The world is a complex place and any simple description of it will be incomplete, but I think it is fair to say we are the subjects of an artificial system of theft and oppression that continues to make the world harder to live in.
Look at the sources of power in the world. Look at government, corporations and the media. Laws written for rich people have created a system where it is necessary for us all to sell our labour to the owners of businesses. They own the land, the factories, the offices, the infrastructure. We need to earn money to survive and the best and sometimes only way to make money is to work for a large corporation. We make money for the people who own and run the corporation and they give us back some of it. Next, the government takes its share, claiming it needs it for roads, schools, hospitals, pensions and security, and gives as much as it can (for example through contracts) to corporations. It does not give people a choice to keep that money, decide what to do with it themselves and get what they need through mutual aid (helping each other) like they used to. Some people work their whole lives making others rich and still end up penniless. Why? Because they didn’t work hard enough? Because they were evil in a past life?
The media tell us to consume. The remaining money we have earned, the last bones we have been thrown, we are encouraged to spend on things that make us feel rich: nice houses, cars, furniture, decorations, restaurants, two-week vacations and fancy coffee. Consumers spend their lives working for corporations and giving most of their money back to them. Instead of pursuing their dreams, they work hard in order to spend hard.
I understand people who do not do anything about it. Politics can be pretty boring. I disagree with people who say you should pay attention to politics even if you are not interested in it. You should not be compelled to pay attention to the news and what it tells you the people in power are doing. If they do not have your consent, they should not spend your money or pass laws over you. Moreover, most of the people who expect you to follow politics pay attention to the wrong things. They watch party nominations and election results and contribute to political parties and candidates who never make any real changes. But the media tell us those are the important things. That is how we can make a difference. There are no alternatives, except competing warlords or some USSR/North Korea nightmare. The system works. Stop questioning the system.
Enormous power is thus concentrated in the hands of only a few thousand people, most of whose names you and I have never heard before. A few million or so more wield power on the national level in different parts of the world with some autonomy (think the generals in Egypt) but they have mutually beneficial relationships with members of the upper ranks of the global elite. Look at what the elite do with their power. In the old days, a king would send soldiers somewhere and thousands of people would die. They had power over small parts of the world. Nowadays, power has become global, and as such the crises it leads to have gone global as well. Look at all the (supposedly unintended) consequences of all the wars the US government has been leading, all the people who have been tortured and killed, or who lost their homes and their livelihoods, and continue to do so even after the foreign militaries have left. And yet, consider who has got rich from those wars. Look at the economic carnage from the last financial crisis. Look how many people lost their jobs, homes and all their money, all around the world. And yet, the people who caused it actually made more money from it. And they tell you not to worry, because there will be an economic recovery. Do you believe them? Where is the justice?
Finally, “education” tells us what to think. I’m sure you can think of reasons why the system we live under is the best possible system. You learned it in school, and if you learned it in university like I did (political science major), you have even more reasons why it works best. We need leaders because without people making our decisions for us, society would collapse. We need rich people because without them, who would start businesses for us to work in? We need police to protect us from all the bad people around us. We need hierarchy: all societies have hierarchy, right? All other ways of living go against human nature. Don’t think too much about it: watch TV instead.
As far as I can tell, most people are neither interested in understanding the system nor willing to take the risk of fighting it. Again, I understand and I don’t judge. I just think they should understand it better than they do. If they choose to do something to change it or to change their circumstances, that is their choice and I will support them. I warn you, however, if we do not fight back, one day it will be too late.
“Corporate capitalists don’t want free markets. They want dependable profits, and their surest route is to crush the competition by controlling the government.” – RFK, Jr.
It is often claimed in “progressive” and “liberal” circles that we need more regulation to curb the influence and power of big business. This belief is based largely on a misconception as to the origin, purpose and result of regulations.
During the period between the end of the American Civil War and roughly the 1890s, business in the US tried to cartelise but found it could not. In general, cartels can only control a market when force is introduced. During this period, every attempt to form a cartel and raise prices led to new competitors that realised they could undercut the cartels. In response, big business began lobbying the government to pass laws “in the public interest” (as all laws are claimed to be) that would enable them to keep competitors out. It worked. (Find a large amount of research on the subject here.)
Today, regulations and other laws protecting business include corporate personhood, accounting standards, safety standards, environmental standards and intellectual property. In addition, there are subsidies (“corporate welfare”), amounting to perhaps $98b a year, selective tax breaks and contracting. In each of these categories, government and industry have made a variety of laws enabling large firms to eliminate competition. As such, they are a kind of tax taken from consumers who would pay lower prices and entrepreneurs who would be able to make their livings doing what they want. The tax is given to business owners who would be forced to lower prices or improve services in a free market. The Small Business Administration in 2005 estimated the total cost of these regulations at $1.1 trillion.
Accounting standards are widely considered necessary to prove a firm is not cooking the books. But in the absence of state regulation, concerned investors would find a way to insure against this possibility with audits. An example of the enormous and unnecessary complication of accounting standards is the Sarbanes-Oxley Act, passed in the wake of the Enron accounting scandal and failure. The Act made accounting more complicated. Implementing it costs a firm millions of dollars. Millions of dollars is pocket change for a big corporation, but prohibitively expensive for new and small businesses that could otherwise rival them. As a result, fewer businesses are created, and wealth and power are concentrated in the larger firms. We now have a complex tax code that could not be implemented by less than a team of accountants. The same is true of the legal code. The modern legal code was designed so that teams of high-priced lawyers can get away with murder and people without money see no justice.
Sarbanes-Oxley is, of course, but one law in a sea of other laws. Those who say the 2008 financial crash was caused by a lack of regulation may do well to realise there were thousands of lines of financial regulations already. They often cite the repeal of parts of the Glass-Steagal Act as the only incidence of deregulation they can think of, but this change did nothing to enable banks to make bad loans. A look at the facts indicates very clearly that regulation was the main cause of the bubble that caused the massive destruction of wealth for all but those whose ties to the state got them trillion-dollar bailouts.
Negative externalities, which seem to be the reason people beg the government to get involved in the market, are easily externalised in a statist society. The same big corporations pollute and break the law repeatedly. They are sued by the government, they pay the government, which means it gets another legal donation from an interest group, and then they are allowed to continue business as usual. The lawsuits are a bone thrown to voters and the corporations shake them off like lice. But they give the appearance that justice has been done. The corporations nonetheless retain all the benefits they get from the state in the form of legal personhood, subsidies, tax loopholes, intellectual property and regulatory barriers to competition. The state does not protect us against negative externalities.
Intellectual property enables firms to monopolise virtually anything they create. Consider the effects of IP laws in the pharmaceutical industry. Kevin Carson explains that drug patents are unnecessary to recoup expenses and develop the most effective drugs.
First of all, there has been a dramatic shift away from fundamentally new kinds of blockbuster drugs, because it’s much more cost-effective to put money into tweaking the formulas of drugs whose patents are about to expire just enough to qualify for repatenting them—so-called ‘me, too drugs.’ Second, a great deal of the basic research on which drug development is based is carried out at government expense in publicly-funded universities. Around half of the overall cost of drug R&D is taxpayer-funded. And in the United States, under the terms of legislation passed in the 1980s, the patents on drugs developed entirely at taxpayer expense are given away—free of charge—to the drug companies that produce and market them. Third, most of the actual R&D cost for developing drugs comes, not from testing the version of a drug actually marketed, but from securing patent lockdown on all the other major possible variants.
Generic drugs do not get developed, or get banned as soon as they are, because they are competition. The poor people who need them most do not get them. Intellectual property, Carson concludes, is murder.
We can divine the purpose of regulation from its results. We now have giant, multinational corporations straddling the Earth, with no government willing or able to oppose them, with the exception of a few populist, anti-imperialist holdouts. Large corporations’ alliance with the state has enabled the two to control natural resources and all manner of other markets. Consumers thus have fewer choices and higher prices than in a market freed from regulation. But freedom is always preferable to laws and regulations imposed by the state. Freedom allows economies and the arts to flourish. It means scientific advances and technological innovation. And it forces responsibility on those able to handle it while still allowing for us to help each other.
The solution to the control of markets by cartels is to free them. That would make customers the true regulators. If they decry a firm’s practices, they can stop buying from it and start buying from its competitor. If you abhor business, you are free to start and join one of the thousands of cooperatives in the world or simply produce and give to your neighbours. But demanding more regulation to prevent big-business malfeasance is akin to shooting oneself in the head to cure one’s headache.
I have written elsewhere (here and in chapter 30 of my upcoming book) on this subject but here is a post committed solely to dispelling the myth “the free market” caused the crash of financial markets in 2008. I hear the lies repeated every day, even by my political economy professor: the reason the banks made such risky bets was there was no regulation and no oversight of the sector. The truth is, regulation was rampant.
Let us start with the Federal Reserve. The Fed is hardly ever mentioned as a cause of the crisis. Artificially-low interest rates (1%) encouraged artificially-high risk taking for certain sectors, including construction and lending to people who could not afford to buy homes. Fed policy increased the supply of money (look out for inflation) with the result that more dollars were created between 2000 and 2007 than had been created in the rest of the history of the United States. (It has done so again in the years since.) House prices rose.
They rose the most in California, where various laws made it impossible to develop the land, creating artificial scarcity and driving up home prices. But they rose in other localities too, in most cases because of similar restrictive building laws. 90% of the land in Nevada is owned by the federal government, so instead of a free market, the availability of land for building depends on the government’s approval of each use of it. Less than 10% of the land in the US is actually developed, but under the guise of preserving nature (a handout to environmentalists), the government protected land near residential areas and thus raised the price of it. As a result, many places saw a housing boom artificially brought on by government, whereas other places saw no boom at all. Thomas Sowell explains.
A fundamental misconception of the housing market existed both during the boom and after the bust. That misconception was that the free market failed to produce affordable housing, and that government intervention was therefore necessary in order to enable ordinary people to find a place to live that was within their means. Yet, the hard evidence points in the opposite direction. It has been precisely where there was massive government intervention, in the form of severe building restrictions, that housing prices skyrocketed. Where the market was more or less left alone, places like Houston and Dallas, for example, housing prices took a smaller share of family income than in the past. (The Housing Boom and Bust, 24)
The booms that did result, however, were, like many local problems, misperceived by an officious federal government as a national problem, requiring national-level intervention.
Easy access to housing began under the Clinton administration. Fannie Mae and Freddie Mac, government-backed but publicly-traded corporations that would be bailed out if necessary (a formula for moral hazard if ever there was one) also pushed to expand mortgage loans to people with bad credit under Bill Clinton. Bill Clinton’s Secretary of Housing and Urban Development, Andrew Cuomo
made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis…. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded ‘kickbacks’ to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.
(Here are three more people to blame, in case you are interested.)
Democratic Congresspeople were reluctant to demand any oversight of Fannie, a campaign contributor. Fannie and Freddie guaranteed loans to people who were bad credit risks. These government-sponsored enterprises held about $5 trillion in mortgages. The Fed lent money to the banks at near 0% interest because, well, it could create money without hurting the people making the decision to do so.
At least as important regarding the subprime mortgage meltdown is the fact that owning homes had become the political cause du jour. Not everyone has to own a house to live; but if people are given houses, whether or not they can afford the mortgages, they might vote for the people who made it possible. The desire to introduce coercion into a market is always for the benefit of the coercer. Sometimes it benefits the constituent, and sometimes it leads to one of the most costly financial crashes in history. The Community Reinvestment Act (CRA) was meant to eliminate racial inequality in availability of credit. If banks did not lend to minorities in high enough numbers to satisfy the authorities, they could be crushed by lawsuits. (Remember, poor people were already being stung by local land use restrictions that raised housing prices. The CRA would enable them to get credit for something they might have been able to afford in a free market.) Instead of leaving interest rates to the market, politicians found it politically expedient to help minorities buy homes. It makes sense: if one can finally buy a home, one’s standard of living appears to have risen, and rising living standards get politicians reelected. Lending standards loosened.
Bear Stearns said the mortgages were sound. The three rating agencies (a state-protected oligopoly), you remember, the ones that said the mortgage-backed securities were great when they were garbage, served to reinforce the popular lending-to-everyone policies. Tax codes encouraged overinvestment in housing. To blame lack of government oversight for the crash is to get things backwards. The banks did what the government wanted them to do: hand out more and riskier loans. Those who talk of deregulation as a cause of the crisis fail to point to a single episode of deregulation, aside from the repeal of one clause of the Glass-Steagal act, which did nothing to enable banks to make bad loans. To say the banking sector was deregulated is to ignore or misunderstand the many regulations in place that helped cause the crisis.
One study finds that federal outlays for banking regulation—the laws big banks supposedly fear so much—increased from $190m in 1960 to $1.9b in 2000 and $2.3b in 2008. The US has 115 regulatory agencies. Funding to the Securities and Exchange Commission under George W. increased sizeably, with the result that its staff increased by one quarter. The number of rules businesses needed to follow rose. There may be an ideal regulatory agency or system, but it has nothing to do with what what the agencies actually do. These ones did what the politicians wanted: encouraged banks to make home loans to people who could not afford them, and solved a problem that did not exist, namely a nationwide lack of affordable housing. The result was disaster. Either government cannot be trusted to oversee corporations because it has been corrupted by them, or else it cannot be trusted because it is so incompetent. Either the fox is guarding the henhouse or the headless rooster is. More layers of regulations added to the existing system are not likely to help the public.
Moreover, it may be a mistake to call the crash a failure of regulation. Again, the corporations did what the government told them to, and people responded to incentives that monetary and lending policies created. Whenever we consider a policy a failure, we need to question whether it is indeed a failure or whether the goals and eventual outcomes went just as planned. After all, the crisis has ended up further enriching the rich, through bailouts and stimulus.
The securities and investment industry contributed $53m to congressional and presidential campaigns in 2008. (They have not slowed down since then.) Then, they stood back with their hands out and received more than a trillion dollars for their generosity. The bailout bill was defeated at first, but legislators, in their inimitable way, searched for a new way to pass the bill. They got more Congresspeople on board by sprinkling horsetraded favours in with the bailout money. (Something similar happened when Ronald Reagan bailed out big banks in 1983.) Special interests got what they wanted, legislators got what they wanted—win-win!
The argument the government made at the time was that these firms were “too big to fail”. In other words, their failure would mean the collapse of many more firms and the economy itself; therefore, they might need to be rescued. But the fate of Lehman Brothers, with more than $600b in assets, is instructive. It seemed too big to fail; yet, when it did fail, its assets that were worth preserving were bought by other firms. Keeping firms on life support discourages investment, encourages wild risk taking and drains money from those firms who are, in fact, productive and allocates it to those who have proven they are not. Promising to bail out failed firms created the moral hazard that enabled this crash.
Along came a large (more than 400-page) bailout bill, which anyone who opposed or even wanted to debate would be labeled as wanting the economy to fail. The government now owned hundreds of billions in bad debt, which meant instead of letting the companies pay for their own foolish bets, the taxpayers would. The case of the 2008 crisis and the recession was one of socialism for the rich. And democrats, who think that they have choices, were presented with two presidential candidates who agreed on the bailout and stimulus bills.
I am not an economist, but I do recommend the book Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse by Thomas E. Woods. Obviously, one book is not definitive, and all books I have read on this subject make good points. This one cogently argues the government’s role in the debacle was enormous. Its author is from the Austrian school of economics. The Austrian school predicted the crash (not to mention those of 1929 and 2000) based on evidence and basic economic principles. Either way, it is obvious that “the free market” and lack of regulation did not exist to cause this crisis. It was caused by the alliance of big business and big government, of a political system that rewards liars and thieves.
Many people, Occupy Wall Street protesters most vocally, blame the corporations for the crash. But corporations were doing what the government told them to. They blame corporations for accepting the bailout money. But if someone had trillions of dollars to give you, would you say no? That money only existed because it had been stolen from taxpayers in the first place.
And though some people—those who watch the news—think things are getting better, they are not. There will be no economic recovery, as the ruling class has already stolen it.
“We endorse the idea of voluntarism, self-responsibility, family, friends, and churches to solve problems, rather than saying that some monolithic government is going to make you take care of yourself and be a better person.” – Ron Paul
Electoral politics, despite everything I have said about it, could be a path to freedom. I might be wrong that working through the current political system to achieve a freer and more just society is unrealistic. After all, perhaps the anarchist vision of a world without artifical hierarchies backed up by force is unrealisable. Presumably that and similarly less-optimistic beliefs about what is possible are why some people reject radical ideas. But Ron Paul could represent a major new step toward that world.
Well, it’s possible. This post is why Dr Ron is the only politician I have ever seen anywhere that I would (tentatively) endorse; why his policies are the right ones; why the two biggest slanders against him are wrong; why I do not expect him to win; why he will have trouble implementing his programme even if he does win; and why I am nonetheless glad to see how far he has come.
Why Ron Paul is different
There are two reasons I believe Ron Paul is different from anyone else running for president.
-First, he has a consistent voting record. As a Congressman, Ron has always voted according to his libertarian convictions, voting against wars and the police state, for example. (The same could not have been said about Barack when he took office, as Barack had voted for spending bills funding Operation Iraqi Freedom, for instance.) That means Ron has principles, a hard quality to find in a politician, and even more important, sensible principles; we can be thankful that the voters in Ron’s district approved.
-Second, one of the biggest problems with democracy is that most politicians are swayed while in office of promises of lucrative jobs and other benefits after leaving office for pleasing special interest groups. Ron would be 82 or 86 when he retired from the presidency. Would he really need any more money? He is less corruptible than a president in his 40s or 50s. I think. I could be proven wrong, however. After all, he still accepts campaign contributions. He will need to give out some tax-funded presents if he gets to the top. Still, his policies are worth trying.
Dr Ron’s policies
Before we delve briefly into the man’s policies, bear in mind that everything I am about to say is based on his voting record and stated principles. I do not need to remind anyone reading this blog that politicians seldom keep their word when they get into office. As I say above, he is more likely to do what he says than others, but we should be careful not to fall into the trap of assuming he will or will be able to. If fewer than nine tenths of those who voted for Barack with tears of joy in their eyes are not disappointed now, they have not been paying attention. We can only hope Ron will be different.
His policies, if he truly attempted to implement them and was able to do so, would save countless lives and taxpayer money.
-He would very likely refuse to bomb Iran, or give the Israeli hawks the green light to do so they thirst for.
-He would end the War on Drugs, and all the maddening arrests, gangs, murders, destruction and seizure of property, corruption of law enforcement and governments that goes with it.
-He would end the War on Terror, the war on Afghanistan and support for corrupt dictatorships. Doing so would shrink and hobble the military-industrial complex and the surveillance state. Ending the US’s disastrous military adventurism would almost certainly reduce or even end both foreign and domestic terrorism as well. As such, we would have less need for the FBI and the CIA and all the trouble they cause as well.
-He would abolish the Federal Reserve, meaning people would be able to save their money and not see it vanish through inflation caused by the printing of money. Since the Federal Reserve was instituted in 1913, the US dollar has lost about 98% of its previous value. That means anyone holding dollars at any time in the past century has lost his or her ability to spend that money. And since the Fed printing more dollars between 2000 and 2007 than in all its previous years combined, we can expect inflation to eat away at everyone’s savings ever more rapidly in the near future. (If you think we need a central bank because inflation is a good thing, I urge you to read this.)
-He would decrease government spending, meaning lower tax and debt burdens for our and future generations. This move would encourage investment locally and from other countries.
-He would repeal (or just stop passing) laws and regulations that hold back small and medium sized businesses in favour of big ones. A freer market would bring innumerable benefits we can only begin to imagine. The greatest experiment in anarchy and free markets ever, the internet, has proven the value of creative destruction, creating new economies, new ways of communicating and access to a previously unthinkable amount of information. A free market in the US could mean something similar. Ron Paul could take the US on its first few steps in over a hundred years in that direction.
Of course, all hopes are that he can get into office, can follow his principles while in office and avoids getting blocked by special interest groups. His first obstacle is libel and slander.
What has been said about Ron Paul
-“He’s a racist.” In a move typical of politics, his opponents have been able to use the scantest evidence to turn countless lefties away from Ron Paul by branding him as the thing they hate the most. But are his policies racist? How would they affect people?
In fact, policies of freedom are policies of equality and anti-racism. They give everyone the opportunity to live the life they want. They reverse the state’s entrenchment of poverty and the entitlement mentality it has fostered for decades. Fewer people would depend on the state. Poverty would fall as people would be able more easily to start policies without endless restrictions, tax forms, regulatory requirements and licensing fees. Paying lip service to diversity, or in Barack’s case just being black, says nothing about how the man’s policies affect people. The free market would do wonders to eliminate poverty for everyone.
-“He’s an isolationist.” Nearly as emotive for the right wing as “racist” is for the left, Ron Paul has been called an “isolationist” for his foreign policy. Presumably, by isolationist his enemies want to shed light on the fact that Dr Ron disapproves of overseas military bases and interventions. Is that really such a bad thing? At a time when the US intervenes militarily in a number of countries and kills everyone in its path, its overseas prisons and bases consume billions of dollars and approval of the US around the world is in the toilet?
But isolationist implies ignoring the rest of the world, evoking the time China’s emperor ordered the destruction of all imperial boats to cut China off from the rest of the world. The word these people are looking for is non-interventionist. Non-interventionism is simply the absence of coercion on an international scale. In the absence of instability caused by war, people trade with each other. And because borders are meaningless to people who have something to offer humanity, they trade with whoever in the world has what they want. And free trade, which really means without a government-written and implemented policy backed up by a gun but the absence of one, breaks down barriers. It lets everyone benefit from a liberal economy wherever the power has not been taken away from them to do so. A Ron Paul foreign policy would likely be one of cooperation and trade, not war.
Why I don’t think he’ll win
I am not a pessimist by nature. The glimmer of hope I see is the reason I wrote this post. But I do not actually think Ron has a chance. Think of the people who oppose his policies.
-First, big business, protected by countless laws that run counter to the free market Ron may understand and believe in more than any politician in the US. The opposition of big business to Ron Paul shows up in the media conspiracy against his candidacy. As is well documented by media watchers and his supporters, the mainstream media have deliberately ignored Ron Paul every chance they can, even sneakily not mentioning his name when discussing the Republican candidates. If Ron’s supporters can continue their commendable, tireless efforts to turn heads, he will break the media blockade.
-At the same time, Ron is opposed by anti-business types who believe his free market policies benefit big business. Ron Paul or no Ron Paul, these people need to be made to understand that the owners and executives of big business do not fear regulations: they write them. At the moment, markets in the US are dominated by an effective oligopoly of large corporations who can easily afford to comply with complicated tax codes and burdensome regulations. Fewer regulations and subsidies mean new businesses can be created by anyone to challenge the big players, lowering prices and unleashing the ingenuity of the free market as a result.
-Next, the US military’s domestic constituency. Everyone who believes the US should have a big, interventionist military that invades other countries for looking at the president the wrong way have something to fear from a Ron Paul presidency. These are powerful people, represented in some very powerful interest groups.
-Any other pressure groups currently getting rich off the US taxpayer may also decide Ron Paul is not their man. All these groups can fund media campaigns to deny Ron his chance.
Since Ron wants to reduce or eliminate foreign aid, foreign governments do not want him to win, either. Think of the states who would lose military aid and protection:
-Afghanistan, Pakistan and the other Central Asian states as the AfPak war is wound down;
-Saudi Arabia and the Gulf states protected by the US military;
-Israel, Egypt, Jordan, the Palestinian Authority and so on benefiting from US government patronage;
-and even Britain, France, Germany, Italy, Japan, Turkey, Russia and China who benefit from the oil and other big business concessions they would lose when the US stops fighting wars for them. (See here.)
How they could prevent Ron’s victory is hard to say, as it would be clandestine; perhaps they would fund media campaigns; perhaps they could get him assassinated. Presumably, not all of these governments would do such a thing. But we would probably never know who it was if they did.
Why he probably would not be able to do much if he did win
It is still possible that enough voters are not fools and Ron will be elected in 2012. A major push by his supporters, along with a continued stellar performance from Ron himself, could secure a victory. But things would not be easy for him.
-The same foreign governments could find ways to oppose his actions after he was elected, from the same hypothetical disinformation campaigns to a terrorist attack that would leave the US people thirsting for blood and forcing Ron’s hand to go to war. But, of course, the hardest hurdles would be from within the US.
-Congress would not be libertarian. It would still be beholden to interest groups. It would likely block as much meaningful legislation as it could. Congress has grown in dysfunction for decades as the rewards of power have grown. A libertarian president’s greatest hurdle would probably be an irretrievably corrupt Congress.
-The people would not be libertarian, either. To make what could amount to a revolution in the US could be catastrophic if the people are not ready for Ron Paul’s ideas. To his endless credit, he has educated numerous masses on the principles of freedom, the Constitution, US history, the Federal Reserve and the realities of wars and terrorism. And many of his supporters have spread the same ideas; kudos to them, too. Winning the Republican nomination would give Ron far more time on the bully pulpit, forcing the media to pay more attention to him. My worry, however, is that, at this point in history, opposition to Ron’s policies will pour out of every corner of American society.
-Teacher strikes that would ensue if Ron eliminated the Department of Education, and they would enjoy widespread popular support. Any similar union or other interest group fearing a threat to its established legal privileges could engage in strikes or other protests. Millions of Americans depend on the state in one way or another, many of whom are very rich. Working together, they could cripple the economic growth Ron’s policies would otherwise foster.
-Moreover, there is also a distinct possibility that those predicting an imminent economic crash will be vindicated. Ron Paul would be taking the reins just as the economy and the political system are crashing. The uneducated masses will be easily led to believe libertarianism is to blame for these crashes, just as they believe the free market was to blame for the subprime and financial market crashes of 2007 and 2008. The instability caused by strikes and so on might lead the people to pine for the days of the police state.
Why I am glad he is running for president
I may not think he will win the nomination or the election, but I am nonetheless thrilled to see how many people Dr Ron has educated. He has used the bully pulpit to open countless pairs of eyes to libertarian ideas and Austrian economics. This alone makes me love his candidacy.
But until we change many more minds in the US, Ron Paul’s wonderful ideas could run into million-dollar or million-man roadblocks.
Fortunately, with or without a Ron Paul presidency, there are plenty of ways to oppose the state and achieve freedom. This blog will go into those ways in future posts (and when it becomes a book later this year).
“What about the roads??” they ask desperately. Statists seem to think that, because the government has always built the roads, at least most of the time in recent memory, that only the government could ever build roads. I find the assumption behind this question quite ironic. The roads are a striking example of a utility that should logically be privatised. What roads should the government pay to build and maintain? The roads to a residential neighbourhood? Why should people from the entire city or country pay for these roads? Let the residents pay. How about the road to an office, shopping district or mall? Let the business owners pay, perhaps through a local business association. Getting the government to do it means forcing everyone to subsidise the businesses who benefit.
So the problem is unresolvable? Think about it. How could we get roads built without the state? I bet you can come up with some ideas. There are all kinds of ways to make roads profitable, from electronic or cash tolls, GPS charges, roads maintained by the businesses they lead to, communal organisations that own the roads, and so on. “And if none of those work?” asks Stefan Molyneux. “Why, then personal flying machines will hit the market!”
Besides, it is already happening. Private contractors who build roads do so far more efficiently than governments (believe it or not). A private road in Paris saves commuters time and the company that built it clears the road quickly when there is an obstruction. A company added two lanes to a highway in California, making them toll roads, thus giving people the option to go faster for a fee. Companies have implemented electronic tolls, obviating the slow and inefficient toll booth. But surely, citizens could never be expected to just build and maintain their own roads, could they? Oh wait, that’s already happening too.
Economist Walter Block has written extensively on the privatisation of roads. To those who believe a competitive road system makes no sense, think again. There is nothing about roads that requires a monopoly. After all, the first roads in the US were private; and no, the government did not take them over because the public demanded it or they knew they could do so more efficiently. In fact, like many libertarians, Block has some very good ideas for how to make competition in formerly public services work. Governments rarely innovate, except in methods of killing. But private-sector solutions, such as airbags and snow chains, have saved lives. If there were competition among roads, people would be able to choose which one they drove on. They might have the choice to drive on the road with the heater underneath it to melt the ice, making it safer; the highway with the rubber dividers that are safer in a crash; and the routes with the lower death rate. We do not know what great life-saving innovations could come from people with an incentive to think of them. Release something into the private sphere and see what happens.
Is the logic of privatising all roads and highways becoming clearer? Zachary Slayback has more to say.
Privatization would ensure that the project would be finished in a timely manner, would remove the moral hazard of building a possibly unnecessary highway with public funds, and would not force every individual to fund the project, whether they wish to use it or not….
Should a company decide that any highway is a viable venture for their ownership and stockholders, then it would be on that company to build a product that consumers would wish to use. If several companies wished to build a highway, then whichever company offered the best product (i.e., the best-maintained, cheapest, fastest highway) would be chosen by consumers to deliver that product via the price system.…
In a free-market system, the signals sent via the price mechanism allow the market to adjust to any changes much more quickly and efficiently than the current centrally planned model under which we operate.
Knowledge is not something that can be aggregated and centrally planned by a Department of Transportation. Knowledge is something that must be acquired in small bits throughout the market. Risks must be taken to acquire knowledge; and no one man, nor any group of men for that matter, can possess the knowledge necessary to perfectly plan any specific endeavor.
So why leave this, what Friedrich Hayek, the Austrian economist and Nobel laureate, called the ‘knowledge problem’, to a group of individuals who are insulated from the signs and information of price signals? Major investments — especially those that require a large amount of information to properly operate, such as highways — should be left to the system that best responds to market signals and the price mechanism: the free market.
Moreover, there is a major moral issue at play when building any public-works project, but especially highways: Who pays for the highway and with what money? Under the current system, public-works projects are paid for by ‘the public.’ But what gives central planners the moral authority to determine that all taxpayers in a given population should be forced to pay for the planners’ project?…
[O]ne thing is for sure: the free market would not force consumers who do not wish to use the product to pay for it.
Roads could be owned by the people who live or work around them. Perhaps electronic tolls (which already exist) could charge people on roads one-tenth of a penny to pass by each person’s house or business (Walter Block’s idea again) without slowing them down. Highways can be profitable for their owners through tolls, billboards and other things clever businesspeople can think of that I have not. Free market highways would reflect the true costs of building them. Their being built by government tends to result in millions of dollars in waste. Roads could be owned by one man who charges you for driving on them, and you could build your own roads or go round if you did not want to pay. People always find alternatives when there is an incentive to do so. It is fatuous to say it is wrong that we should have to pay for roads when we already do through taxation. And it is unfair to argue that it could not work just because you have not thought of an alternative.
Why do we believe that, if there must be a monopoly (and that is probably never the case), it must be a government monopoly? Do we not know better than to trust the government with anything as important as a monopoly? Milton Friedman called a situation which seems like it needs to be a monopoly, such as of plumbing or power lines, a technical monopoly. There are three ways to deal with a monopoly: private monopoly, government monopoly and government regulation. Friedman argued that, in a world of rapid technological change, a private monopoly was preferable. If government has a monopoly, there is no chance for competition and its benefits (lower prices, greater efficiency, wealth creation, innovation). If one business has a monopoly, there may be some way around it, and another firm might be able to find a solution. Contrary to popular myth, free markets abhor monopolies.
But what if someone built a road around your property and said you could not get out unless you paid him a million dollars? Well, my initial impulse might be to shoot him, but there is almost always a peaceful, preventive solution. Perhaps when buying the house, along with fire insurance, one could also purchase access insurance, to insure against such possibilities. Or perhaps one would buy the stretch of road outside one’s own house. One would probably let other people in the neighbourhood through free of charge, in the name of maintaining friendly relations; otherwise, their property values would drop and the shaming and ostracism that could result would be devastating. The sovereign community will need no government roads when it saves money with better ones.
We have discussed free markets, but barely touched on the most regulated market of all: the labour market. And the biggest barrier to a free market for labour is the national border.
Which of the world’s borders are the most tightly controlled? Those of the rich world. Why would that be? It has something to do with the privileges afforded exclusively to citizens under the welfare state. Having lots of children means a welfare system is potentially sustainable, though it is largely unnecessary, as children will take care of their parents. Since welfare states were implemented, mostly in the wake of WW2, fertility rates have dropped. Overall fertility rates have historically fallen as prosperity has risen. However, this drop in fertility has made welfare states unsustainable. This problem is particularly acute when people live longer and technology improves: health care systems require more money to buy the equipment to keep more people alive longer. But since the austerity of the War, citizens of the rich world have acquired an entitlement mentality. Now that the austerity generation is nearly gone and the first welfare generation is retiring, the belief that we somehow deserve all the important things is entrenched. Entitlement is supposed to guarantee jobs, minimum wages (or for some “a fair wage”, which presumably means something higher than market wage), schools and universities, recreation centers , hospitals and clinics, medicine, retirement at 65 or younger and pensions. Given the enormous government spending required to maintain all these things, again, in their current forms these privileges are not sustainable. Without a rise in taxes to pay for it, which would mean less money for the productive sector and thus less wealth to go round, the welfare state cannot continue to dole out the same level of benefits it always has. There is, however, an alternative: immigrants.
Though it may seem unfair to ask the poor to pay for our luxuries, there might be billions of people around the world willing to do so. But the people of the rich world do not want immigrants; at least, not many. Immigrants burden our public services, take our jobs and worst of all, threaten “our way of life”. As a result, we tighten the borders. Tight or closed borders, like unions, reduce competition for jobs, raising wages and with thus the costs of doing business. Corporations ship jobs overseas where they can pay lower wages and avoid burdensome regulations (though due in part to that trend, other countries now offer other advantages as well). Workers get angry that they have lost their jobs, and instead of either considering that their lack of competitiveness, the welfare state or the closing of the border had anything to do with it, they advocate policies of violence (arrest and deportation) against the immigrants they think are the reason for all their troubles.
Many people are opposed to immigration, and are opposed to trade that affects their jobs, and are opposed to the offshoring of their jobs. They blame big business for offshoring, as big business is only in it for themselves. Well, labourers are only in it for themselves, too. In fact, so is everyone. That makes us all selfish and greedy, not just rich people. Calling corporate executives selfish is hypocritical, as workers who are protecting their jobs by not letting anyone else into the country could easily be described as selfish as well. When immigrants enter a country, many of them (depending who is allowed in) gravitate toward the lowest-paid jobs, because these jobs are jobs for which you do not need much English, a college education, local accreditation, and so on. If native-born people believe they should have those jobs rather than others who had the misfortune of being born elsewhere, let them work for them. If they cannot do the jobs at market wages, which is whatever the workers who are available and good enough to do the job will accept, then they could either upgrade their skills, look for another job, start their own businesses or figure something else out. Throughout history, when technology and immigration have destroyed jobs, the newly unemployed typically find new jobs. When jobs are destroyed, as thousands are every day, a roughly equal number (depending on conditions such as economic boom or bust) are usually created. There is nothing to fear from job destruction, or from people who will accept lower wages’ taking jobs, because there is no fixed number of jobs to go round. A related economic fallacy is the belief that war would be good for the economy. War employs many men, but the activities they perform are destructive, as opposed to productive. They are employed by the state, which sucks money and people from the productive sector of the economy. If they had been left in the private sector, it might have taken longer for them to find jobs or get their businesses off the ground, but they would have done so eventually, adding far more to the economy over time.
When working people start complaining that foreigners are snatching up their jobs, calling people illegal and demanding deportation and giant fences, corporations are forced to pay higher wages. There is less competition for the same job because the government is distorting the labour market and denying entrance to the country to people who have as much right to be there as anyone else. Who cares who was there first? There is no moral case for immigration laws. When corporations are thus hobbled, they want to reduce costs and thus seek out cheap labour in other parts of the world. If the workers had accepted less, they would not have done so. But people who believe that having the same job for 40 years is somehow a right get self righteous. Instead of improving themselves, they blame immigrants, corporations and the government. The entitlement mentality blinds us to our own faults, and to the irrationality and immorality of fortified national borders.
Borders make sense when they are amicably agreed on by owners. The borders of your property, for example, or unguarded borders in Europe that now demarcate cultural boundaries rather than the do-not-pass-or-we-shoot variety, make good neighbours. But when nationalism comes into play, and groups that, hundreds or thousands of years ago (before national boundaries were invented), used to control this territory, feel that it is theirs (and by extension, not yours), they are willing to kill each other to secure that border. This is our property and our people and our resources and our little lines drawn on the map.
But where is the logic of these boundaries? Even the idea that “we” used to control this or that territory, or have done for a long time, usually has no merit. Almost every (if not every) national boundary has been created by war and empire. The empires of Britain, France, Spain, Portugal, Germany, Italy, the Netherlands, Belgium, Russia, China, plus all the empires that disappeared before the Treaty of Westphalia, all drew lines around their possessions. They needed to be clear what was whose. At the same time, these possessions contained people not native to the empire’s centre of power on them so they needed to keep them in line by inventing nationalities. Almost every (if not every) one of these borders did not reflect the cultural makeup of the people it enclosed; they were arbitrary. But when the empires left, instead of redrawing the borders, the elites decided they wanted to make everyone inside those borders think they were a cohesive group—a nation—because it would help them gain power. No government wants to relinquish control of part of its territory because it means less power; and less power is out of the question for anybody in it. So they invented myths about how everyone within the imperial borders has always been a nation, and since we are the political party who will help keep our nation together, support us. The story of post colonial electoral politics in a nutshell.
So why are there so many border disputes? Why not dissolve the borders and share these artificial creations called countries as equals? Because the empires and post-colonial elites have already made the people feel they are indivisible and proud nations that must retain territorial integrity at all costs. They do not want to share with outsiders. Children know how to share. If children were at the helm, they would share. But adults would rather send people to die before that happens. There is no sharing within our border.
And God forbid one might call those who would deny others access to a piece of land because they are from the wrong country racist. It certainly seems that way to me. Borders and anti-immigrant policies of any kind strike me as inherently racist. There is something superior about people from within our imaginary line, but those outside just do not deserve the same benefits. Of course, that is not how the argument is framed. Instead, it is considered unrealistic to think that a country like Canada, the US, Australia, etc. could ever absorb tens of millions more immigrants. But why not? There is obviously space for them. “Overpopulation” is not a problem anywhere people are free to move and create their own opportunities. The problem is lack of money to feed and house everyone. As we will see below, the claim that integrating newcomers will come at enormous expense or would cause food shortages is largely baseless, especially in a free society. But the racism is still there, under the surface, whether the non-racist people against immigration realise it or not.
Are you afraid your culture will change? It makes sense to think you culture is superior to that of others because it is what you are used to. It is the culture you understand best; every other culture is full of freaks. If we do not understand other people beyond the surface, and we do not try hard to understand, it is easy to see them as inferior. Ruben Navarrette believes that the arguments about border security, lower wages and overburdened schools are nonsense. No, he says, it is cultural change that makes us shiver, and any rhetoric disguising that fact should be exposed.
It conjures up the alarm bells that Benjamin Franklin set off about German immigrants in the late 18th century, who he insisted could never adopt the culture of the English, but would “swarm into our Settlements, and by herding together establish their Language and Manners to the Exclusion of ours.” It popped up in the mid-19th century amid worries that Chinese immigrants were “inassimilable,” which led to Congress approving the explicitly-named Chinese Exclusion Act of 1882. And it helped welcome the 20th century when Massachusetts Sen. Henry Cabot Lodge warned that immigrants (read: the Irish) were diluting “the quality of (U.S.) citizenship” and others complained that Italian immigrants were uneducated, low skilled, apt to send all their money to their home country and prone to criminal activity.
I think opposition to immigration stems from a combination of factors economic and cultural, but Mr Navarrette’s argument is worth considering.
It is not just the welfare system and jobs that attract the “invaders” (a term used, ironically, pejoratively by many people who supported interventions in Iraq or Afghanistan). It is also the avoidance of wars. The US government’s War on Drugs has killed some 35,000 Mexicans, not to mention Colombians, Guatemalans and other Latin Americans. Not only do they have a reason to leave where they are, an argument could be made that a certain government with a certain agenda owes them something. The war in Libya, along with the overfishing of the coasts of Somalia, have created refugees that have been rejected by the European countries that sponsored those efforts and let innocent people drown in the sea. One commentator describes letting refugees die in Fortress Europe’s moat a strategy for keeping them out. But at least they are not burdening our welfare system.
As with most laws, a few people making money off the status quo are a hindrance to their repeal. Your country as a whole does not benefit from restrictions to immigration, but some people do. Well-connected corporations make millions of taxpayers for locking up undocumented immigrants. The criminalisation of movement keeps prison operators happy. Like workers who fear newcomers, special interests will fight to the bone to influence legislators to retain their legal privileges. A few people win, but desperate people who risk their lives crossing an invisible and arbitrary line on a map for a better job lose. If we want to boost economies, reduce poverty and promote freedom, let us open all borders.
A further reason immigration is so restricted is that the anti-immigrant argument is partly a scapegoat contrived to divert attention to people who are different from the underlying causes of unemployment, violence and other things people blame on newcomers. A government that induces financial crisis and takes away money from people so they have less ability to defend themselves against them has a major interest in pointing fingers. Who better to blame than people who are visibly different, poor and cannot stand up for themselves? There is no longer any case against immigration. Should we do away with borders altogether? Well, have they brought us any benefits?
Are we freer than ever before? Until a hundred years ago, people who wanted to cross borders did not carry passports; they just went. Now, we need passports and visas, obtained following time-consuming and expensive (in fees and taxes) bureaucratic processes. And not everyone can get a visa. We can be denied access to the US-Canadian border for a record with a DUI, possession of a medical marijuana card, shoplifting or arrest for attending a peace rally. You do have legal recourse, which you can apply for after five years, but you need to send in court, police and FBI records, and a $200 fee. It’s a good thing about that fee, eh? Without that, how would the people who don’t let peaceful people cross borders make their livings? The persistence of borders seems to be little more than another bureaucratic rule designed to justify the existence of the bureaucracy.
The argument that national welfare systems would be overwhelmed first ignores the fact that immigrants contribute more to it than they take out, but more importantly underlines the flaws of the welfare state. Why would we get rid of immigrants at great expense in order to perpetuate this expensive and self-defeating system of welfare when we could welcome immigrants, who would contribute greatly to the economy? We would not have the exclusivity of borders and the violence of deportation on our consciences.
The myths are that immigrants steal jobs, commit more crime, go on welfare and contribute poverty. The reality is different. Most immigrants are young men, which one would think would mean more crime and incarceration. But in fact, the incarceration of natives in the US is five times higher than that of immigrants of every ethnic group, without exception. And why not? Immigrants go to work, not to commit crimes. Moreover, welfare case loads have fallen as illegal immigration has increased. Overall poverty have decreased too. It is not simply due to the high-skilled immigrants but the low-skilled ones as well.
A book by the Center for Global Development’s Lant Pritchett called Let Their People Come: Breaking the Gridlock on Global Labor Mobility cites two studies (Hamilton and Whalley 1984; Winters et al. 2003) that reach startling conclusions. Far from harming economies, the full liberalisation of labour markets could result in gains to global GDP at nearly forty trillion dollars. Actually, given what we know about how well free markets generate growth, and given the strict laws preventing a free market for labour, this figure may not be so surprising. Most of the benefits would accrue to the poor, but a rising tide of poor people would probably lift the boats of anyone working for any business they bought from. On a purely cost-benefit analysis, it makes sense to let all immigrants in. Economies would burst with growth, and though temporarily unemployment might increase, over time it would probably remain low. The short-term consideration of losing one’s job should be measured against the potentially enormous long-term benefits to nearly everyone.
Immigration reduces world poverty. Anyone who says they care for the poor and support barriers to immigration is either lying or does not understand poverty. When they support foreign aid to reduce poverty but not opening borders to reduce poverty, they would rather throw a bone to homeless man in order to ease their consciences than integrate him into their neighbourhood. And everyone who sees famines on television and throws up their hands in despair needs to consider that if starving people could emigrate, most of them would survive.
If crops fail in one place, it is likely they will flourish elsewhere, at least if people can move. In a free market, supply almost always rises to meet demand: existing producers produce more and new producers enter market that offer lucrative returns. Naturally, it is possible that climate change, in a much more advanced stage than it is today, would lead most crops to fail all over the world; though as we will see in my post on the environment, it is by no means impossible for a stateless society to have better means of protecting the environment than the status quo. Open borders might be a cure for famine.
But the real reason it is wrong to hold back immigration is that it is wrong to initiate force against peaceful people for any reason, and wrong to close off a country and call it yours. It’s not your country. It’s everyone’s world. Stop being so selfish. Either way, if you believe we should use coercion to keep others out of our country, you advocate violence and exclusivity and you do not believe we should help the poor.