With Dollar Demise in Focus, Beijing Pushes “New World Order”

An editorial that sent shockwaves around the world

by  Alex Newman

From establishment mouthpieces in the West to the brutal Communist Chinese regime’s propaganda outlets in the East, discussion and even brazen calls for ending the U.S. dollar’s (USD) prized status as the global reserve currency are increasingly coming out in the open. Of course, as The New American magazine has documented extensively over the years, the eventual implosion of America’s fiat currency — and all that entails — has been in the works for quite some time. What is remarkable now, however, is that the prospect is being trumpeted in headlines around the world as Beijing loudly pushes for a global currency and what it calls a “new world order.”

The real culprits behind the decline of the dollar, of course, include wild debt-based currency printing by the privately owned U.S. Federal Reserve and a broader global agenda to build what both China’s dictatorship-run Xinhua “news” service and the Western establishment often refer to as a “new world order.” However, instead of pointing to the true causes of the potential looming implosion of America’s fiat currency, the party line in China and the West alike seems to be: Blame it on the U.S. Constitution, the political system created under it, and reluctance among some lawmakers to continue raising the debt limit indefinitely.

Prominent American and British media outlets have even been publishing pieces openly discussing the possible end of the dollar’s reign in recent days. “The sun is setting on dollar supremacy, and with it, American power,” declared an October 14 headline in the U.K. Telegraph, one of Britain’s most influential newspapers. Among the U.S. press, the New York Times, for example, ran a piece late last week entitled “At Risk: Currency Privilege of the Dollar.” Another NY Times article, also published on October 16 in the Economic Times, warned: “Dollar's role as world's leading reserve currency may be at risk.” CNBC, meanwhile, headlined its own article about it, “Default fears put dollar's reserve status at risk.” There were plenty of others, too.   

Despite the fact that the U.S. government takes in more than enough in taxes to pay its existing bills without more borrowing — though it would certainly require cuts in spending — senior bureaucrats and officials around the world have been busy making similar remarks about the demise of the dollar. International Monetary Fund (IMF) boss Christine Lagarde, for example, said if Congress refuses to raise the already sky-high debt ceiling to allow even more borrowing, it would cause so much disruption in the world economy that “the standing of the US economy would, again, be at risk.” Swedish Finance Minister Anders Borg said: “As it is an enormous advantage to be a reserve currency it seems completely insane to even contemplate creating insecurity around that status.” 

Iran and the Petrodollar Threat to U.S. Empire

The U.S. has shot itself in the foot

By Christopher Doran

Over the last few years, Iran has unleashed a weapon of mass destruction of a very different kind, one that directly challenges a key underpinning of American hegemony: the U.S. dollar as the exclusive global currency for all oil transactions. 

It began in 2005, when Iran announced it would form its own International Oil Bourse (IOB), the first phase of which opened in 2008. The IOB is an international exchange that allows international oil, gas, and petroleum products to be traded using a basket of currencies other than the U.S. dollar. Then in November 2007 at a major OPEC meeting, Iran's President Mahmoud Ahmadinejad called for a “credible and good currency to take over U.S. dollar’s role and to serve oil trades”. He also called the dollar “a worthless piece of paper.” The following month, Iran—consistently ranked as either the third or fourth biggest oil producer in the world—announced that it had requested all payments for its oil be made in currencies other than dollars. 

The latest round of U.S. sanctions targets countries that do business with Iran's Central Bank, which, combined with the U.S. and EU oil embargoes, should in theory shut down Iran's ability to export oil and thus force it to abandon its nuclear program by crippling its economy. But instead, Iran is successfully negotiating oil sales via accepting gold, individual national currencies like China's renmimbi, and direct bartering.

China and India are by far the most significant players, with Russia playing a supporting role. China is Iran's number one oil export market, followed by India. Both have been paying for at least part of their Iranian oil imports with gold, and according to the Financial Times, have also been paying in their own currencies, the Chinese renmimbi and Indian rupee.[1] As neither currency is easily convertible as international currency, they will be used to pay for Chinese and Indian imports. And on 22 June, Russian media reported that China imported almost 524,000 barrels per day in May, a whopping 35% jump from the previous month.[2]

There is only so much the U.S. can do if China continues to do business with Iran. China holds $1 trillion dollars of U.S. debt, and the U.S. is utterly dependent on cheap Chinese manufacturing. Significantly, just as the newest and toughest round of U.S. sanctions kicked in at the start of July, Iran's PressTV announced that China would be investing at least $20 billion to develop the north and south Azadegan and Yadavaran oil fields which will produce 700,000 barrels per day. Azadegan is estimated to contain 42 billion barrels, making it one of the world’s largest oil deposits.[3]

America has more leverage with India, but with the “BRICs”—Brazil, Russia, India and China—showing increasing solidarity in dealing with the U.S. and Europe, U.S. options are still limited. In January Bloomberg reported that all Russian trade with Iran was being conducted in Russian rubles and Iranian rials, and not U.S. dollars.[4]

The Growing Rift With Saudi Arabia Threatens To Severely Damage The Petrodollar

All options are on the table 

by Michael Snyder

The number one American export is U.S. dollars.  It is paper currency that is backed up by absolutely nothing, but the rest of the world has been using it to trade with one another and so there is tremendous global demand for our dollars.  The linchpin of this system is the petrodollar.  For decades, if you have wanted to buy oil virtually anywhere in the world you have had to do so with U.S. dollars.  But if one of the biggest oil exporters on the planet, such as Saudi Arabia, decided to start accepting other currencies as payment for oil, the petrodollar monopoly would disintegrate very rapidly.  For years, everyone assumed that nothing like that would happen any time soon, but now Saudi officials are warning of a "major shift" in relations with the United States.  In fact, the Saudis are so upset at the Obama administration that "all options" are reportedly "on the table".  If it gets to the point where the Saudis decide to make a major move away from the petrodollar monopoly, it will be absolutely catastrophic for the U.S. economy.

The biggest reason why having good relations with Saudi Arabia is so important to the United States is because the petrodollar monopoly will not work without them.  For decades, Washington D.C. has gone to extraordinary lengths to keep the Saudis happy.  But now the Saudis are becoming increasingly frustrated that the U.S. military is not being used to fight their wars for them.  The following is from a recent Daily Mail report...

Upset at President Barack Obama's policies on Iran and Syria, members of Saudi Arabia's ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years. 

Saudi Arabia's intelligence chief is vowing that the kingdom will make a 'major shift' in relations with the United States to protest perceived American inaction over Syria's civil war as well as recent U.S. overtures to Iran, a source close to Saudi policy said on Tuesday. 

Prince Bandar bin Sultan told European diplomats that the United States had failed to act effectively against Syrian President Bashar al-Assad and the Israeli-Palestinian conflict, was growing closer to Tehran, and had failed to back Saudi support for Bahrain when it crushed an anti-government revolt in 2011, the source said.

Saudi Arabia desperately wants the U.S. military to intervene in the Syrian civil war on the side of the "rebels".  This has not happened yet, and the Saudis are very upset about that.

Of course the Saudis could always go and fight their own war, but that is not the way that the Saudis do things.

So since the Saudis are not getting their way, they are threatening to punish the U.S. for their inaction.  According to Reuters, the Saudis are saying that "all options are on the table now"...

Why climate change is good for the world

Don't panic! The scientific consensus is that warmer temperatures do more good than harm

By Matt Ridley

Climate change has done more good than harm so far and is likely to continue doing so for most of this century. This is not some barmy, right-wing fantasy; it is the consensus of expert opinion. Yet almost nobody seems to know this. Whenever I make the point in public, I am told by those who are paid to insult anybody who departs from climate alarm that I have got it embarrassingly wrong, don’t know what I am talking about, must be referring to Britain only, rather than the world as a whole, and so forth.

At first, I thought this was just their usual bluster. But then I realised that they are genuinely unaware. Good news is no news, which is why the mainstream media largely ignores all studies showing net benefits of climate change. And academics have not exactly been keen to push such analysis forward. So here follows, for possibly the first time in history, an entire article in the national press on the net benefits of climate change.

There are many likely effects of climate change: positive and negative, economic and ecological, humanitarian and financial. And if you aggregate them all, the overall effect is positive today — and likely to stay positive until around 2080. That was the conclusion of Professor Richard Tol of Sussex University after he reviewed 14 different studies of the effects of future climate trends.

To be precise, Prof Tol calculated that climate change would be beneficial up to 2.2˚C of warming from 2009 (when he wrote his paper). This means approximately 3˚C from pre-industrial levels, since about 0.8˚C of warming has happened in the last 150 years. The latest estimates of climate sensitivity suggest that such temperatures may not be reached till the end of the century — if at all. The Intergovernmental Panel on Climate Change, whose reports define the consensis, is sticking to older assumptions, however, which would mean net benefits till about 2080. Either way, it’s a long way off.

France's Irrepressible 'Industrial Renewal' Clown on a Roll

Montebourg Announces Fictional Deal Between Goodyear and Titan to Save Union Jobs 

By Mike "Mish" Shedlock

The politics in France get curiouser and curiouser (to put things mildly).
On Monday, the Minister of Productive Recovery, Arnaud Montebourg, announced a deal between Titan and Goodyear that would save union jobs in tire manufacturing plants.
The problem, and a significant one, is that Goodyear did not agree to the deal. Heck, the CEO of Titan denies even making an offer.

Via translation from Les Echo, please consider Goodyear Amiens: new imbroglio between Montebourg and Titan 

 It's a pretty mess that would be almost amusing if it was not hundreds of jobs at stake Monday, the Minister of Productive Recovery Arnaud Montebourg, told AFP that the U.S. tire manufacturer Titan had made a new offer of a partial recovery for the site of Goodyear Amiens Nord, which employs 1,200 workers, the closure was announced in January by the company management.

The proposal concerns the activity of agricultural tires and covers "333 jobs in the Amiens plant whose maintenance is guaranteed for four years," the minister said. Titan International would even be willing to invest "one hundred million minimum on the site".
Alas, Maurice Taylor, the CEO of Titan, contacted by AFP, declined to confirm this announcement. "I am not aware of anything related to your country of great wines and beautiful women," he responded ... Besides, "the management of Goodyear has not received any new offer" from Titan.

This tire story has an amusing background.

Blonde children and Roma

When the two great hysterias of our age clash

by Ed West

The media seem to be in a pickle over the removal of a blonde girl from a Roma family in Dublin, which followed the arrest of a couple in Athens who had a suspiciously Nordic-looking child with them.

It’s a fascinating story because for the first time I can remember the two great hysterias of our age have finally clashed – racism and child-snatching, the Guardian’s obsession versus the Sun’s.

It has also pitted the almost immovable object of media taboo against the unstoppable force of the human-interest story. The highbrow media maintains a sort of code of decency about reporting the Roma, so that you will never read anywhere an accurate analysis of anti-Roma prejudice. I don’t think this actually sways anyone, because you’d have to be a total cretin not to see the causes, rather it informs the official opinion people are supposed to have in public.

However ‘missing child turns up alive’ is the most powerful story of all time and nothing will keep it off the homepage. It goes back to the Bible and the Greeks and early-modern European fairy tales, and it’s a narrative still poignant because of the children who are missing today, such as Madeleine McCann.

Perhaps because of the BBC’s remit to promote multiculturalism, their coverage of the affair has seemed highly editorialised towards informing the public that Roma are not going around snatching children, rather than just reporting a story. And as it is, it strikes me as extremely unlikely that there is any sort of trend here, and the Dublin family may well be innocent victims of circumstances.

But neither does that mean there is some campaign against the Roma, or that the Gardai should be blamed for their actions. Roma tend to have a lot of informal family adoption but they rarely adopt non-Roma and, knowing this, someone in Greece understandably got suspicious and then someone in Ireland did.

Contrary to the media cant, this doesn’t suggest that in Europe we treat blonde children better and want to snatch them away from swarthy parents. We just live in a society where it’s impolite to notice social patterns, yet one where it’s the police’s job to look out for them; to hone all those evolution-bred skills to notice when something doesn’t quite fit, like the wrong person in the wrong place or a child with someone very unlikely to be her birth or adoptive parents. So pity the poor policeman who has to traverse between the Scylla of race relations and the Charybdis of child-snatching hysteria.

The Times They Are a-Changin

Get out the popcorn, pull up a chair, and let the show begin!

by Justin Raimondo

There are no major stories to cover, but lots of seemingly minor ones that all point to major trends in the works. Let’s start with the news that the Heritage Foundation is "censoring" pro-surveillance material coming out of that policy-wonk factory: yes, you heard me, although "censoring" is Politico reporter Josh Gerstein’s phraseology. Funny, but we never heard about "censorship" of any anti-surveillance, pro-civil liberties views in all the years of the Bush administration, or anywhere at any time for that matter. Gee, I wonder if this means Gerstein and/or Politico have a certain bias when it comes to matters such as these. Ya think?

In any case, the kerfluffle seems to be over former US Senator and now Heritage president Jim DeMint’s decision not to publish a paper by former Bush administration legal mavens Steven Bradbury and the evil David Addington, which – surprise! surprise! – came to the conclusion that government spying on practically everyone is perfectly "legal." Forget the Fourth Amendment – the Bushian concept of the "unitary presidency," like the old absolutist dogma of "divine right of kings," trumps everything.According to Shane Harris over at Foreignpolicy.com, however, the "anti-surveillance" stance taken by DeMint and Heritage isn’t a "traditional conservative position," and – scarier still – it indicates that the fears of "mainstream Republicans" who have been "fretting" deMint would "turn the prominent conservative thinktank into a political proxy for the most extreme elements of the GOP" have been proved right.

Oh no!

According to Harris, those evil "debt-deniers" (that’s a new one!) and "defund-Obamacare die-hards" who "propelled" Harris’s beloved federal government into a shutdown (except the drones were still flying) "have found a political, if not quite intellectual center of gravity at Heritage." Not quite intellectual enough for the scholarly Harris, a recipient of the military contractor’s equivalent of the Nobel Prize: the Gerald R. Ford Prize for national security reporting. Coincidentally, Harris is also associated with the New America Foundation, the Obama administration’s favorite foreign policy thinktank.

Ten or so paragraphs later, in which various assorted neocons vent their rage, Harris delivers the considered judgment of Those In The Know on the revamped and "radicalized" Heritage: "The lunatics have taken over the asylum."

Only "extreme elements of the GOP" want to rein in Obama’s spymasters – except that these "extremists" constitute the majority of the American people, who overwhelmingly oppose the NSA’s invasion of their privacy. Oh, but you see, they don’t count: the only people who matter are all those Very Serious People in Washington, D.C., which – as we all know – is the Center of the Universe.

The Scramble for Africa’s Oil

Oil-rich nations are bedeviled by the Resource Curse

BY CHARLES HUGH SMITH

The global scramble for Africa's estimated 25 billion barrels of oil is on. Those scrambling to secure (and/or exploit) the continent's abundance of fossil fuels include each oil-rich nation's political and economic Elites, international oil corporations, regional powers, trading blocs and the four major (and energy-hungry) economic players: the E.U., the U.S., Japan and China.

Oil-rich nations are bedeviled by the Resource Curse. An abundance of natural resource wealth distorts the national economy and politics in a number of ways: private investment in other less exploitable/profitable sectors of the economy stagnates, leaving the government and economy highly dependent on resource revenues; local Elites quickly gain control of the income stream from the resource wealth and divert it to their own accounts and cronies, institutionalizing corruption, and this diversion of national income to Elites starves the nation of investment in infrastructure, education, transportation networks and all the other foundations of a vibrant, competitive economy.

In geopolitical terms, oil-rich nations become "areas of interest" to neighboring states and energy-hungry global powers, further complicating and distorting national development.

Though many hope that this flood of energy wealth can be used to fund much-needed infrastructure, education and public health projects throughout the continent, the key systems of governance, governmental transparency, an open media and a political process that enables public participation are problematic in many (if not all) of Africa's energy-rich nations.

Unfortunately, these systemic weaknesses render these nations even more vulnerable to the distortions of the Resource Curse.

No energy-importing power center can afford to be sidelined in the scramble for Africa's fossil fuel wealth. Sadly, that insures global and regional powers will continue jockeying for oil leases (vulnerable to cancellation when corrupt regimes change hands), development contracts and political influence within controlling Elites, a process that rewards the least savory aspects of corrupt regimes.

Global rivals who have lost out will be tempted to support armed rebellions that weaken their rival's influence, encouraging conflicts that are inherently destabilizing, not just to the oil-rich nations but to the region.

Arrayed against these powerful forces of corruption and destabilization are grassroots groups supporting democracy and national development and some non-governmental organizations (NGOs) funded by foundations.

In the abstract, almost everyone agrees that this energy wealth should benefit all residents of oil-rich nations. But as long as it is cheaper in terms of time and money to secure oil by making deals with kleptocrats and corrupt Elites, there will be few incentives for major powers to risk losing access to oil/natural gas by supporting policies that would spread the wealth and encourage democracy.

Don't Cry For Me, America

Comparing Argentina And The United States

By Alejandro Chafuen

Many observers have pondered if the United States is following the same troubled path as Argentina.  In the 1940s, Argentina’s Juan Domingo Perón used government agencies for political gain and created a popular form of fascism called Perónism. In the United States, the recent revelation of the Internal Revenue Service targeting political enemies is a bad omen. Are we on an Argentinean course?

The road to decay in my native country, Argentina, began with the implementation of one of the most powerful collectivist doctrines of the 20th century: fascism. The Labour Charter of 1927 –  promulgated by Italy’s Grand Council of Fascism under Mussolini – is a guiding document of this doctrine and provides for government-based economic management. This same document recommends government provision of healthcare and unemployment insurance. Sound familiar?

Since adopting its own brand of fascism, “Justicialismo,” Argentina began to fall in world economic rankings.

·         In 1930, Argentina’s gold reserves ranked 6th. After the “experts” took over the central bank, reserves fell to 9th in 1948 (with $700 million), 16th during 1950-54 (with $530 million), and 28th during 1960-1964 (with $290 million).

·         The Argentine central bank, created in 1935, was at first a private corporation. Its president lasted longer (seven years) than the president of the country, and it had strict limits for government debt purchases and even had foreign bankers on its board. It became a government entity in 1946.

When Perón assumed power shortly thereafter, he hastily expanded the role of government, relaxed central banking rules and used the bank to facilitate his statist policies. In just 10 years, the peso went from 4.05 per U.S. dollar to 18 in 1955 (and later peaked at 36 that same year). After Perón’s rule, Argentina further devalued its currency to 400 pesos per U.S. dollar by 1970.

Bipartisanship in bad policy-making can be especially damaging. Just as some of President Obama’s interventionist monetary policies were preceded by similar Bush administration policies, some of Perón’s policies were similarly foreshadowed: “Already before we reached power, we started to reform, with the approval and collaboration of the previous de facto regime,” said the populist.

Perón was removed from power in 1955 but his policies lived on.  The “Liberating Revolution” claimed it was leading an effort to return to the free-market system dictated by the Argentine Constitution of 1853.  But Argentines chose an interventionist, Raúl Prebisch, as minister.

Inflationary policies and political use of the monetary regulatory authority, especially after Perón’s first presidency, devastated the economic culture and rule of law of Argentina. In the United States, the Fed does not have all the powers delineated by Perón, and has not caused as much destruction as the Argentine central bank, but the process has been similar and more gradual. The U.S. dollar buys less than 10 percent of what it did in 1913 when the Federal Reserve was created, the debt limit increases regularly—thus stimulating further debt monetization—and monetary authorities have increased their arbitrary interventions.

Sex Sells And The Japanese Are Buying

A Look At Japan's Love Industry

by Tyler Durden

Tokyo, and the entire country of Japan, which the documentary below describes as "a place where socially awkward people gather and use money to resolve their communication problems", has a ticking demographic time-bomb: on one hand the population is getting so old that sales of adult diapers now exceed those for babies; on the other as the chart below courtesy of Mark Adomanis shows, the number of actual births each year has dropped to a record low.

The issue: young people in Japan just don't want or have any interest, in commitment to the other sex, nor do they seem to have any interest in procreating in a narrow sense, or sex in a broad one (a topic further pursued in "Why have young people in Japan stopped having sex"). In short:

• 50% of Japanese women 18-34 are single
• More than 60% of Japanese men 18-34 are single

Whether it is the women's fault, described as "so infatuated with their careers that work trumps a boyfriend or husband", or men "a generation obsessed with virtual reality and so intimidated by real women that they prefer cyber girlfriends over real relationships" is unknown, and irrelevant.

There is another angle. As this documentary from Vice investigates, "sex sells and the Japanese are buying." The reason: Japan has a "seemingly infinite menu of relationship replacement services." And who really needs the hassle of a steady significant other when on one hand the gamma radiation levels keep creeping higher and higher by the day meaning the threat of a random mutant appendage emerging is no longer negligible, and on the other Abenomics is making everyone feel wealthier, even as everyone actual purchasing power implodes, leaving everyone but the 0.1% broke and starving.

Has Japanese society crossed the Rubicon into full devolution (and after watching the video below you will understand why), where cheap single-serving sexual thrills and intimacy replacement have overtaken the household unit as the hub of society?

The reality is that unless something drastically changes between the demographic singularity the country is rapidly headed toward, the Fukushima disaster which hits new spilled radioactivity records on a daily basis, and the emotional detachment that the locals (don't) feel toward each other, in a few years none of this will matter.

Worst of all: Japan is merely the test tube baby, pardon the pun, for the rest of the insolvent "developed" world. What happens in Japan, is coming to a broke centrally-planned country near you.

For all this and much more (those who want to skip the autistic Japanese parts and go straight to the Yakuza meeting, proceed to 9 minutes into the clip) watch the Vice clip below. 

Average:

Doing good is a complex affair

Bangladeshi Garment Workers and the Perversion of Ethics

by Mario Rizzo

For the last few days the newspapers have been filled with stories about how western garment manufacturers will now insist on greater safety for the workers who make their clothes in Bangladesh. They will pay for renovations and reconstructions of the physical plants. What is more, the government in Bangladesh will raise the minimum wage and make unionization easier.

So now Pope Francis and the relatively rich in the developed world (many of whom were among the 900,000 names on a petition to improve things that has been circulated) will be pleased and the demands of their social conscience will be satisfied.

This is another instance of the simplistic pseudo-morality of those who can only see what is right in front of them at the present moment. This attitude is closer to a sympathetic reflex than a reasoned moral judgment.

Consider the following. The cost of garment labor in Bangladesh will rise. When public attention moves elsewhere, western manufacturers will either hire fewer workers or reduce the rate at which they hire workers in Bangladesh. Some many even leave the country. (Remember Bangladesh also has bad infrastructure and political instability making it a marginal place to do business.)

Costs will rise not only because of the costs of improved working conditions but also because a rise in the minimum wage will prevent the compensating-downward adjustment of wages. And the increase of unionization will also raise costs and wages. What Bangladesh has going for it at this particular stage in its development is relatively low wages and globalization. We do not do the Bangladeshis a favor by insisting on even early twentieth-century labor standards in an incredibly backward economy.

The nineteenth-century economist Frederic Bastiat asked us to pay attention to the “unseen” as well as the seen in economic life.  Where will Bangladeshis who do not get to work in the garment factories (or perhaps other factories if the new minimum wage and labor standards set in more widely) go? Where will they get an income? Will people in Western Europe and the United States send them compensatory payments?

Too often, as this case demonstrates, people moralize high standards of living and hence of worker safety. Worker safety is a normal good, that is, as income rises we can afford more of it. To say that people have a right to a certain level of worker safety and a “living wage” is an example of the harm the notion of positive rights can do in poor countries – especially when the standards are imported from developed countries.

I am not saying that the death of more than a thousand garment workers isn’t a horrible event. I am not saying that we should not have compassion for these people. What I am saying is that the whole of morality is not about feeling good. It is about doing good. And doing good is a complex affair. It requires attention to the unseen. 

Standing Up to the New Paternalism

Today's nudging elite poses a threat to our everyday freedoms

By SEAN COLLINS

Why ‘nudge’ theory and its more coercive variants are so popular among Western policymakers. 

When Nudge: Improving Decisions About Health, Wealth and Happiness was published in 2008, it seemed like it might be a fad bestseller, like Freakonomics  or one of those Malcolm Gladwell books.

Nudge authors Richard Thaler and Cass Sunstein, both American academics, proposed that government and employers should more consciously direct people to make ‘better’ choices in health, personal finance and other areas, in order to improve their lives. They gave the example of a cafeteria that lays out food in a way that encourages people to select carrot sticks over French fries or dessert. The authors label their approach ‘libertarian paternalism’: ‘paternalism’ because they want to steer people in a certain direction, and ‘libertarian’ because they would still offer people an array of choices (if you really want the chocolate mousse, you can reach under the counter at the back).

Although a new idea at the time, nudge was hardly a Big Idea. And yet governments around the world picked it up and ran with it, giving the concept more substance and longevity than might have been expected. As Sunstein has noted, the findings from his and others’ behavioural research have informed US regulations concerning ‘retirement savings, fuel economy, energy efficiency, environmental protection, healthcare, and obesity’. Sunstein himself implemented many of these measures in his role of Regulatory Czar in the Obama administration (described in his recently published book, Simpler: The Future of Government). In the UK, prime minister David Cameron set up a Behavioural Insights Team, also known as the ‘nudge unit’, in 2010. This has led to a variety of new policies and schemes directed at anything from obesity and teenage pregnancy to organ donations and the environment.

Some are now seeking to extend ‘nudge’ policies into new areas. Earlier this summer, the White House announced the establishment of a new team to explore applications of the concept. In a recent New York Times op-ed, David Brooks argued for taking nudge further, in the name of social cohesion: ‘Most of us behave decently because we are surrounded by social norms and judgments that make it simpler for us to be good. To some gentle extent, government policy should embody those norms, a preference for saving over consumption, a preference for fitness over obesity… These days, we have more to fear from a tattered social fabric than from a suffocatingly tight one.’ In the UK, nudge-based recommendations have received favourable responses from across the political spectrum, from the Guardian to the Daily Telegraph.

Even certain libertarian-leaning writers have argued that there isn’t much, if anything, paternalistic about Thaler and Sunstein’s ‘libertarian paternalism’. Will Wilkinson, formerly of the libertarian Cato Institute, writes in the Economist’s ‘Democracy in America’ blog: ‘By definition, “choice-preserving policy” is not paternalistic policy.’ Atlantic journalist Conor Friedersdorf believes it is possible to ‘sell “libertarian paternalism” to actual libertarians’. He writes: ‘My enthusiasm for “libertarian paternalism” is high when there is no neutral default position possible, and government sets an enlightened default within a realm it properly controls. I am even amenable to some government mandates… But to be worthy of its name, “libertarian paternalism” must go further… in insisting on a bright line between enlightened defaults and paternalistic mandates with no opt-out.’ In other words, as long as there is an opt-out, nudge policy’s ‘enlightened defaults’ are okay.

But what Thaler, Sunstein and their fans miss is the fact that just because nudges offer a degree of choice, this does not, in itself, mean that such programmes are respectful of individuals’ liberty and decision-making capacities. Nor does that fact render nudges any less paternalistic.

The Compassionate Science

Caring about people is not always easy

by Steve Landsburg

I’ve said this before and will say it again: Part of the reason I love economics is that economics is the compassionate science. It’s the discipline that requires us to think hard and to care about how policies affect everyone, not just the people who happen to be standing in front of us.

The response to the government shutdown has been as good an example of this as any. Nothing but a garguntuan failure of empathy can explain the chorus of voices insisting that the shutdown is a bad thing because government employees might lose their paychecks. It takes a mighty powerful set of moral blinders to care so much about the recipients of those checks and so little about the taxpayers who fund them.

It gets even uglier when that same chorus of voices responds “But the government employees are poor and the taxpayers are rich!”. Put aside the question of whether that’s true. If your goal is to transfer money to the poor, and if the poorest people you can think of are government employees, then the well of your compassion is truly dry.

Argue if you must for transferring income from the rich to the poor. But to turn that into an argument for transferring income from the taxpayers to the employees of the government, there are a couple of billion poor people you’ve got to willfully ignore.

When I blogged about this issue earlier this week, we had one commenter — a personal friend, actually, and someone I’ve been surprised and delighted to see showing up in our comments section from time to time — who broke my heart by pointing to the pain of Capitol Hill coffee shop owners who are losing business, apparently oblivious to the fact that taxpayers also visit coffee shops, and that for every dime not being spent by a DC bureaucrat, there’s an extra dime available to be spent by a Nebraska farmer or a New York cab driver. Our commenter apparently remembered to care about the guys selling coffee in DC but forgot to care about the guys selling coffee in Nebraska.

Which brings me back to what I like about economics. I don’t care what your views are on the shutdown, I don’t care what your views are on income redistribution, I don’t care where you are on the ideological spectrum, but if you’ve ever absorbed any economics at all, you’re immune from the mistake my friend made this week. The single biggest lesson that economists have to teach is that it’s important to care about everyone, not just about the people who happen to cross your path. That’s a really good lesson, and this week has been a good reminder that we have to keep on hammering away at it.

Welcome to the 'Trust No One' Society

UK officialdom has successfully fostered an all-embracing climate of mistrust

By BRENDAN O’NEILL

There’s something very weird about today’s discussion of trust in public life, which is this: the institutions and organisations that crow most loudly about a crisis of trust are the same institutions and organisations that actively stir up mistrust across modern society.

That is, the public bodies which wring their hands over the fact that they aren’t trusted much anymore are also the ones that do an enormous amount to stoke today’s broader climate of mistrust, to inflame the idea that we, the public, cannot trust each other, and in fact that we as individuals cannot trust ourselves.

So we have a bizarre situation today where public bodies seem to think they can encourage mistrust among citizens, in everyday life, without any repercussions for themselves or for the levels of trust that they enjoy. Recent developments seem to have proved them wrong. In many ways, what we are witnessing now, in the corrosion of trust in institutions, is the misanthropic climate of mistrust biting back at those who did so much to unleash it.

Consider the NHS. Following various scandals, including the Savile affair and the Mid-Staffs debacle, the NHS is very worried that people don’t trust it anymore. It is thinking about how to rebuild trust, and is always telling us how important trust is.

This is the institution that has done perhaps more than any other in contemporary Britain to create a climate of mistrust.

Walk into any NHS facility and the first thing you see are posters saying, ‘Don’t attack our staff! If you attack our staff we will have you arrested and you won’t get treatment.’ Rough translation: we don’t trust you, you are volatile, stay at arm’s length. The NHS has also acted, in the words of one of its internal documents, as ‘agents of the state’, effectively spying on citizens. NHS workers have been used to keep an eye out for radicalisation among their Muslim patients, contributing to the idea that Muslims can’t be trusted. Midwives are trained to look out for signs of domestic violence among pregnant women, spreading the poisonous, mistrustful idea that intimate relationships are all a bit dodgy.

As for NHS propaganda, it’s always telling us to beware others and to beware ourselves. Its latest safe-sex posters show a room full of young people drinking and dancing and getting off with each other, next to the words, ‘The only thing standing between you and disease is a condom’. In short, everyone is diseased, dirty, dangerous, so you had better cover up when touching them.

Its recent anti-smoking posters show toddlers saying things like, ‘Mummy, if you smoke, I smoke’. Here, we have that very fashionable idea that parents can’t be trusted to look after their children properly, in fact that parents are a toxic threat to their offspring.

Quite why the NHS thinks it can stir up so much social mistrust and yet never be the victim of mistrust is beyond me.

Or consider care homes for elderly people. Following recent revelations of mistreatment, politicians and officials have set themselves the task of rebuilding public trust in care homes.

Vice Vs Crime

Mises Explains the Drug War

by Laurence M. Vance

Air travelers were outraged when the FAA announced that there would be flight delays because air-traffic controllers had to take furloughs as a result of sequester budget cuts. But there is another federal agency whose budget cuts Americans should be cheering — the Drug Enforcement Administration.

According to the Office of Management and Budget’s report to Congress on the effects of sequestration, the DEA will lose $166 million from its $2.02 billion budget. Other agencies that are part of the expansive federal drug war apparatus are getting their drug-fighting budgets cut as well.

These cuts, no matter how small they may actually end up being, are certainly a good thing since over 1.5 million Americans are arrested on drug charges every year, with almost half of those arrests just for marijuana possession.

Although 18 states have legalized medical marijuana, seven states have decriminalized the possession of certain amounts of marijuana, and Colorado and Washington have legalized marijuana for recreational use. In the majority of the 50 states, possession of even a small amount of marijuana can still result in jail time, probation terms, or fines. The federal government still classifies marijuana as a Schedule I controlled substance under the Controlled Substances Act, with a high potential for abuse and with no acceptable medical use.

Since the federal government has not followed its own Constitution, which nowhere authorizes the federal government to ban drugs or other any substance, it is no surprise that it has not followed the judgment of Ludwig von Mises when it comes to the drug war.

The war on drugs is a failure. It has failed to prevent drug abuse. It has failed to keep drugs out of the hands of addicts. It has failed to keep drugs away from teenagers. It has failed to reduce the demand for drugs. It has failed to stop the violence associated with drug trafficking. It has failed to help drug addicts get treatment. It has failed to have an impact on the use or availability of most drugs in the United States.

None of this means that there is necessarily anything good about illicit drugs, but as Mises explains,

“It is an established fact that alcoholism, cocainism, and morphinism are deadly enemies of life, of health, and of the capacity for work and enjoyment; and a utilitarian must therefore consider them as vices.” 

But, as Mises contends, the fact that something is a vice is no reason for suppression by way of commercial prohibitions,

“nor is it by any means evident that such intervention on the part of a government is really capable of suppressing them or that, even if this end could be attained, it might not therewith open up a Pandora’s box of other dangers, no less mischievous than alcoholism and morphinism.”