An Old Friend

I have commented in the past regarding my relationship with The Daily Bell and my favorable view of the site and many of the regular feed-backers.  One of the more enjoyable encounters was with Lila Rajiva, who for a time regularly maintained community at the site. 

That’s enough set-up for the following comment, which I posted at her site:

Lila

It is nice to see you again.  I saw your comments at EPJ and followed the links.

As to this post, this is certainly the elephant in the room for an-caps.  It is an even larger elephant in the room for those advocating some form of "government" as that term is commonly used.

While critics of an-cap society can point largely to "what-if" questions and the inability of an-caps to give absolute certainty in response, critics of investing final monopoly power of force in an entity have hundreds of millions of victims to point to as evidence of the folly of this faith.  Al Capone never caused the harm of an FDR or a Stalin.  And an FDR or a Stalin could never have done the harm they did absent a centralized apparatus available as the means. (And I do not suggest that those who criticize certain shortcomings in an-cap thought automatically are advocating for the next Stalin; I only suggest that criminals can do exceedingly more harm when a monopoly of legalized force and final arbiter status is available to them.)

I have no final summary - brighter minds than mine (including Rothbard) have failed to answer these questions.  However, regularly calling into question faith in the state as an effective (or least bad) means of ordering society is one step in the most needed change - an educated and enlightened population on matters of organizing society.  Without this, no form of ordering society is safe from predators looking to take advantage of the cracks in the system (and every system will have its cracks).  With an educated population, I will take the an-cap option – the predators can do far less harm!


My subsequent comment:

"Even in the matter of financial speculation - there is never a real self-questioning of fundamental problems and issues, just some reiteration of talking points and ideology."

As much as I promote the an-cap view, I find myself at a loss - for an example - specifically on this issue of financial crimes.

I would love for there to be private solutions for things such as the fraud (if actions were as reported) of liborgate.  Most of these private solutions have been stripped due to government action.  So the only means of some form of justice is through state action.  I won't cry if beneficiaries of state interventions (many in the banking industry) get knifed by their own benefactors.

But to worsen the situation, the real manipulations come directly from the state - again, liborgate will only serve to distract from the real interest rate manipulations of central banks.

Anyway, I find it hard to remain pure in thought (impossible to do so in deed, though many an-cap proponents go apoplectic about this) - and I often cannot even articulate what "pure" means in any case....

Take care.

Steve Forbes: An Advocate of Free Markets?

Zero Hedge linked to this interview of Steve Forbes.  The interview was conducted by Hera Research Newsletter (HRN).  A link to the HRN page is provided at the Zero Hedge post.

For a mainstream analyst, Steve Forbes is about as good as you can get for a free-market perspective.  Many of his positions represent improvements over the current situation in the U.S. and world economy, and also represent improvements over current U.S. Government policy.  However, like virtually all mainstream critiques and analysis, he falls short on the critical issue – the one issue that separates the chaff from the wheat, so to speak.

But I will come to this later.  I would first focus on the positive aspects of this interview.  Early on, Forbes presents his advocacy for many smaller-government, freer-market positions, including a return to the gold standard:

HRN: Thank you for joining us today.  With the U.S. economy struggling to recover from recession and financial crisis, what policies would you recommend?

Steve Forbes: The only way to recover is to stabilize our money, have a gold backed dollar, simplified tax code and return to a free market.

Regarding a gold standard, he is dealt several of the usual fallacious arguments and issues against such a position.  He addresses these quite well, especially considering the overall tone of the interview.  Following are some of the questions addressed by Forbes regarding monetary policy and the gold standard:

HRN: Don’t we need a flexible money supply?

HRN: Doesn’t increasing the money supply help to stimulate the economy?

HRN: Wouldn’t the gold standard prevent financial innovation?

HRN: Doesn’t government deficit spending smooth over recessions?

HRN: Isn’t the gold standard deflationary?

Again, Forbes handles these quite well – if you are interested in his answers, I will suggest a visit to the original interview. 

However, Forbes, like all mainstream commentators, ignores the elephant in the room when it comes to today’s economy – the one position that ensures all of his other positions cannot be implemented, or if implemented, cannot be sustained.  He does not question the existence of a central bank, nor does he question the government’s control over money:

HRN: How would re-linking the U.S. dollar to gold work?

Steve Forbes: You simply peg the value of the dollar to gold.  Let’s say, for argument’s sake, you peg the dollar to gold at $1,600 per ounce.  If gold goes above $1,600, you tighten up on money creation.  If it goes below $1,600, you ease up.  You keep it around $1,600 by tightening or easing up on money creation.  The gold standard doesn’t preclude a booming economy having more money or a stagnant economy having less money.

Who would “peg” the dollar to a certain gold price?  The only way in which this can be achieved is for the government to grant a monopoly power of currency and banking to a centralized institution – an institution whose function is to manage the nation’s money supply.  Call it a central bank…or the Federal Reserve.

A central bank created by congress is a central bank that is controlled by congress – money, banking, credit and currency become political and not economic.  A granted monopoly enforced by the power of the state is not a market enhancing entity.  As money is one side of every transaction in a modern economy, it seems impossible to truly advocate for free-markets without calling into question the underlying inconsistency of a centrally planned and managed money supply.  Forbes is the mainstream champion of free-markets, yet he does not call into question the idea that money must be centrally planned and managed.

How will market forces be brought to bear to ensure that this institution with such power will act credibly?  Will congress enforce the rules?  The money center banks?  If the entity cannot be disciplined by the market, it will not be disciplined.

This is the failing of Steve Forbes, and the failing of all so-called advocates of freedom.  You will know them by their words and deeds – if they do not call for money and banking to be a function of the free market they are not advocates of freedom, regardless of the annual festivals they host.

HRN: Do competing currencies make sense?

Steve Forbes: The idea of a parallel currency is a perfectly good one.  People would come to prefer a dollar based on gold rather than a dollar based on politicians.

Why is it a dollar in either case?  Why can’t an American use Swissies, or Yen, or “Joe’s Gold Backed Buckeroos”?  Competing currencies should mean competing currencies – anyone can bring to market his own forms of money, banking, credit, and currencies.  The market will decide on the most honest and trustworthy means.  The market will develop its own standards.

HRN: What should Chairman Bernanke do instead?

Steve Forbes: Other than resign, Chairman Bernanke should realize that the gold standard works and that when you deviate from it, you create more and more uncertainty.  He should re-link the dollar to gold.  Doctors used to treat patients by bleeding them.  Bernanke just keeps bleeding the economy.

No, Bernanke should not re-link the dollar to gold.  Leaving a central bank in place is a guarantee of no freedom for the people.  The free market should determine all issues around money and credit. Why do so many so-called free-market advocates go blind when it comes to this topic?

On to other topics:

HRN: How could the U.S. transition to a flat-tax system?

Steve Forbes: Since people get hung up on their deductions, we would institute a flat tax and give people the option of filing either under the new, simple system or the old, horrific system.  If you’re a masochist and want to punish yourself, you can file under the old income tax system.  If you want the simplified one, you can go with that.  I think 99% of Americans, out of sheer convenience, would quickly switch to the new system.

Here again, I would take a flat tax over the current system.  However, the issue of individual income taxes cannot be understood as long as it is viewed from the perspective of generating “revenue” for the government.  Personal income taxes have one purpose only, and that is for control.  The reporting ensures that the government knows all aspects of one’s financial life, and with this knowledge the government has significant control over the taxpayer.  A flat tax will not change this.

HRN: How would you go about deregulating health care?

Steve Forbes: First, we should repeal the Patient Protection and Affordable Care Act—Obamacare—which is an abomination.  Patients should have more choice.  The insurance companies don’t compete freely for business.  We should allow people to shop nationwide for health insurance.  I live in New Jersey, which has a lot of senseless regulations.  Why can’t I buy a health insurance policy in Pennsylvania that costs less?  We should equalize the tax treatment of health care expenses.  If you’re a business or are self-employed, you should be able to deduct the expense.  And individuals should be free to go into the market and pay with after-tax dollars.  We should make it easier for small businesses to form a collective to buy health insurance.  There are a lot of simple things that could be done.

How about just getting government out of the health-care business?  Don’t “equalize the tax treatment” (how would this work in a simplified flat tax anyway?), don’t get rid of the “senseless regulations” (everyone has their own opinion of “senseless” - get rid of them all).  Just get the government out of the relationship between doctor and patient.

HRN: Do free markets really work?

Steve Forbes: Free markets, with sensible rules of the road, can do all the things that big government advocates say the government does but that it really can’t do.

Who will define the “sensible rules”?  Either the market will, or a central planner will.  One cannot truly advocate for free markets and also advocate for central planning.

Again, I would take the world Steve Forbes portrays over the one we have today.  There is a small portion of the path we can walk together.  However, to believe his path will lead to the outcomes he suggests is folly- leave an entity in place to define the “sensible rules of the road” leave a central bank in place to manage the price of the dollar to gold, and you will end up right where we are today.

If you advocate free markets, then advocate free markets.  If you advocate free markets while ignoring the elephant in the room, then you remain an acceptable mainstream voice.

Why "Liebor"? Why Now?

From the beginnings of the credit and banking calamities in 2008, there has been desire in some quarters for charges and prosecutions against the bankers that have wrecked such havoc upon the rest of us.  How can the fraudulent mortgage practices go unpunished?  (Of course, the root cause is central banking, and all other excesses are possible only because of this institution.)

Yet, other than a minor bit player or two, nothing came of this.  Certainly one aspect is that, in the washing of the laundry, various politicians and central bankers would come under fire.  Perhaps for this reason, among others, the actions were swept under the rug.

I felt all along that this turning-the-other-way by the politicians would last only as long as the façade was held together with bubble gum and duct tape.  In other words, the politicians would turn on the bankers when the heat of the crisis was finally deemed intolerable.  The sinking ship has the rats turning on each other, so to speak, and while banks control politicians, ultimately the politicians control the banks – even the Fed.

Is this why the Libor story is breaking now?  What is so special about Libor (something few in the mainstream understand) as compared to the mortgage frauds (which the average Joe understands quite well)?

There is a reason we are being handed this spectacle at this time.  My simple answer is that Obama will use this to rebuild his relationship with his base – and as Romney can get lumped into the Wall-Street banker crowd, Obama will use this against Romney in the election. 

However, it could be far bigger.  Is there something big coming? Is it a diversion for something else, something big that the politicians (and central bankers) want to draw attention away from?

We are always tricked into looking at the wrong walnut shell.  I don’t mean to diminish the events of Liborgate – if they are as reported, these were fraudulent actions.  However, this certainly isn’t the biggest such story to emerge in the last five years – even if one ignores the biggest manipulator of all, the central banks and Federal Reserve.

Why this story?  Why today?  That is the question.

Whose Independence is it, Anyway?

Most Americans will celebrate this July 4^th as they have every other – bar-b-cues, picnics, sports, gatherings with friends and family.  And like most American holidays, there will be praise and worship of the military and its conquests.  Underlying it all is the celebration of the anniversary of the signing of the Declaration of Independence, and the traditional marking of the battle for the independence of the thirteen colonies from rule by the King of England.

It seems fair to ask if the war was worth it.  What if the war wasn’t fought?  What was this “independence”?  “Independence” for whom?  Was life for the average American different than life for the average Brit twenty years after the war?  One hundred years?  Two hundred years?  Was life for the average American different after the war than it might have been had this war not been fought at all, if the colonies remained part of the empire?  What of the path of Canada or Australia?   Did the American Revolutionary War result in a vastly different life for the average American than it did for the average Canadian or Australian?

I will emphasize, I am speaking about the average American, the average Brit, Canadian, or Australian.  The guy who goes to the factory or office every day, raises his kids, takes them to football matches (of the different types played in each country), struggles with his budget and retirement, mows his lawn and tends his garden, drinks a pint with his buddies.

I am not speaking about differences for the elite in each location.  Certainly, the American Revolution resulted in the rise of a local political and oligarchical class that likely would not have enjoyed the same power and wealth had the colonies remained under the empire.  July 4 is certainly a day to celebrate for this class in America.

I hate to let you down – I won’t pretend to answer these questions.  It seems the work of a lifetime, or at least a doctoral dissertation, to attempt to answer such questions.  But I will look at a few aspects of the history of the two entities – the United States on one hand, and the United Kingdom / Great Britain on the other.  Through this, perhaps at least some light can be shed on these questions.  At least, I hope to provide some food for thought.

Taxes

Like every aspect of this commentary, to address just this one would be a lifetime’s work.  What were taxes like in the colonies in 1776, and then in the United States in 1806, 1865, 1914, and today?  What of comparable periods in Great Britain and its remaining colonies.

What is clear is that taxes in both the United States and Great Britain are much higher today than was the case in 1776.  In both countries, the top marginal tax rate has seen and exceeded 90%.  Perhaps one measure is to compare the length of the respective tax codes – as I believe the codes are used for control and not revenue, it seems reasonable to suggest that the longer the code the greater the control intended.

For the United States as of 2006:

By the way, if you go to the US Government Printing Office ( www.gpo.gov ), you can order a complete set of Title 26 of the US Code of Federal Regulations (that's the part written by the IRS), all twenty volumes of it, at the bargain price of $974, shipping included.

According to the US Government Printing Office, it's 13,458 pages in total. The full text of Title 26 of the United States Code (the part written by Congress--available for an additional $179) is a mere 3,387 printed pages, bringing the adjusted gross page count to 16,845.

And for Great Britain as of 2009:

The 2009 edition of Tolley's Yellow Tax Handbook has 11,520 pages….

Both over ten thousand pages.  For the average Joe, I am not sure the difference is meaningful.

As an interesting aside, compare the length of the Wikipedia entries regarding taxation in the two jurisdictions.  It takes over 11,000 words to explain the U.S. tax system and over 5,000 words to explain the system that the British live under.  This could be relative to the complexity of the two, or it could just mean that those with knowledge of the U.S. code like to write more in Wikipedia.  Neither is a good sign for the average American.

Slavery

Slavery ended in the United States with the passing of the 13^th amendment to the Constitution shortly after the conclusion of the War Between the States.  While Lincoln did not fight the war with the purpose and intent to end slavery, it is certainly true that the institution of slavery ended after this war.

Besides the financial cost, the war cost the two sides a combined one million casualties.  While it is certainly a “good” that slavery ended in the United States as an outcome of this war, it certainly was a high cost to pay to end this horrific institution.  Was it a necessary cost?

Slavery was ended in Great Britain more than twenty-five years earlier than in the United States, and without the violence associated with war:

On 28 August 1833, the Slavery Abolition Act was given Royal Assent, which paved the way for the abolition of slavery within the British Empire and its colonies. On 1 August 1834, all slaves in the British Empire were emancipated, but they were indentured to their former owners in an apprenticeship system that meant gradual abolition: the first set of apprenticeships came to an end on 1 August 1838, while the final apprenticeships were scheduled to cease on 1 August 1840, six years later.

On 1 August 1834, as the Governor in Port of Spain, Trinidad addressed an audience about the new laws, the mostly elderly, unarmed slaves began chanting: "Pas de six ans. Point de six ans" ("Not six years. No six years"), drowning out his voice. Peaceful protests continued until the government passed a resolution to abolish apprenticeship and the slaves gained de facto freedom. Full emancipation for all slaves was legally granted on 1 August 1838, ahead of schedule, making Trinidad the first British slave society to fully end slavery.[16] The government set aside £20 million for compensation of slave owners for their "property" across the Empire, but it did not offer the former slaves compensation or reparations.[17]

For slaves under the two governments, slaves in lands under the rule of Great Britain achieved freedom a generation sooner, without the bloodshed and violence and therefore without the hatreds that remained after the end of the violence.  Clearly for slaves, life under British rule would have been preferable.

Wars since 1776

Beginning with the American Revolution, both Great Britain and the United States have been involved in more than 100 wars - not counted the same way, but in any case averaging almost one war every two years.  These wars range from relatively minor conflicts to major world wars.  Almost all were wars of expansion (manifest destiny and empire), and the largest were overseas conflicts – conflicts with little or no justification based on defense. Up to the early 19^th century, the two were often found on opposite sides of the conflict.  Beginning in the 20^th century, they were often on the same side.

For the average American Joe, would it have made much different to be eligible for military service to have been under British rule as opposed to rule under Washington, DC?  Certainly not if counted by the number of wars.  Also certainly not if assessed based on the number of conflicts that were to expand or defend empire – if the fights were for home defense, this might be understandable.  Both the US and Britain were pretty active in this arena, with the new American government beginning in 1812 (and for Britain this was part and parcel of its being).

Worse for the Americans: not only did they fight for the wars of Washington – in the 20^th century they fought (with no direct American defense purpose) in the two largest wars in history on the side of Britain.  It certainly would not have been worse for the average American Joe had he remained subject to British rule.

Inflation

The most insidious and hidden tax, that of inflation has ravaged the subjects of both the United States and Britain.  According to official measures of consumer prices (not true inflation, but a measure of loss of purchasing power) the US Dollar has lost over 95% of its purchasing power since 1913, while the British pound has lost over 98% of its purchasing power in the same time period.  I guess it can be said that the average American Joe is better off with the US Dollar than with the British pound, but neither statistic is one to brag about.

Summary and Conclusion

I don’t have one.  From this brief overview, it seems to me that life for the average American is not much different than it would have been if left under British rule – the one clear exception is in the sooner ending of slavery in Britain. 

One could argue that British rule might have been better if only for the distance between the governors and the governed.  As Benjamin Martin (Mel Gibson in “The Patriot”) said, “…why should I trade one tyrant three thousand miles away for three thousand tyrants one mile away? An elected legislature can trample a man's rights as easily as a king can.”

Indeed, why?

Servants by Choice

The Politics of Obedience: The Discourse of Voluntary Servitude

By Étienne de La Boétie

Resolve to serve no more, and you are at once freed.

Étienne de La Boétie was born in France in 1530 to an aristocratic family.  The date is uncertain, but it is believed he wrote this discourse at the age of 22 or 23.  He died when he was only 32 years old.

In this discourse, La Boétie gets to the heart of the issue regarding tyrants and tyranny: why do people submit to the tyrant? Or as Rothbard says in the introduction, “why in the world do people consent to their own enslavement?”

La Boétie cuts to the heart of what is, or rather should be, the central problem of political philosophy: the mystery of civil obedience.  Why do people, in all times and place, obey the commands of the government, which always constitutes a small minority of the society?   To La Boétie the spectacle of general consent to despotism is puzzling and appalling.

Rothbard has neatly summed up the question being addressed by La Boétie.  La Boétie himself poses the question as follows:

…I should merely like to understand how it happens that so many men, so many villages, so many cities, so many nations, sometimes suffer under a single tyrant who has no other power other than the power they give him.

It is a curious question, especially considering that there are countless more servants than there are served.  Numbers alone cannot explain this submission:

If two, if three, if four, do not defend themselves from the one, we might call that circumstance surprising but nevertheless conceivable….  But if a hundred, if a thousand endure the caprice of a single man, should we not say they lack not the courage but the desire to rise against him, and that such an attitude indicates indifference rather than cowardice?

Could it be that the large numbers explain the submission?  To protest when the overwhelming majority of people are compliant is the act of true courage.  It is here that La Boétie begins to explore why it is that the majority submits to the minority – or even the one:

Let us therefore understand by logic, if we can, how it happens that this obstinate willingness to submit has become so deeply rooted in a nation that the very love of liberty seems no longer natural…what evil chance has so denatured man that he, the only creature really born to be free, lacks the memory of his original condition and the desire to return to it.

In connection with this, let us imagine some newborn individuals, neither acquainted with slavery nor desirous of liberty, ignorant indeed of the very words.  If they were permitted to choose between being slaves and free men, to which would they give their vote?

La Boétie rightly concludes that the newborns would choose liberty – and liberty as properly understood, not the liberty of state-worshipping songs and pledges, but the liberty grounded on a real understanding and acceptance of property rights and the non-aggression principle.

It suggests the complete depravity of man that he today considers his life as one lived in a state of liberty.  What kind of liberty is this?  Half of his work is confiscated by the state.  The most fundamental commodity useful for trade and division of labor is monopolized and then abused by the state.  Every aspect of life is controlled by rules and regulations promoted and enforced by the state.  To acquire food, one must pay a tax.  To acquire and hold property, one must pay a tax.  Now, to NOT acquire medical insurance, one must pay a tax.  After all of this, when he dies, half of what he has managed to save is confiscated by the state.

Yet many today count this as liberty.  I think La Boétie uses the example of the newborn to demonstrate that for one to truly answer this question one must be free of the biased and false definitions of the term liberty.  The true meaning of this term is virtually unknown to a person raised under the current tyranny.

La Boétie then suggests the one possible exception of those, previously free, willingly submitting to tyrannical rule:

The only possible exception might be the Israelites who, without any compulsion or need, appointed a tyrant.  I can never read their history without becoming angered and even inhumane enough to find satisfaction in the many evils that befell them on this account.

Here La Boétie is referring to 1 Samuel 8.  The passage itself is worth a read, as God warns the Israelites of the abuses awaiting them under a king, including a 10% tax on all one produces.  Ten Percent.

La Boétie believes that man willingly lives under this tyranny because it is all he knows.  The first generation may fight it and hate it, but shortly subsequent generations come to live under it as the only system they know.

...men born under the yoke and then nourished and reared in slavery are content, without further effort, to live in their native circumstance, unaware of any other state or right….the essential reason why men take orders willingly is that they are born serfs and are reared as such.

This certainly has truth to it, however it should be noted that schooling, controlled and funded by the state, plays a significant role in keeping the masses content with their lot in life.

La Boétie then observes that the very nature of the state under tyranny will attract those with the worst nature – those that are the worst choices for placing in such positions of power:

…whenever a ruler makes himself a dictator, all the wicked dregs of the nation…those who are corrupted by burning ambition or extraordinary avarice, these gather around him and support him in order to have a share in the booty and to constitute themselves petty chiefs under the big tyrant….they act as if their wealth really belonged to them, and forget that it is they themselves who give the ruler the power to deprive everybody of everything….

Individuals with well-centered ethics do not choose to lord over others, telling them what to do, forcing them to comply under threat of punishment up to and including death.  One of the worst characteristics of state power is that it attracts to it human beings of the worst character.

La Boétie ends with what is almost a prayer or a plea, a wish I am sure held by many who understand the true nature of the evil that is the coercion unto submission under the tyrannical state:

There is nothing so contrary to a generous and loving God as tyranny – I believe He has reserved, in a separate spot in Hell, some very special punishment for tyrants and their accomplices.

La Boétie makes the case that the power of all tyrants comes from the consent of the governed.  Withdraw the consent, and the tyrant will be toppled.

What to do with all of this?  La Boétie must be commended for these observations – observations made almost 500 years ago.  In a few short pages he has laid bare the truth that the ruled far outnumber the rulers, and that this truth offers some hope, a way through.

La Boétie identifies one problem in achieving a positive change – there is a remnant, but they do not and cannot know each other – they are too few in a land of the masses educated and trained to live in the service of their masters.

…however numerous they may be, they are not known to one another.

The internet today has certainly changed this dynamic, and to a large extent Ron Paul has been the catalyst for the remnant to find each other.

In the introduction, Rothbard outlines his views on the best strategy to achieve positive results based on the observations made by La Boétie:

…the primary task of opponents of modern tyranny is an educational one: to awaken the public to this process, to demystify and desanctify the State apparatus….[it] is not simply one of educating the public about the “errors” committed by the government….We have to realize that we are facing a mighty engine of power and economic exploitation, and therefore that, at the very least, libertarian education of the public must include an exposé of this exploitation, and of the economic interests and intellectual apologists who benefit from State rule.

This is the task.  It is a task being accomplished by many, including Ron Paul, Lew Rockwell and the Mises Institute, Gary North, and many others.

Rothbard ends with a note of real optimism:

…should State despotism ever be removed, it would be extremely difficult to reimpose statism.  The bulwark of habit would be gone, and statism would be seen by all for the tyranny that it is.  If a free society were ever to be established, then, the chances for its maintaining itself would be excellent.

From Murray’s lips to God’s ears.  If we live to see this day, may we never again make the mistake the Israelites made.