Money demand and banking

Some challenges for the “Free Bankers”

by DETLEV SCHLICHTER

Within the Austrian School of Economics there has long been disagreement and therefore occasionally fierce debate about the nature and consequences of fractional-reserve banking, from here on called simply FRB. FRB denotes the practice by banks of issuing, as part of their lending activities, claims against themselves, either in the form of banknotes or demand deposits (fiduciary media), that are instantly redeemable in money proper (such as gold or state fiat money, depending on the prevailing monetary system) but that are not fully backed by money proper. To the extent that the public accepts these claims and uses them side by side with money proper, gold or state fiat money, as has been the case throughout most of banking history, the banks add to the supply of what the public uses as money in the wider sense.

Very broadly speaking, and at the risk of oversimplifying things, we can identify two camps. There is the 100-percent reserve group, which considers FRB either outright fraud or at least some kind of scam, and tends to advocate its ban. As an outright ban is difficult for an otherwise libertarian group of intellectuals to advocate – who would ban it if there were no state? – certain ideas have taken hold among members of this group. There is the notion that without state support – which, at present, is everywhere substantial – the public would not participate in it, and therefore it would not exist, or that it constitutes a fundamental violation of property rights, and that it would thus be in conflict with libertarian law in a free society. This position is most strongly associated with Murray Rothbard, and has, to various degrees and with different shadings, been advocated by Hans-Hermann Hoppe, Jesus Huerto de Soto, and Jörg Guido Hülsmann.

The Graffiti on the Wall

The future belongs to those who show up for it

By mark steyn

Timing is everything, even in apocalyptic doom-mongering. When my book America Alone came out in 2006, the conventional wisdom was that its argument about Europe's demographic death spiral was "alarmist" (The Economist). Seven years on, it's so non-alarmist that even the Washington Post is running stories about the Continent's "plummeting" birth rates. The Post's focus was on a small corner of the Portuguese interior, wherein their reporter met Maria Jesus Rodrigues, 87, who recently moved into the old folks' home from her nearby village. The youngest resident is 57. Not in the old folks' home, but in the village. That's to say, the entire parish qualifies for membership in the AARP, which regards you as a potentially "retired person" from the age of 50.

"Retirement" is an invention of the 20th century, and will not long outlive it. When everyone's a senior, nobody is — because, if there are no young people around to pave the roads, police the streets, weed your garden, fix your roof, give you a bed bath, and change your feeding tube, you're going to have to do it yourself. In The Children of Men, P. D. James's dystopian novel of a world turned mysteriously barren, the roads are potholed and broken, and the buildings crumbling, for want of a sufficiently able-bodied population to maintain them. By 2021, the year Lady James's story is set in, much of inland Portugal will be approaching the same condition — not through biological affliction, but through a kind of silent mass consensus that this is no longer a world worth bringing children into. "A country without children is a nation without a future," warned Aníbal Cavaco Silva, Portugal's president, in 2007, since when the fertility rate has nosedived. Why would you have a kid in Portugal? The country's youth-unemployment rate is over 40 percent. In Spain it's 57 percent, and in Greece just shy of 63 percent.

Death by Treacle

Sentiment surfaces fast and runs hot in public life, dumbing it down and crippling intimacy in private life

By Pamela Haag

When I was a child, I knew national flags by the color and design alone; today I could know diseases the same way. This occurs to me on my morning commute as I note the abundance of magnetic awareness ribbons adhering to cars. A ribbon inventory on the Internet turns up 84 solid colors, color combinations, and color patterns, although there are certainly more. The most popular colors must multitask to raise awareness of several afflictions and disasters at once. Blue is a particularly hard-working color, the new black of misfortunes; 43 things jockey to be the thing that the blue ribbon makes us aware of.

Awareness-raising and fundraising 5K races augment the work of the ribbons. Maryland, where I live, had 28 5K races in one recent two-month period. I think it might be possible to chart a transcontinental route cobbled together entirely by annual 5K charity and awareness runs. Some memorialize a deceased loved one or raise funds for an affliction in the family (“Miles for Megan,” for example, or “Bita’s Run for Wellness”); others raise awareness of problems ranging from world health to Haiti to brain injury. A friend of mine who works in fundraising and development once observed, and lamented, that some medical problems were more popular than others and easier to solicit money for. Conditions with sentimental clout elicit more research donations, and cute endangered animals such as the giant panda, the World Wildlife Fund’s mascot, lure more donations than noncuddly ones.

On some days you’ll see makeshift shrines for victims of car accidents or violence by the side of the road, placed next to a mangled guardrail or wrapped around a lamppost. As more people hear of the tragedy, teddy bears, flowers, and notes accumulate. Princess Diana’s was the biggest of such shrines, a mountain of hundreds of thousands of plastic-sheathed bouquets outside her residence. Queen Elizabeth resisted the presumptuous momentum of all the grief but finally relented and went to inspect the flower shrine and its handwritten messages, a concession to sentiment depicted in the movie The Queen. Maybe I was the only one in the theater who thought the Queen was right; I rooted for her propriety over Tony Blair’s dubious advice that she drag the monarchy into the modern age by publicly displaying a sentiment she probably didn’t feel. The mourners didn’t even know Diana, the queen reasoned by an obsolete logic of restrained stoicism, and the palace flag didn’t fly at half-mast even for more illustrious figures. But she caved in the end. We most always do.

Southern Delusions

'Like the Coming of the Messiah'

by Pater Tenebrarum

Apparently politicians in the Southern European periphery are the victims of some sort of mass delusion. Their shared hope is that Germany's chancellor Ms. Merkel will somehow be transmogrified by her likely reelection and become a kind of Teutonic Santa Claus overnight. According to a press report

“Like the coming of the messiah, depressed southern Europe nations await Angela Merkel's likely victory in Germany's September election with a mixture of hope and trepidation.

Four years into the euro zone debt crisis, people in debt-laden Spain, Italy, Greece, Portugal and Cyprus are deeply worried that a third term in power for the conservative chancellor may only bring them more austerity and pain.

The five countries that implemented Merkel's anti-crisis recipes and cut spending massively in areas such as health and education, have been in or close to recession since 2008. Unemployment tops 27 percent in Spain and Greece.

Their leaders, however, disagree. Confident that Merkel will tone down her budget cutting mantra and accept more burden-sharing within the euro zone, they are positioning themselves as close allies of Europe's main paymaster.

"I think we will see a different Mrs Merkel after the elections," said Cypriot President Nicos Anastasiades, echoing a view shared by most of his fellow southern European leaders.

Turning “A Parliamentary Democracy Into A Banana Republic”

NSA Spying in Germany

By Wolf Richter   

“The largest espionage scandal in the 21st century is shaking Germany,” wrote Peer Steinbrück, the man who is desperately trying to unseat one of the most popular German politicians, Chancellor Angela Merkel, as massive anti-NSA protests spread across the country.... Well, not quite: 1,000 demonstrators straggled through Frankfurt. It’s going to be tough for him.

Edward Snowden’s revelation of widespread US and British spying on German internet and telecommunications – and Germany’s own role in it – damaged confidence in the democratic rule of law, and suspicions were growing that constitutional rights had been “systematically violated millions of times,” he asserted in a guest commentary in the Frankfurter Rundschau – 56 days before the election. The SPD’s candidate for chancellor, and erstwhile Finance Minister under Merkel’s grand coalition government of 2005-2009, was running out of time.

Back in June, 100 days before the election, only 14% of German voters believed that he could become chancellor, while 78% believed that he was electoral road kill. Even among SPD supporters, moroseness had taken over: only 22% believed he’d make it. The spy scandal might be his last chance. Only a big debacle could unseat Merkel. But Germany was on vacation, and the government would simply not allow any big debacles to transpire before the elections.

So Interior Minister Hans-Peter Friedrich was sent to the forefront to defend the NSA’s surveillance programs. July 12, he went to the US ostensibly to be briefed by the NSA and came back a strong supporter. At the time, he said they’d prevented five terror attacks in Germany. Later, he was forced to cut that down to two.

Rouhanimania grips world attention

The word ‘pragmatism’ is what is on everyone’s lip

By M K Bhadrakumar

The transition of power next week in Tehran makes Iran look what it is in actuality in the volatile Middle eastern region — an oasis of stability. What makes this orderly possible is the political legitimacy of the Iranian regime and its very substantial social base, the erosion that is inevitable through decades in power notwithstanding. 

So, we now know that President Mahmoud Ahmedinejad is returning to his profession — academia. No heartburns there. The irony is there, of course, that the new university proposes to specialize in nuclear engineering. But then, obviously, Supreme Leader Ali Khamenei approves it. 

The president-elect Hassan Rouhani is also having his way putting together his cabinet and it is taken for granted as his prerogative to summon back the old wizard of Iran’s all-powerful oil ministry Bijan Zanganeh to handle matters once again — presumably, in anticipation that the industry needs to be revved up, technologically upgraded, hopefully with western technology and investment, so that Iran can emerge as a major exporter, hopefully to the western market. 

War against Iran, Iraq AND Syria?

Round up all the Prada jihadis

By Pepe Escobar 
Amidst the incessant rumble in the (Washington) jungle about a possible Obama administration military adventure in Syria, new information has come to light. And what a piece of Pipelineistan information that is. 
Picture Iraqi Oil Minister Abdelkarim al-Luaybi, Syrian Oil Minister Sufian Allaw, and the current Iranian caretaker Oil Minister Mohammad Aliabadi getting together in the port of Assalouyeh, southern Iran, to sign a memorandum of understanding for the construction of the Iran-Iraq-Syria gas pipeline, no less. 

At Asia Times Online and also elsewhere I have been arguing that this prospective Pipelinestan node is one of the fundamental reasons for the proxy war in Syria. Against the interests of Washington, for whom integrating Iran is anathema, the pipeline bypasses two crucial foreign actors in Syria - prime "rebel" weaponizer Qatar (as a gas producer) and logistical "rebel" supporter Turkey (as the self-described privileged energy crossroads between East and West). 

The US$10 billion, 6,000 kilometer pipeline is set to start in Iran's South Pars gas field (the largest in the world, shared with Qatar), and run via Iraq, Syria and ultimately to Lebanon. Then it could go under the Mediterranean to Greece and beyond; be linked to the Arab gas pipeline; or both. 

Norway is a Junkie, and Oil is its Heroin

Buying Votes with Oil Money

Norway's socialist prime minister Jens Stoltenberg: provider of welfare-statism financed by oil revenues (a.k.a. 'the pusher').

by Pater Tenebrarum

People usually don't care much about Norway, on account of its relatively small size, population-wise (4.5 million inhabitants). However, as we have noted on previous occasions, its economy is beset by the Scandinavian bubble disease, with household debt growing to the sky and real estate prices exploding into the blue yonder. The central bank, faced with what it deems an overvalued currency, has kept interest rates at rock-bottom, continuing to fuel these twin bubbles. Nothing can possibly go wrong of course.

However, Norway is also quite unique due to being blessed with large oil wealth. Considering the tiny population, this oil wealth has allowed politicians to both save funds for a rainy day (said rainy day will arrive once the oil runs out, or so the theory goes), as well as financing a vast socialistic welfare state. Note that just because the central authority has lots of money to throw around, socialism cannot really be improved upon. It would still be far better for the country if the services provided by the government were provided by the market. And yet, Norway's government wants to throw more money around and enlarge the welfare state even further, in the hope of getting re-elected. As this is what it is going to use some of the accumulated wealth from oil sales for, we can state that saving for the dreaded 'rainy day' has for now given way to the exigencies of elections.

Throwing even more funds on the bubble bonfire that is Norway is not really apt to improve the country's economic risk profile. According to Bloomberg:

“Prime Minister Jens Stoltenberg pledged to build Norway’s welfare system, financed by the nation’s $750 billion oil fund, as he trails in the polls behind an opposition that’s promised tax cuts.

Stoltenberg, who is seeking an unprecedented third four-year term in September elections, said western Europe’s biggest oil producer needs a more developed system of public benefits as his Labor-led coalition raises spending by 19 percent in 2013.

I live with my parents

Madrid: Dignity and Indignation

By Aaron Shulman

Since I moved to Spain two and a half years ago, my personal life has settled into a state of contentment I’d never before even thought to contemplate. I married a Spanish woman on an Andalusian patio with orange trees; my 89-year-old grandmother was present, along with two dozen other relatives and friends from America. I’ve made close friends here with whom I can grab beers and talk about anything from private difficulties to the novels of Roberto Bolaño. My in-laws say I fit into the family like a puzzle piece, and when Elisa and I visit they always have the local delicacies I adore waiting for me: Córdoba-style oxtail, flamenquínes, cured Iberian ham. In other words, though the United States is my first home, I’ve been lucky enough to find a second home here. And yet there’s a bitter corollary: we have to leave. “I feel like Spain is kicking us out,” Elisa says from time to time as tears form in her eyes. I can’t help but agree, and we’re not the only ones who feel this way.

To say that unemployment is bad in Spain is like saying that the sea is watery. The situation is that oceanically obvious. Since the global economic crisis began,paro—the Spanish word for unemployment—has been rising over the country like a patient, ineluctable flood. Twenty-five percent of the population is jobless, and this leaves out the considerable number of eternal students, young men and women who, lacking alternatives, accrue degree after degree. The phenomenon has a name, titulitis, that reflects both the Spanish sense of humor and the feeling of an ailment infecting the future of the most highly educated generation in the country’s history. The 18-to-35 age group faces a 50 percent unemployment rate. I think back to 2004, the year of my college graduation. A sense of possibility remained strong even then, long after the 1990s boom had passed. And then I think of a student protest slogan today in Spain: Pre-Parado—another bit of wordplay—which means both ready in the sense of educated and pre-unemployed.

European Theater of the Absurd

It’s not the Moon that Makes People Mad – it is the Sun

by Pater Tenebrarum

Last week, Mish wrote about the recent plan of Spain's government (a 'conservative' government, no less) to actually tax sunlight. At first we though there must be an error. Could it really be that what Bastiat thought to be so utterly absurd he used it in his famous 'Petition of the Candlemakers' to satirize the errors of protectionists and mercantilists has now become reality in  a truly bizarre example of life imitates art? Is it possible that the Spaniards are so devoid of humor they don't recognize that the ridicule coefficient of this idea is truly off the scale?

One must keep in mind though that this is Europe and Spain is part of the EU. There isn't anything the ruling castes will not think about taxing. Breathing is probably next in line; after all, we humans exhale that 'dangerous poison gasCO₂'. What better way to reduce our 'carbon footprint' than charge us for breathing, which is evidently endangering the planet?

However, in Spain's case the reasons for the proposed new tax are more crassly commercial, since solar panels are obviously widely approved as planet-saving devices. No, it is simply about subsidizing the existing providers of electricity by making solar energy more uneconomic. After solar energy has finally become remotely viable, the EU is doing whatever it can to make it non-viable again. These are the same impertinent bureaucrats who have made the light bulb illegal citing 'climate change'. In reality that was of course just a flimsy pretext as well. They were lobbied (read: probably bribed) by industry, which now is making a mint from selling people lighting devices that seemingly come straight from the morgue. Not only that, since the 'energy savings lamps' contain plenty of mercury, they actually really are poisonous. If one of them breaks in a classroom, the whole school must be evacuated.

The Economist as Novelist in the Greek ‘Crisis’

The never-ending crisis in Greece is not merely financial, but social and political as well

by Theodore Dalrymple

The relationship between economics on the one hand and disciplines such as history, psychology, and sociology on the other is much disputed and seems to me a little like that of couples who live in a state of hostile dependence: they cannot live together but cannot live apart.

Are there rules of political economy such that if they are obeyed prosperity invariably and everywhere results? Or, of course, if disobeyed, impoverishment? Ought an economist to be more like a novelist in his understanding than a scientist?

I recently read an article by Barry Eichengreen, professor of economics and political science at Berkeley, about the Greek crisis, if a situation that has continued for years can properly be called a crisis. The article addresses the mistakes made by Greece. 

Amen to that: who wants to repeat mistakes?

But what exactly is or was the Greek mistake? We cannot trace it back to the Garden of Eden, though that is undoubtedly where things first began to go wrong in Greece, as everywhere else. Professor Eichengreen’s question is really this: the Greek situation having once arisen (never mind whether it ought to have arisen, it is part of the human condition always to be setting out from where we ought not to be), how should it have been dealt with?

Certainly not the way it actually was dealt with, on that many people are agreed. The IMF, one of the three institutions that recommended, dictated and oversaw the response, has issued a kind of mea culpa, acknowledging that its prescription was not right: though I doubt (and I apologize in advance if I am mistaken) that anyone will lose his or her job over the mere ruination of a country. Love is never having to say you’re sorry; being an international bureaucrat is never having to lose your job if you do say sorry.

Professor Eichengreen says that two thirds of the Greek debt, which is obviously unsustainable, should have been written off at the outset; the interest payments saved by the Greeks could have been used to recapitalize its banks and to reduce rather than increase taxes. This would have resulted in investment which would soon have got the Greek economy moving again.

The second thing that should have happened was an orderly internal devaluation (the Greeks, being members of the Eurozone, couldn’t arrange an external one) combined with structural reforms. By internal devaluation the professor means a reduction of salaries and pensions, all brought about consensually by agreement between the unions, the bosses and the politicians. The economic pain and discomfort would thus have been shared equitably, and this would have been propitious for the necessary structural reforms that Greece has so far been unable to carry out.

All this seems very sensible to me, except for two things. The first is that Greece is not an island; and the international conjuncture at the time the Greek crisis erupted is omitted from the professor’s recommendation in hindsight that two thirds of the Greek debt should at once have been restructured or in effect written off. This might have been possible if Greece had been the only country in crisis: but it wasn’t, and what was sauce for the Greek goose would, for political reasons, have had to be sauce for the Irish, Portuguese and other ganders. Writing off the Irish debt to the same extent as the Greek – a debt contracted in a very different manner from the Greek, but a debt nonetheless – would have entailed losses of more than $200,000,000,000 for the British, German and Belgian banks. The near-simultaneous default of several deeply indebted states would thus have been a nerve-wracking experiment. Politicians preferred – and who can really blame them? – to pretend for a few more years that the debts were performing and that the banks were solvent in the Micawber-like hope that something – strong growth, perhaps, or more likely inflation – would turn up in the meantime to make the debts manageable.

Seven reasons to hate your parents: Reason #5

The higher "education" scam 

 

by Eugen von Böhm-Bawerk 
In their quest to avoid reality, our parents tried to re-establish the medieval practice of guilds to protect their own interest from our generation

In medieval time’s workers formed associations or guilds to control the practice of their particular craft. A guild was basically a state granted privilege designed to keep potential new comers from entering and hence competing in the particular line of business. Often these guilds emerged around universities with the blessing from the monarch in return for a fee or taxes. The appearance of protective guilds traces as far back as the 13th century.

However, toward the end of the 18th and through the 19th century outspoken intellectuals such as Adam Smith, David Ricardo, John Stuart Mill and Frederic Bastiat managed to rationally argue against guilds and in favour for free trade. Even left-wing thinkers such as Jean Jacques Rousseau and Karl Marx meant the guilds system was degrading to the worker as it locked in social rank and hampered social mobility. It basically was a caste system. By the time scientific thinking and economics in particular, had matured to the extent witnessed by 19th century, no arguments could maintain the continuation of guilds. Thus, we saw guilds being abandoned one by one all over Western Europe. The abolishment of guilds is mostly forgotten when historians today try to explain the “lift-off” and industrial revolution that led to prosperity for the masses!

So why do our parents insist on re-establishing this medieval practice of protection? There can be few other explanations than that they want to keep the goodies for themselves. By making it much harder for us to enter their domain they can reap the benefits while we pay.

The process of creating guilds today takes many forms, but the most prevalent is through the educational system. In order to secure a job at a big corporation the minimum requirement is always a Bachelor`s degree, and very often a Master’s degree. Truth be told, many seek menial corporate jobs with Ph.Ds. We have witnessed all this first hand. A big corporation does not even bother to look at your application unless you hold a Master`s degree from a relatively well renowned University.

Your humble writer has spent five years obtaining a Master degree and can confirm that 90 per cent of the time spent during those five years is a complete waste of time. The diploma derives its entire value solely by functioning as a ticket where the winning price is the opportunity to apply for a job. In the process almost every student has to go deep into debt!

What is even worse is that our parents taught us it didn’t really mean much what you studied, as long as you could prove to have wasted five years of your life. That is all that is needed to secure a ticket. Most of the education today is not investments, but simply kids spending time on their hobbies. Gender studies, fashion design, theatre, history, photography, art etc. may all be interesting, but are strictly speaking only hobbies.

‘Big History’: The Annihilation of Human Agency

Meet the historians who treat mankind as the passive voyeur of the passing of time

By FRANK FUREDI
Debates about history, especially politicised debates, can give us striking insights into the prevailing cultural view of the human condition. Such debates send us signals - about what should be the focus of our loyalty and solidarity; about what role we think people play in the making of history; and most importantly of all about the legacy of humanity’s historical experiences, and what impact that legacy might have on the future.

Consider today’s constant calls to abolish the national focus of history in school curriculums in Western societies. The criticism of so-called nationalist history-teaching reflects an inability to give meaning to what were, until recently, taken-for-granted loyalties and shared assumptions. The vociferous campaign against the British Tory government’s attempt to reintroduce the ‘story of a nation’ into history-teaching was a success because not even the defenders of such teaching believed in it, never mind its opponents. Even someone like Richard Evans, who sports the title of regius professor of history at the University of Cambridge, now feels so estranged from the ancient traditions of his subject area that he can celebrate the new, non-nationalist history curriculum on the basis that ‘it recognises that children are not empty vessels to be filled with patriotic myths’.

Evans went on to argue that ‘history isn’t a mythmaking discipline, it’s a myth-busting discipline, and it needs to be taught as such in our schools’. Of course, busting myths is an honourable enterprise. But when it becomes the central purpose of a discipline, then the integrity of that discipline is compromised. Moreover, turning myth-busting into a standalone ideal - like its companion metaphor of ‘deconstruction’ - inevitably encourages uncritical criticism and cynicism. Certainly before children are let loose on the field of myth-busting, they would benefit from some familiarity with, and understanding of, the myths they are about to take apart.

Myth-busters are very selective about what kind of history they target. So whereas national history is denounced as ideological, other forms of history are offered a free pass. Evans wants British schools to put greater emphasis on European history rather than national history. His expansion of the scale of study is relatively modest in comparison with the current trend in history circles, which seeks continually to magnify history’s focus. There are frequent calls these days for global history, cosmopolitan history, Big History. As the Harvard professor David Armitage has argued, ‘Across the historical profession, the telescope rather than the microscope is increasingly the preferred instrument of examination’.

The proponents of the teaching of Big History claim to be driven by humanist sentiments. One, David Christian, says Big History offers a story that transcends the nation state and covers humanity as whole. He says that in his history courses, for example, you will ‘encounter humans not as Americans or Germans or Russians or Nigerians but as members of a single, genetically homogeneous, species, Homo sapiens’. You won’t only encounter humanity, in fact; Christian is proud of the fact that on his Big History course the species Homo sapiens is not even mentioned until halfway through. Is this really humanist? It looks to me more like the reduction of humanity to a biological species, and a sign that we are becoming increasingly estranged from ideas of civilisation, culture and community.

François Hollande: political magician

The French president has a cunning trick up his sleeve: doing nothing.

By Julian Lagnado

The French, generally, don’t go in for self-derision. But as the old joke goes, the French national emblem, the Gallic cock, is the only bird who crows on a pile of dung. Today, he isn’t crowing at all. France is no longer on a pile of merde - it is in it.

Public confidence in politicians is at an all-time low. Pressure from the bottom up, one of the country’s favourite pastimes, has become a caricature. One million people turned up in Paris to demonstrate against gay marriage, yet there was not one banner against unemployment, currently at 10.5 per cent and rising. Voters who put their faith in the Socialist Party last year are now confirmed agnostics. That’s what comes from electing a president on the sole basis of hating the one before.

Living standards and buying power are falling. The middle class is being squeezed; their pips are not squeaking yet, but there is plenty of time. Hollande’s promise to tax the rich at 75 per cent fell flat on its face, thrown out of court for being anti-constitutional. In the meantime, the government is grabbing taxes elsewhere and everywhere in an attempt to bring down the public debt. French state spending is at 57 per cent of GDP, the highest in Europe. For a population of 66million, public-sector employment spending is equivalent to 35 per cent of GDP; in the UK, with roughly the same population, public-sector employment costs 20 per cent of GDP and in Germany, with 82million people, it is 31 per cent.

Private-sector investment is on drip feed. Startups are a no-fly zone. It is as if the state is at war with private enterprise. The French naturally mistrust capitalists, whether they are big corporations or small businesses. The attitude is that a boss is a boss and he’s always raking it in. If you flaunt your wealth, you risk being abused by the press. Last week, the government cut the subsidy for firms employing apprentices by half, from €500,000 to €250,000, and that, under pressure from the employers’ federation, was a volte face; the government had wanted to do away with the lot.

Banks are not lending, even though interest rates are low. Taxes on labour are 100 per cent of net salary. How can you expect them to invest in your project if the state is already poised to pounce on the lion’s share of any profit you make? Former US President George W Bush is credited (probably apochraphally) with the quip: ‘The trouble with the French is that they don’t have a word for entrepreneur.’ Whether Bush’s comment was a joke, a gaffe or a myth, it rings true nonetheless.

The other thing the French have is a phobia about globalisation, which they fear will drown their national culture. Their national angst stems from their fear of competition.

Tell it to the widows

Chris Christie's anti-libertarian populism

by Will Wilkinson

Chris Christie, the Republican governor of New Jersey and possibly the most popular conservative politician in America, yesterday characterised as "dangerous" the "strain of libertarianism that's going through both parties right now", and dismissed concerns about the National Security Agency's controversial spying programmes as "esoteric". When asked about the views of Rand Paul, a Republican senator from Kentucky and a possible competitor for the 2016 GOP presidential nomination, Mr Christie said:

I want them to come to New Jersey and sit across from the widows and the orphans and have that conversation... I'm very nervous about the direction this is moving in.

I think what we as a country have to decide is: Do we have amnesia? Because I don't. ... I remember what we felt like on Sept. 12, 2001.

Mr Christie's remarks are illuminating in the context of the ongoing debate over the promise of "libertarian populism" as an electoral strategy for the GOP. Mr Christie's cognition-arresting sentimental appeal to the grief of the "widows and orphans" of 9/11 and his exploitation of irrational, deep-seated fears of further terrorist calamity could hardly be more "populist". And what could be less libertarian than to straightforwardly suggest that "libertarianism", of all things, threatens to enable terrorism and increase the supply of American orphans and widows? Mr Christie, a politician who knows something about charming the public, has probably not committed a blunder. Sadly, his explicitly anti-libertarian fearmongering probably remains the more potent populism.

Of course, on the substance of the matter, Mr Paul's tweet in response to Mr Christie's comments is correct: 

But what about those 9/11 widows? What about the children?

Conor Friedersdorf of the Atlantic gives it a crack in an imaginary address to the victims of our era's defining violent geopolitical event. Mr Friedersdorf would tell the widows and orphans of 9/11 that, by sacrificing our humanitarian values and constitutional liberties for the sake of a specious sense of safety, and charging fecklessly into a war, Americans have handed al-Qaeda a victory it never could have won on its own. However, he goes on, we can yet claim ultimate victory by refusing from here on to be cowed by fear, by refusing henceforth to allow the memories of the 9/11 dead to be exploited as a rhetorical trump, and by reclaiming our constitutional liberties, all the while assuring our safety by "good, old-fashioned police work".

Missionary Creep in Egypt

Never show a fool a half-finished job

By Adam Garfinkle

I promised you yesterday, dear reader, a post arguing that the Manichean pro- and anti-democracy polarity with which most Americans think about the situation in Egypt is deeply and dangerously misguided. I promised, as well, an argument to the effect that this view is an expression of a secularized evangelism anchored in the Western/Christian mythical, salvationist idea of progress, and that its unselfconscious use says a great deal more about what’s wrong with us than about what’s wrong with Egyptians. I will fulfill that promise and more—maybe too much more for some tastes. But first a little scene-setting.

Yesterday morning I went over to Carnegie to listen to Senator Carl Levin talk about Syria on a basis of a recent trip he and Senator Angus King of Maine took to Jordan and Turkey. On Syria, Senator Levin has turned into a liberal hawk a year and a half too late, in my view. To prevent Syria from becoming a failed or a split state that would give aid and comfort and room to plot to terrorist groups, he wants lots of lethal U.S. aid delivered to assist the anti-Assad insurgency in Syria, and he wants the U.S. military, in the context of a wide coalition understanding not yet achieved, to attack Syrian artillery and air bases with standoff weapons (so as to avoid having first to fly approximately 700 sorties to take down Syria’s integrated air-defense system). The purpose of this is to level the battlefield so that diplomacy can arrange an inclusive, post-Assad reconstruction of Syrian politics and society. He assumes that radical sectarianism is foreign to Syria, and that a new compact would rid the country of both Sunni and Shi’a foreign fanatics in the pay of neighboring states. He also assumes that because of this compact, no extensive international peacekeeping force or reconstruction effort will be required—not only no boots on the ground, but not even all that many shoes on the ground. Naturally, he is somewhat vexed that other Senators do not see things his way, and are trying to obstruct the shipment of weapons to the Syrian insurgents. But he a very good-natured and well-intentioned man, and so does not appear nearly as vexed as he actually is.

In my view, Senator Levin’s proposal belies a certain naiveté about Syria. As my more loyal readers would know, I sympathized with some of Senator Levin’s points a year and more ago, before the situation had metastasized within the country and spread toxins without. Then the risks of acting were relatively small, and the benefits prospectively large; now the risks are huge and the benefits deeply uncertain. But never mind that; he’s wrong on the facts.

First, the ability to reliably destroy targets of the kind he identifies with standoff weapons is questionable. Libya is an island from a military point of view. Every target worth hitting can be hit from a naval platform. Syria’s topography and demographic realities are another matter. I’m a big fan of cruise missiles fired from Aegis cruisers, too; I saw a test-firing of one once from the deck of the USS Farragut a few years ago and it was tres cool, believe me. But I am skeptical that standoff weapons can do in Syria what Senator Levin thinks they can do. General Dempsey, can you please enlighten us on this point?

Second, the early 1980s Sunni radicalism that led Bashar al-Assad’s father to level the town of Hama in 1982 was almost entirely homegrown, not foreign. Syrians are more than capable of radical capture, especially in the current dire circumstances. When people’s backs are up against the wall, radicals thrive and moderates melt away.

The Libertarian Paradox

Violence is the tool of the state. Knowledge and the mind are the tools of free people.

by Llewellyn H. Rockwell Jr.

As libertarians attempt to persuade others of their position, they encounter an interesting paradox. On the one hand, the libertarian message is simple. It involves moral premises and intuitions that in principle are shared by virtually everyone, including children. Do not hurt anyone. Do not steal from anyone. Mind your own business.

A child will say, “I had it first.” There is an intuitive sense according to which the first user of a previously unowned good holds moral priority over latecomers. This, too, is a central aspect of libertarian theory.

Following Locke, Murray Rothbard, and other libertarian philosophers sought to establish a morally and philosophically defensible account of how property comes to be owned. Locke held the goods of the earth to have been owned in common at the beginning, while Rothbard more plausibly held all goods to have been initially unowned, but this difference does not affect their analysis. Locke is looking to justify how someone may remove a good from common ownership for his individual use, and Rothbard is interested in how someone may take an unowned good and claim it for his individual use.

Locke’s answer will be familiar. He noted, first of all, that “every man has a property in his own person.” By extension, everyone justly holds as his own property those goods with which he has mixed his labor. Cultivating land, picking an apple — whatever the case may be, we say that the first person to homestead property that had previously sat in the state of nature without an individual owner could call himself its owner.

Once a good that was previously in the state of nature has been homesteaded, its owner need not continue to work on or transform it in order to maintain his ownership title. Once the initial homesteading process has taken place, future owners can acquire the property not by mixing their labor with it — which at this point would be trespassing — but by purchasing it or receiving it as a gift from the legitimate owner.

As I’ve said, we sense intuitively the justice at the heart of this rule. If the individual does not own himself, then what other human being does? If the individual who transforms some good that previously lacked specific ownership title does not have a right to that good, then what other person should?

In addition to being just, this rule also minimizes conflict. It is a rule everyone can understand, based on a principle that applies to all people equally. It does not say that only members of a particular race or level of intelligence may own property. And it is a rule that definitively stakes out ownership claims in ways that anyone can grasp, and which will keep disputes to a minimum.

Alternatives to this first user, first homesteader principle are few and unhelpful. If not the first user, then who? The fourth user? The twelfth user? But if only the fourth or twelfth user is the rightful owner, then only the fourth or twelfth user has the right to do anything with the good. That is what ownership is: the ability to dispose of a good however one wishes, provided that in doing so the owner does not harm anyone else. Assigning property title through a method like verbal declaration, say, would do nothing to minimize conflict; people would shout vainly at each other, each claiming ownership of the good in question, and peaceful resolution of the resulting conflict seems impossible.

These principles are easy to grasp, and as I’ve said, they involve moral insights which practically everyone claims to share.

And here is the libertarian paradox. Libertarians begin with these basic, commonly shared principles, and seek only to apply them consistently and equally to all people. But even though people claim to support these principles, and even though most people claim to believe in equality — which is what the libertarian is upholding by applying moral principles to everyone without exception — the libertarian message suddenly becomes extreme, unreasonable, and unacceptable.

Why is it so difficult to persuade people of what they implicitly believe already?

The reason is not difficult to find. Most people inherit an intellectual schizophrenia from the state that educates them, the media that amuses them, and the intellectuals who propagandize them.

This is what Murray Rothbard was driving at when he described the relationship between the state and the intellectuals. “The ruling elite,” he wrote,

whether it be the monarchs of yore or the Communist parties of today, are in desperate need of intellectual elites to weave apologias for state power. The state rules by divine edict; the state insures the common good or the general welfare; the state protects us from the bad guys over the mountain; the state guarantees full employment; the state activates the multiplier effect; the state insures social justice, and on and on. The apologias differ over the centuries; the effect is always the same.

The Cult of the Colossal

The rare courage to be simple and natural

By WILHELM RÖPKE, june 1948

The cult of the colossal means kowtowing before the merely “big”–which is thus adequately legitimized as the better and more valuable–it means contempt for what is outwardly small but inwardly great, it is the cult of power and unity, the predilection for the superlative in all spheres of cultural life, yes, even in language. It is only since Napoleon’s time that the adjective “great” or “grand” begins to make its telling appearance in expressions such as “Grand Army,” “Grand Dukes,” “Great General Staff,” “Great Powers,” and begins to demand from men the proper respect, and Europe is actually just as much intoxicated as America by expressions such as “unique,” “the world’s biggest,” “the greatest of all times,” “unprecedented.” To this style of the time correspond, in equal degree, the unexampled increase in population, imperialism, socialism, mammoth industries, monopolism, statism, monumental architecture, technical dynamism, mass armies, the concentration of governmental powers, giant cities, spiritual collectivization, yes, even Wagner’s operas.

Since the cult of the colossal reduces qualitative greatness to mere quantity, to nothing but numbers, and since quantity can only be topped by ever greater quantity, the intoxication with size will in the end exceed all bounds and will finally lead to absurdities which have to be stopped. Since, moreover, different quantities of different species can only be reduced to a common denominator by means of money in order to render them comparable in the race of outdoing each other, the result is a tendency to measure size by money pure and simple–as, for instance, in the American seaside resort, Atlantic City, where in 1926 I found a gigantic pier simply being christened “Million Dollar Pier.” Thus we find very close bonds of kinship between the cult of the colossal and commercialism.

While this time the world was gained, the soul suffered considerable damage in the process. The abrupt change from the concerns of the spirit to material affairs was bound to result in the withering of the soul. By abandoning humanism one lost the capacity for making man the measure of things and thus finally lost every kind of orientation. Life becomes de-humanized and man becomes the plaything of inhuman, pitiless forces. This results in “the abuse of greatness … when it disjoins remorse from power” (Julius Caesar II, I), hence the increasing indifference to all matters of collective ethics, hence scientific positivism and relativism, which represent such a radical departure from the certain sense of values possessed by the eighteenth century. It further leads to a fanatical belief in a mechanical causality even outside the processes of nature; to the love of mathematics (which the eighteenth century, in contrast to the seventeenth, did not favor, at least not during its latter part); to social laws such as Malthus’ “law of population,” or Lassalle’s “immutable law of wages”; to the oriental-baroque flirtation with fate; in brief to determinism which not only is raised anew to a philosophic dogma, but also dominates sociology, be it in the garb of Marx’s materialist view of history, be it in that of geographical determinism, as first developed by Ritter and Ratzel and finally raised in geopolitics to a veritable geographic romanticism, or be it finally as biological or even merely zoological determinism, the final degradation that could be reached along that path.