear power. In truth, the really dodgy spin in the aftermath of Fukushima emanated from anti-nuclear campaigners. The problem is not that the government has been defending nuclear, but that it hasn’t defended nuclear nearly enough.

Last Thursday, the Guardian reported that 80 emails between British government officials and the nuclear industry had been released under Freedom of Information requests. The emails revealed that just two days after the tsunami-caused accident at the Japanese nuclear power plant, an official at the UK Department for Business, Innovation and Skills (BIS) wrote an email with the subject ‘Nuclear Lines Safety of Nuclear’: ‘This has the potential to set the nuclear industry back globally’, the email said. ‘We need to ensure the anti-nuclear chaps and chapesses do not gain ground on this. We need to occupy the territory and hold it. We really need to show the safety of nuclear.’ The only shocking thing about this email is the public-school prose, chaps.

Later, there were discussions about a ‘joint communications and engagement strategy aimed at ensuring we maintain confidence among the British public on the safety of nuclear power stations and nuclear new-build policy in light of recent events at the Fukushima nuclear power plant’.

Tory MP and leading green Zac Goldsmith has condemned the exposed communications, saying the government had ‘no business doing PR for the industry’. A Greenpeace spokesperson described them as ‘scandalous collusion’.

Guardian environment editor John Vidal provided a suitably conspiratorial summary: ‘What the emails show is a weak government, captured by a powerful industry colluding to at least misinform and very probably lie to the public and the media. When the emails were sent, no one, least of all the industry and its friends in and out of government, had any idea how serious the situation at Fukushima was or might become.’ Vidal argues that ‘an area of around 966 square kilometres near the power station is now probably uninhabitable for generations; there is a strong likelihood that children living in or near Fukushima were exposed to radiation internally; the costs run possibly to hundreds of billions of dollars’.

Vidal is as wrong as it is possible to be. Government and industry haven’t tried to ‘spin one of the biggest industrial catastrophes of the last 50 years’ because there has been no disaster at Fukushima. There has been a serious and messy accident that has left a mess, which is now stable if not exactly under control and which will take many years to clean up. Nobody has died as a result of radiation leaks and, given the level of leaks involved, few, if any, are likely to. Compare that to the natural disaster of the earthquake and tsunami in Japan, which left well over 20,000 people dead, flattened whole towns and left many homeless.

As for a large area around the plant being ‘uninhabitable’, it is worth noting that many thousands of people have worked at Chernobyl since the accident there in 1986 and continue to do so. The idea that the area around Fukushima will be ‘uninhabitable’ is almost certainly alarmist nonsense. Given that radiation has been released into the environment, it would be highly surprising if children had not ingested at least some. But, as an expert at the Dalton Institute in Manchester told the Guardian: ‘What we’re seeing here is residual caesium that will be around for quite a while. But, given the circumstances, the levels quoted in the survey are not particularly alarming.’

Congress shall make no law ...

2011 Declaration of Independence From Big Government

by  Frank Miniter

The Declaration of Independence, signed July 4, 1776, was a moral and profound list of grievances and/or charges detailing why colonial Americans found it necessary to separate themselves from the English Parliament and King George III.  As we near Independence Day, it’s time for such a declaration of complaints listing what some in our government are doing to our individual freedoms as safeguarded in the U.S. Bill of Rights.  Besides, it’s a lot of fun to tell the government where to go, so here’s my list of the top 10 freedoms we’ve lost or are losing and want returned.  

1.  The First Amendment says, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech.”  Therefore, if my priest wants to say former Rep. Anthony Weiner (D.-N.Y.) behaved immorally, he should be able to do so without risking his church’s nonprofit status.  Or if my priest wants to call out President Barack Obama for his stance on abortion, the First Amendment clearly protects his right to do that.  The law banning tax-exempt organizations, including churches, from politics didn’t come from the founding era.  It was actually engineered in 1954 by then-Senate Minority Leader Lyndon B. Johnson (1908–1973).  Johnson wanted to silence two nonprofit organizations in Texas that had opposed his reelection, so he pushed the bill through.  It wasn’t controversial because Johnson passed it off as a favor to churches.  The legislation passed as an amendment to another bill via an up-or-down voice vote in the U.S. Senate.  Most churches in America have since organized themselves as 501(c)(3) tax-exempt religious organizations—501(c)(3) churches are prohibited from addressing, in any tangible way, the vital issues of the day.  If they do, the IRS might come for their tax-exempt status.  This is unconstitutional.  Religious leaders also have First Amendment rights.  Of course, if parishioners don’t like what a priest, reverend, rabbi or other leader says, they have the right to complain, to leave the church, or to start a campaign to get a new priest.  That’s the freedom Americans have always fought for.

2.  If people choose to spend their own money on an ad supporting or criticizing someone who is running for political office, then they have the First Amendment right to do so.  This right doesn’t cease if someone pools his or her money with others in an association, union or organization.  It’s their hard-earned money, and the government can’t constitutionally stop them from condemning or praising someone with it.  Nor should a union or other association be able to legally force someone to contribute to a candidate or political party he or she doesn’t support.

3.  When law-abiding citizens log on to the Internet on their private computers, they don’t need the Federal Communications Commission (FCC) working behind the scenes with net neutrality regulations to decide what they should be reading, how fast their downloads should be working, or what their searches should turn up.  That’s none of the government’s business.  The First Amendment should prevent the FCC from interfering with the freedom of speech of not just the Internet user, but also of the provider.  Americans have the right to take their business to the company or companies that provide the best services at the lowest prices—such is the free market that has given us everything.

4.  If someone attacks us with lethal force in our homes or in the public square, we have the Second Amendment right to use a firearm to preserve our lives.  Sure, all of the amendments within the Bill of Rights can be reasonably restricted by the government (via the will of the people) so that one person’s individual rights don’t impede another’s, but when a sane adult who has broken no laws simply wants to carry a firearm for self-protection, his or her action doesn’t impact others’ constitutional rights—though it just might impact a mass-murderer’s evil intentions.

5.  It’s time to stop trial attorneys from making American citizens (as well as corporations and the government) liable for whatever some idiot decides to do.  We have the right to behave as responsible adults—or as idiots, until our actions affect someone else.  For example, if peope choose to swim outside the ropes at a public lake, then they are taking their lives into their our own hands.  If one of those people drowns, then no one should be able to sue the government or anyone else because a person got in over his or her silly head.  To stop the threat of lawsuits from reducing our liberty, we need tort reform.  The Seventh Amendment was not designed to be a tool for attorneys using only a “preponderance of evidence” to win large sums of money in a lawsuit.  The Seventh Amendment was designed protect individuals from negligent and fraudulent actions.  “Loser-pays” legislation and other tort reforms must be instituted to stop the lawsuit lottery from curtailing our freedoms by making everyone from the government to grandmothers practice extreme lawsuit avoidance.

6.  My property can only be taken for a public “use,” just as the Fifth Amendment says, not for a public “purpose,” as the U.S. Supreme Court decided in Berman v. Parker (1954) and later upheld in Kelo v. New London (2005).  If they come to take our homes so they can give them to someone who will pay more taxes or who is more politically connected, then they are trampling on the individual rights this great nation was founded upon.

7.  Until the government gets a warrant, citizens' movements, cell phone usage, bank records, e-mails and more are their own business.  The Fourth Amendment protects the “right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures.”  “Papers” include e-mails, financial records and more.  Just because papers are now digital doesn’t preclude their constitutional protections.  After all, no one says we lose the First Amendment’s right to free speech when we write an e-mail or speak over the telephone.  The courts need to start understanding the basic premise that new technology doesn’t erase the U.S. Constitution.

8.  The people's decision to purchase health insurance is their private decision.  ObamaCare is an infringement on state and individual rights, as the bill mandates that, as of 2014, every American must buy a product approved by the U.S. Congress or be fined for not doing so.  Failure to buy government-approved health insurance, according to ObamaCare, results in a penalty included on the taxpayer’s annual federal return.  As Virginia’s attorney general, Ken Cuccinelli, said, “There has never been a point in our history where the federal government has been given the authority to require citizens to buy goods or services.”  According to the Left’s reasoning, a person’s decision not to eat fast food, not to take a job, not to join the military or not to buy a Chevy is an “activity that is commercial and economic in nature” that can be regulated and even required by Congress.  The U.S. Constitution’s Commerce Clause (“The Congress shall have Power … To regulate Commerce with foreign Nations, and among the several States …”) does not give the federal government the power to make us buy products.  The Supreme Court needs to rule this portion of ObamaCare unconstitutional.

9.  “Penumbras” and “emanations” should not be used by the U.S. Supreme Court to create new “privacy” rights that don’t appear in the Constitution, but penumbras and emanations are exactly where Justice William O. Douglas found new “constitutional” privacy protections in Griswold v. Connecticut(1965).  Griswold created new rights not found in the Constitution and led to Roe v. Wade (1973), a case that constitutionalized the right to have an abortion even though the Constitution never mentions abortions.  (Can you picture even a minority of the Founding Fathers including a right to have an abortion in the Bill of Rights?)  By creating such unenumerated privacy rights, the high court has taken the Constitution away from the people.  After all, we the people can’t pressure our representative in Congress to change a ruling the Supreme Court errantly made—this is why such judicial activism is undemocratic.  Judges are supposed to adjudicate the law, not write it.

10.  When people find themselves on a jury sitting in judgment of an accused person, they have the right to rule according to their conscience, not how some judge says they must rule.  According to the common-law doctrine of jury nullification, jurors can nullify a law—refuse to convict a defendant despite instructions from a judge—if they believe the law is unjust or that the application of the law in a specific instance is unjust.  Historically, the jury’s power to sit in judgment of not only their peers, but also of the law, is what led to many of the freedoms we cherish today.  For example, in 1735, John Peter Zenger, editor of the New York Weekly Journal, was tried for printing seditious criticisms of the governor of New York.  Andrew Hamilton, Zenger’s attorney, convinced the jury that something isn’t libelous if it’s true.  Hamilton informed the jury members that they had the common-law authority to ignore the law and to instead rule according to their consciences.  The jury subsequently acquitted Zenger, setting a precedent that led to increased debate about the importance of press freedom.  Jury nullification has these glorious roots in people’s struggles for freedom from tyranny, yet today liberals tell us that a jury can’t sit in judgment of the law.  If juries lose the right to sit in judgment of government, we are in danger of losing all our rights.

Capitalism works for men who do. Socialism works for men who don’t.

 It's Not Called 'Dependence' Day

by Daniel J. Flynn

Is the Fourth of July a right-wing holiday?

When asked by a conservative, the question is self-serving; by a liberal, self-knowing. As it happens, two Harvard University professors not only ask the question but answer in the affirmative.

Their new study claims that “there is a political congruence between the patriotism promoted on the Fourth of July and the values associated with the Republican party.” The professors worry that the more intensely patriotic celebrations may “socialize children into Republicans.”

The professors aren’t the first Americans made uncomfortable by America’s birthday.

“We hold these truths to be self-evident,” the signers of the Declaration of Independence affirmed, “that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

Fifty years later, on July 4, 1826, Welsh industrialist Robert Owen issued a “Declaration of Mental Independence” at the New Harmony commune that he started in Indiana. “I now declare to you and to the world, that man up to this hour has been in all parts of the earth a slave to a trinity of the most monstrous evils that could be combined to inflict mental and physical evil upon the whole race,” Owen declared. “I refer to private property, absurd and irrational systems of religion and marriage founded upon individual property, combined with some of these irrational systems of religion.”

So enthused by Owen’s address were the inhabitants of New Harmony that they declared a new era: Year 1 M.I. (mental independence). So enraged by the grievances articulated by Jefferson were the inhabitants of the thirteen colonies that they founded a new nation. America celebrates its birthday today. The commune the Owenites started never made it to Year 2 M.I.

Why did the United States make history while New Harmony became a mere footnote to history?

The results of each experiment are fairly easy to interpret. Capitalism works for men who do. Socialism works for men who don’t.

Early America prospered because it incentivized work and ingenuity. New Harmony floundered by socializing profits and losses. In the 19th-century Indiana wilderness, they played music, drank beer, wrote constitutions for distant lands, and performed puppet shows. But they forgot to plant crops one harvest season, left factories unmanned, and even resorted to breaking down a cabin for firewood. As one dejected resident lamented, “the men generally do not work as well as they would for themselves.”

The more America’s policies resemble New Harmony’s, the more America’s outcomes will resemble New Harmony’s.

Jefferson’s declaration based just government on the consent of the governed to protect life, liberty, and the pursuit of happiness. Owen’s declaration envisioned a social system that directed people how to live their lives, exercise their liberty, and pursue happiness—whose is anybody’s guess. If it were called “Dependence Day,” perhaps Robert Owen’s heritors would celebrate more heartily today.

It’s not just that all those American flags make some leftists squeamish about the Fourth. It’s that a holiday so associated with freedom conflicts with an outlook so preoccupied with coordinating the lives of others. So, committed leftists are faced with either downplaying or hijacking the holiday.

Owen’s Declaration of Mental Independence was an early attempt in the long tradition to co-opt or erase American traditions. Washington’s Birthday yields to the blah Presidents’ Day, Columbus Day provides an excuse to bash Western Civilization, and Christmas morphs into “winter holidays.”

Basing the calendar on Robert Owen’s commune rather than Christ’s birth never caught on. But so much else from New Harmony—Doesn’t Owen’s attack on marriage, religion, and private property seem more 2011 than 1826?—eventually did.

The Fourth of July represents America’s heritage of freedom. The more we are separated from that heritage, the easier it is to replace it with principles altogether foreign to the celebrants of the original Independence Day. Certainly the authors of the Harvard study understand this.

Fifty years after July 4, 1776, few Americans were willing to embrace the principles of the Declaration of Mental Independence. Two hundred and thirty-five years after the Declaration of Independence, Americans unmoored from their heritage seem ready to embrace any random scheme that comes along.