Thursday, June 14, 2012

Underground: The Road to Freedom?

Originally published at RevoluTimes on December 10, 2011
With real unemployment nearing a staggering 22% and prices rising throughout the country, many Americans have left the regular market in search of jobs and lower prices. They’re going underground. Many argue this undocumented “shadow” economy is on the rise due to the severe recession of the last few years. The Christian Science Monitor reported in 2009, it was estimated this unspoken market represented nearly 8% of the gross domestic product, amounting to almost $1 trillion. In 2010 it was reported the underground economy was growing faster than the ‘legitimate” economy, at a rate of 5-6% per year. Unfortunately, few realize why this is occurring and even fewer view it as a positive. Many would presume that such a trend would prove detrimental to any hope of economic recovery and some would even go further to the point of calling it criminal; when in reality it’s essential to recovery and the antithesis of a crime.
Contrary to what many would expect, the underground economy is much more than the drug trade or prostitution, (although neither of these are true crimes) but encompasses a multitude of goods and services provided without regulation, or being reported to the IRS. It’s no wonder why businesses and consumers are resorting to such methods when the burden of taxation and government regulations are considered. According to Americans for Prosperity, a recent studyfinds the costs placed on the average American family as a result of higher unemployment, higher wages and production costs due to government regulations are around $15,000. This should be no surprise when viewing the “informal” economies that have formed in the wake of Europe’s economic struggles.
Writes professor of economics, David Howden,
“While the Greek economy has the largest underground estimated at 25.2 percent of GDP, the PIGS countries (Portugal, Italy, Greece, and Spain) average 21.7 percent of their economic activity hidden from the official statistics. For comparison, 14.7 percent of German, and 7.8 percent of American output is estimated to be confined to the underground.”
Concluded Howden,
“The growth of unofficial employment is an entrepreneurial response to unnecessarily rigid labor markets and excess regulation.”
Though America isn’t quite facing the circumstances seen in Europe yet, we’re certainly heading that way; and regrettably, embracing the underground economy hasn’t caught on with most Americans—but it will.
Sadly, many still view the development of a marketplace outside the purview of government as a hindrance to society. In an article published by New America Media, Andrew Leonard writes,
“There are many different names for the realm where taxes aren’t paid, labor laws are ignored, and cash is king. But on at least one point most observers agree: the shadow economy — in the U.S. and abroad — is growing. And that’s not healthy. In a shadow economy, workers are often unsafe and ruthlessly exploited, while governments are deprived of crucial revenue — yet still forced to foot the bill for essential services.”
Such talking points are to be expected from left wingers but even many Republicans share these sentiments. 2012 Republican presidential candidate and so-called conservative, Michelle Bachmann stated in a Las Vegas debate several weeks ago that in regards to taxes, “everyone should pay something.”
But when did you become a servant of government? The notion that not paying taxes is a cost to government is not only fallacious, (as government has no wealth of its own, all expenditures are actually paid for either directly or indirectly by taxpayers) but deeply disturbing. To offer another perspective, when asked his thoughts on the fact that nearly 50% of Americans don’t pay taxes, GOP presidential contender, Congressman Ron Paul answered, “Good, we’re half-way there.”
Leonard’s conclusion that the underground economy’s growth “is not healthy” says it all. Rather than being excited to hear Americans are finding work and buying cheaper goods, he’s more concerned that the State isn’t getting what is owed to it; namely the product of your labor. It’s not only presumed that Americans want services provided by the State (despite the fact they also claim Americans must be compelled to pay for it by force), but furthermore that without the wise minds of Washington, the “necessary” functions of society would fail to exist. For this reason, you are duty bound to sacrifice your income for the “greater good.”
Left-wing statists often claim to be the protectors of the worker and consumer from exploitation; but how is denying someone work or depriving someone from a good or service beneficial? If I offer to pay someone below minimum wage or just in cash for landscaping; how are they being exploited? If a higher paying job were available to them, wouldn’t they have taken it? Wouldn’t forbidding them from earning an income altogether prove to be more harmful? Who was harmed? Did we not both benefit from this trade?
It would be nice to believe only the left has economic statists, but the right has abandoned its laissez-faire roots as well. Aside from its unlawful and futile attempts to legislate virtue by prohibiting the use of drugs or prostitution, many on the right seem to have adopted the dogma of left-liberals that they as Americans have a “right” to a job. This underlying belief comes to light under the guise of illegal immigration “taking American jobs”. To be sure, an individual benefiting from the welfare state without paying taxes is unjust to say the least; but the cause of this problem is the welfare state and taxation, not illegal immigration. For all their talk of revering free markets and property rights, conservatives seem to throw them out the window when it comes to the idea of illegal immigrants being hired for jobs because they’ll work for lower pay. Is this not the most fundamental principle of capitalism; being free to contract? No one has a “right” to a job. Yet again, government intervention in the form of minimum wage laws and payroll taxes drive businesses to look for employees under the table; as is their right. Though few conservatives would admit it, the concept that immigrants “steal their jobs” is predicated on the same collectivist notion as the left’s desire for the “greater good”. This is the notion that you are to serve the State and its stipulations.
In a truly free market of tax-free and unregulated trade, individuals come to agreements voluntarily only because the trade benefits both parties; otherwise why would they do it? This enables entrepreneurship, wealth creation, job opportunities and increased production. So why is this black market opposed so strongly by much of society, and particularly government?
It’s because it creates competition against government institutions or subsidized businesses that are politically-connected. A classic example of this is the case of American legal theorist, political philosopher and entrepreneur, Lysander Spooner who in 1844 began competing with the United States Post Office. The American Letter Mail Company successfully provided mail at lower rates and more efficiently, until the U.S. government forced Spooner to stop operations in 1851.
Most importantly however, the truly freed market is considered deplorable by the establishment because it undermines the authority of the State. If individuals not only have the right but the ability to trade and contract freely, the apparatus of government bureaucracy, corporatism and State dependency becomes irrelevant. The escalating police state and debasement of the dollar are leading many to look for alternative currencies and even some to providing their own forms of local defense and arbitration.
Rather than entrusting a system that deliberately plunders and persecutes its own people; a growing number of Americans are investing and trading in precious metals, and creating community-based solutions to resolving disputes and providing goods and services—without permission.
The ability to trade promotes independence, individual sovereignty and empowerment in a peaceful, productive and socially cooperative manner; and for those reasons it poses the greatest threat to the power of the State.

Where Does Money Come From?

I originally wrote this for RevoluTimes on December 8, 2011

How do green sheets of paper denote wealth? You might think it obvious that money is a representation of wealth and wealth is needed to purchase goods and services for our survival. But does money necessarily represent wealth? Are there different types of money and if so can anything be money? To answer these questions we must first understand where money comes from.
In primitive economies where societies are only beginning to form, the first stage of economic growth arises from barter. Imagine that I have a dairy cow that produces more milk than I can consume while my neighbor has an extra pair of shoes. Suppose I need a pair of shoes and my neighbor needs fresh milk; by exchanging these goods we’ve satisfied the want or need of the other. This is often referred to as the “double coincidence of wants.” While this does result in some economic growth and can increase the standard of living to a degree, barter economies can only develop to a certain point.
As Austrian economist Joe Salerno has indicated, the double coincidence of wants is a very rare occasion. While there certainly may be those who can meet your demands of a particular good or service, in a barter economy, it’s far less likely to find someone who is willing to exchange that good or service for what you have to offer. If my neighbor has no need or use for milk, and I have nothing else to trade for his extra pair of shoes, I’ll be forced to go without. This lack of coincidental wants creates the need for a good that is universally recognized and accepted as having value.
Another hindrance of a barter society Salerno points out is the inability for such a society to have mass production for a few reasons. First, Dr. Salerno invites you to imagine a supermarket in a barter society. According to Salerno, the average supermarket has around 27,000 different products. Using only barter, it would be impossible to calculate a system of pricing as there would almost be an infinite amount of exchange rates for each individual product.
Secondly, most goods are also indivisible in the sense that their value is not maintained if they’re not intact. If my neighbor wished to trade a bundle of firewood for my dairy cow, I’d likely turn him down. The cow far exceeds the value of the firewood, but the cow is not divisible; in other words if I cut the cow into pieces, it loses its value. And lastly, in a barter economy, what would a business pay its workers? Would a plant that manufactures cell phones pay its workers with cell phones? These limitations prevent such societies from further developing beyond a primitive economy. It is due to the need of a universally acceptable good that money comes about in the first place.
Money is simply a good that is widely viewed as valuable and accepted as a medium of exchange. But there are different types of money. Here I want to discuss commodity money and fiat money.
Commodity money or sound money is a medium of exchange that has been chosen by the market to be money; in other words, a good that is voluntarily deemed valuable universally. Traditionally, gold and silver have outperformed other mediums of exchange over time; though various goods have been used throughout the centuries from salt, corn, and even cigarettesafter World War Two. Gold in particular has been chosen by the market because of its characteristics. Gold is very durable, (all of the gold ever mined is still in existence, although some may be under water from sunken ships) malleable, (which allows for it to be easily recognized), it’s very divisible, has scarcity and can be calculated to a very precise weight. While many other goods may share some or most of these traits, the only other commodity that comes close in terms of value in the market is silver.
All of these commodity based monies were derived from the market. When it was realized that a medium of exchange was necessary to facilitate an expansion of the economy, no government instituted these goods as a form of currency. There was no central planner that originally imposed salt, gold, silver or corn to be used as a medium of exchange. This is important to note because it brings to light a very crucial point: market-based money has value not because the State claims it does or that it must be used in transactions; but because individuals find it useful, reliable and trust it to maintain its worth over time. As I’ve discussed prior, the money you earn is a direct reflection of the amount of production created by your labor. The employer and employee are taking part in an act of voluntary exchange. Just as members of barter economies may trade one service for another, when money is developed it takes the place of one of the services rendered.
Despite that the U.S. used commodity-based money for much of its early history, today it uses, (like the rest of the world) what is called a fiat monetary system or a paper based currency. Fiat is Latin for decree or government order. As you may have guessed by the definition, no paper currency in the history of the world has ever come from the market. It may be second nature for us to reach for cash, but when do we ever take the time to consider why we value pieces of paper with such high regard?
This is because for much of American history, the currency was linked to some sort of commodity, (usually gold or silver) in which case the paper was nothing more than a promissory note from the State to be redeemable for a precise weight in gold or silver, (however, Nixon closed the gold window in 1971). But as has been the case throughout history, the fiat monetary system was abused and as too many bills of credit, (paper money) were chasing too few goods and services, the prices of those goods and services increased as the purchasing power of the currency dropped. This is called inflation. The French economist Frederic Bastiat gave a brilliant explanation of this phenomenon in his essay, “What is Money?” Bastiat describes a poker game in which ten men are playing with each having ten chips and each contributing $100 to the pot. But one man claims the more chips he has at the end of a round, the wealthier he is in proportion to those chips; so he suggests doubling the amount of chips amongst the players so as to increase everyone’s wealth. But the end of the next round only reveals that rather than more wealth being miraculously created, it only debased the value of their chips.
Author, blogger and host of Liberty and Production Radio, Shane Coley gives a real life example of inflation at work in his new bookKnow Stealing, (which I highly recommend). Coley asks the question, “Who took your $68?” He describes a scenario in which the reader earned $2 in 1969 and was paid with paper currency. Today, those two dollar bills are only worth $2; but had you been paid with two American Eagle silver dollars, today you’d have $70 worth of silver. Coley’s point is significant as it demonstrates not only the economic effect of inflation but the immorality of fiat currencies.
It’s imperative we understand that money embodies wealth, not by some decree of the State, but only to the extent that it represents production from human labor when providing a good or service. As Bastiat illustrated, doubling the amount of chips on the table results in a corresponding loss of value for each chip. Similarly, flooding the market with paper currency without any new production does not create wealth, but diminishes it. In order to create a robust recovery from this recession we must ask where money comes from, and ask the State where our money went.

Is War Conservative?

I originally wrote this for RevoluTimes on December 6, 2011
Of all the empty talking points presented as philosophical truisms, there is possibly no anecdote I find more obnoxious than the notion that being antiwar is necessarily a stance of the left. By antiwar I do not mean pacifism, but an opposition to the initiation of force and a general and healthy suspicion of the motives of the State and particularly when it engages in its most destructive and aggrandizing function: warfare.
When confronted with the Republican establishment narrative that Texas Congressman Ron Paul is a “leftist”, (I was recently told he’s actually to the left of Obama) because of his lack of zeal for preemptive war, I simply ask, “Were the Founders leftists as well?” Without missing a beat, the Fox News faithful will claim, “That was then, this is now. This isn’t the 18th Century.” It seems nothing gets passed these guys. Except for the fact that the non-interventionist foreign policy of the Founders was not due to some esoteric meme from a bygone era, but the product of historical and economic understanding gathered over the course of generations. Just as so-called conservatives rave daily about the abuses of State intervention domestically, the Framers understood all too well that governments do not miraculously become omniscient and flawless angels when it comes to intervening abroad. Were the leaders of the Republican Party as concerned with free markets and fiscal restraint as they claim, our ballooning overseas expenditures would not be an issue.
Arguably the two most famous of the Founding generation, George Washington and Thomas Jefferson were very clear in their warnings to avoid taking part in war unnecessarily.
George Washington would caution in his farewell address:
“…Observe good faith and justice towards all nations; cultivate peace and harmony with all…the nation which indulges towards another a habitual hatred or a habitual fondness is in some degree a slave. It is a slave to its animosity or to its affection, either of which is sufficient to lead it astray from its duty and its interest…So likewise, a passionate attachment of one nation for another produces a variety of evils. Sympathy for the favorite nation, facilitating the illusion of an imaginary common interest in cases where no real common interest exists, and infusing into one the enmities of the other, betrays the former into a participation in the quarrels and wars of the latter without adequate inducement or justification.”
Some years later, Jefferson would second Washington’s advice saying:
“…Equal and exact justice to all men, of whatever state or persuasion, religious or political; peace, commerce, and honest friendship with all nations, entangling alliances with none.”
Were Washington and Jefferson a couple of left-wing peaceniks? Or were they simply recognizing that nothing expands the size and scope of the State more than war? As Jefferson explained, a position of free trade among all nations creates the greatest incentive to avoid hostility. Prior to the spread of open trade and commerce, Europe experienced a long and gruesome history of conquest and wars, as the lack of trade resulted in each nation only able to consume what its own resources would provide; hence the desire for war. Through conquest and military force, not only could the resources of neighboring nations be consumed but conquering governments were presented with a new tax base to exploit as well. As the laissez-faire economist, Frederic Bastiat said, “When goods don’t cross borders, armies will.”
Bastiat and other proponents of laissez-faire avoided war, not out of some quaint idealism that other nations never posed a threat, but out of reverence for individual freedom and an appreciation for the power of the free market to transcend conflicts or disputes with foreign countries as both parties mutually benefit through peaceful, voluntary exchange. In fact, the policies of preventive war presented as a given today, are more akin to the philosophy of socialists and leftists than they are representative of the American right.
Writes Austrian economist Tom DiLorenzo,
“Like today’s neo-conservatives, nineteenth-century socialists branded classical liberals with the name ‘individualist,’ implying that classical liberals are opposed to fraternity, community, and association. But, as Bastiat astutely pointed out, he (like other classical liberals) was only opposed to forced associations, and was an advocate of genuine, voluntary communities and associations. ‘[E]very time we object to a thing being done by government, the socialists [mistakenly] conclude that we object to its being done at all.’”
Compare the socialist mindset of coerced community and pseudo philanthropy with the banner of “humanitarian war” the U.S. government parades under on its quest to defeat totalitarianism. To object to the notion that the U.S. military should be involved with every conflict around the world is heresy within the Beltway, and it’s further suggested that if government doesn’t act, (via war) then nothing will be done at all.
The conservative movement in America that began in the late 1940s and early 1950s was born out of this classical, (true) liberalism, based on property rights, capitalism, fiscal responsibility and an unwavering desire to limit government. Contrary to what is considered gospel among the GOP rank and file today, some of the staunchest opponents to empire and searching for monsters to destroy was the Old Right. In a speech at the Heritage Foundation in 1991, founder of the American conservative movement, Russell Kirk opined,
“Presidents Woodrow Wilson, Franklin Roosevelt, and Lyndon Johnson were enthusiasts for American domination of the world,” Kirk said in his speech. “Now George Bush appears to be emulating those eminent Democrats. When the Republicans, once upon a time, nominated for the presidency a ‘One World’ candidate, Wendell Willkie, they were sadly trounced. In general, Republicans throughout the twentieth century have been advocates of prudence and restraint in the conduct of foreign affairs…”
As Kirk illustrated, it’s no coincidence the so-called greatest presidents of the twentieth century we’re bombarded with in public schools, were all war presidents, and it’s also no coincidence those same presidents were responsible for some of the largest expansions of government at the time. Whether it was LBJ, George W. Bush or Barack Obama, Big Government and endless war go hand in hand. Prior to the shift of some Troskyites to the Republican Party in the 1960’s, a strong anti-imperialist fervor was a distinctive characteristic of the Old Right.
This common trait of prudence exhibited by the early conservative movement is perhaps articulated best by the most ardent defender of capitalism and freedom of the twentieth century, economist Murray Rothbard:
“It is in war that the State really comes into its own: swelling in power, in number, in pride, in absolute dominion over the economy and the society.”
If to be conservative is to value individual freedom, property rights, free trade and fiscal restraint, it must also be to guard against the influence of the State and to approach with caution every endeavor devised by it. If to be conservative is to oppose the billions in domestic spending that cause an unwarranted burden on the taxpayer, how does spending trillions overseas carry a lighter load? If to be conservative is to condemn the printing of money to rebuild roads here, should we not condemn printing money to bomb and rebuild roads abroad?  If we must forsake all of these principles for war, is war ever conservative to begin with?

The Federal Reserve: A Common Enemy

I originally wrote this piece for RevoluTimes on December 3, 2011
The recent discovery that prior to the TARP bailouts of 2008 (which authorized $700 billion in purchased assets), the Federal Reserve secretly doled out $7.7 trillion to foreign banks has caught the attention of pundits across the political spectrum. And it should. The TARP program originally authorized what was thought to be an unprecedented but allegedly necessary purchase of “troubled assets” by the Department of the Treasury in an attempt to save the participating institutions from further losses by improving the liquidity of these assets. Most of the American people haven’t been convinced such measures were truly necessary. In response to the bailouts emerged the Tea Party; a band of conservatives, libertarians, disenchanted liberals and independents who believe the size of government has grown too large and its influence (particularly in the economy), should be greatly limited. Not satisfied with these sentiments and desperate for a reenergized base, many left-liberals have joined ranks with the growing Occupy Wall Street demonstrations (OWS), that feels the power and influence of corporations has corrupted the government and sold the people to elite bankers. While it’s true there are stark differences between the dominant philosophies of these two movements, to a degree they’re saying the same thing in different languages. The latest reports from Bloomberg News suggest the Federal Reserve may be the missing link between the two populist movements.
Reported Bloomberg:
“A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.”
The report continues to note that not only did the Federal Reserve secretly print this money, but they gave the loans at below market interest rates. How low exactly? 0.01%! As the always hilarious Jon Stewart opined,
“0.01%? I got news for ya, that’s not below market-that’s free!”
The report went on to note that the free loans were then loaned back out by the receiving banks. It’s estimated the banks receiving the secret bailout gained a profit of $13 billion.
According The New American’s Thomas Eddlam,
“The Bloomberg report noted that top Wall Street banks benefited most from the deal. ‘The big six — JPMorgan, Bank of America, Citigroup, Wells Fargo & Co., Goldman Sachs Group Inc., and Morgan Stanley — took 63 percent of the Fed’s emergency-loan money as measured by peak daily borrowing,” the San Francisco Chronicle observed November 29 of the Bloomberg data.’”
Added Eddlam,
“The evidence also reveals that Federal Reserve intervention in the market helped the ‘too big to fail’ banks get bigger still. ‘Records shows that during the past five years, total assets at the largest six banks increased by almost 40% and executive compensation rose by 20% — more than $146 billion in compensation last year alone,’ USA Today reported November 28.’”
The lack of transparency and unaccountability of the Federal Reserve has created some rather strange bedfellows. Lifelong critic of the Fed and 2012 Republican presidential candidate, Congressman Ron Paul has joined with Democratic Congressman Dennis Kucinich numerous times in pushing for an audit of the Federal Reserve. Paul is well-known for his advocacy of a market-based currency and allowing for competition of currency. Kucinich has not gone that far but he has created a new bill, (the NEED Act) to drastically limit the power of the Fed.
In his latest “Kucinich Report”, he outlines the necessity of bringing accountability to the Federal Reserve saying,
“Ten million homes are in jeopardy. Fourteen million people out of work. Fifty million without health care. Endless wars. The Fed creates money out of nothing, gives it to banks, banks keep it on deposit, gain interest, pay high bonuses — fat city — while the rest of America falls apart. The Fed creates money out of nothing for the banks. Meanwhile, the rest of us have to be stuck in a debt-based economic system? I don’t think so…now do you understand ‘Occupy Wall Street’?”
There’s no denying genuine progressives such as Congressman Kucinich and much of OWS aren’t going to find complete agreement with libertarians like Congressman Paul and many among the Tea Party; however, such pressing issues can bring together coalitions of individuals across the spectrum to work towards common goals without sacrificing principle. Whether you view the “1%” as those with most of the money or as those with most of the guns, if we abandon the fictional narrative contrived of vitriol and platitudes by the establishment we may find that we have more in common with each other than we do with politicians or talking heads.

The Tea Party's Identity Crisis

I originally published this article at RevoluTimes on December 1, 2011

The political circus being played by the GOP must leave one wondering if the Tea Party has all but abandoned its goals of fiscal restraint and smaller government. Rick Perry, Herman Cain and now Newt Gingrich have all been declared the frontrunner at some point throughout the presidential race despite their support for Big Government programs and government spending. Mitt Romney continues to poll well throughout the country but many conservative activists have refused to warm up to the former Massachusetts governor due to his many inconsistencies on the campaign trail.
This strong trend of searching for the Anti-Romney (similar sentiments were held during his presidential bid in 2008 as well) is rather puzzling considering the embrace given to the aforementioned candidates by much of the Republican Party and Tea Party supporters. The Tea Party and conservative activists across the country pride themselves on being defenders of capitalism, lower taxes and cuts to federal spending; but their propensity to latch onto whomever the Republican Party and conservative media is promoting at the moment makes this claim questionable at best.
The schizophrenia of right wing voters began with Rick Perry. As I’ve documented elsewhere, the Texas governor has a laundry list of tax hikes, corporate welfare and even a government mandate for young girls to purchase and be submitted to an HPV vaccine. As if this wasn’t enough to eradicate any rumors of Perry’s fiscal conservatism, Perry staunchly supported the springboard for the Tea Party movement: TARP. Indeed, not only did Perry support the bailout, he co-authored a letter with then president of the Democratic Governors Association, Joe Manchin saying,
“…There is a time for partisanship and there is a time for getting things done…and now is not the time to assign blame. It is time for D.C. to step up and be responsible and do what’s in the best interest of American taxpayers and our economy…It’s time for leadership. Congress needs to act now.”
Perry’s well-known history of pandering to special interests and unimpressive debate performances led many within the Tea Party to look towards Atlanta businessman Herman Cain. Cain’s candidacy had been an afterthought for several weeks due to his lack of name recognition; but his apparent outsider demeanor made him far more attractive as voters looked for an anti-establishment candidate. Yet again the so-called conservative media and grassroots organizers touted the latest frontrunner as a stalwart defender of free markets and fiscal responsibility. Little did most Republicans know, (and most still don’t know), Cain oncecondemned a national sales tax only to propose his own, vehemently opposes the notion of ending the Fed and restoring sound money and the coup de grĂ¢ce of course was Cain’s op-ed in strong support of TARP saying,
“…Wake up people! Owning a part of the major banks in America is not a bad thing. We could make a profit while solving a problem. But the mainstream media and thefree market purists want you to believe that this is the end of capitalism as we know it. It is not for several reasons that they have conveniently not explained…” (emphasis added)
It seems Mr. Cain believed the stealing of your wealth was just a wise investment the State was obliged to make for you. But despite his tarnished record and brand of political whimsy, the former CEO of Godfather’s Pizza held strong until allegations regarding his personal life were made public recently.
At this point the conservative masses were more than happy to offer the musical chair to former House Speaker Newt Gingrich. It’s not surprising to see the Georgia native rising in the polls as he’s very well known for his debate skills. It is baffling however that anyone with a straight face could claim Newt Gingrich believes in the free market or fiscal responsibility in any form. Not only did Gingrich support TARP, he staunchly supported the creation of the unconstitutional Department of Education, (and continues to push for its expansion) NAFTA and GATT, various federal subsidies, flip-flopped on Climate Change, received nearly $2 million from Freddie Mac and has repeatedly expressed his support for a federal mandate to purchase health insurance in some manner. And just to illustrate how little concern he has for actually cutting spending, Gingrich referred to the rather modest cuts presented earlier this year by Congressman Paul Ryan as “right wing social engineering”, only to once again change his mind later.
If the Tea Party and its supporters truly wish to be an agent of change and usher in a new age of free markets, sound money and fiscal restraint, they have a very strange way of showing it. As of right now, their choices in a presidential candidate will only result in them becoming a silenced wing of the Republican Party with little influence, and even less credibility. I’d suggest they return to their roots.

Government Is Not A Business

I originally wrote this piece at RevoluTimes on November 29, 2011

Of all the platitudes offered as campaign rhetoric, the most commonly used reasoning for supporting a candidate I hear (especially among Republicans), is the notion that government should be run as a business. This seemingly insightful suggestion is often presented as a means to cure our economic ills.
As Americans struggle to make ends meet, electing a candidate who knows how to “balance a budget” sounds promising. It should be no surprise that presidential candidates such as Herman Cain and Mitt Romney are frequently touted as men with business experience who can bring a private sector approach to government. Though president Obama deserves much of the criticism he receives for prolonging the current recession, those who suggest it’s due to his lack of experience working a “real job” are mistaken.
The issue is not that Obama lacks the knowledge to manage government as a business; the issue is that no one can manage government as a business.
In a article published earlier this year, Frederick Allen provides criticisms from political scientist Seth Masket and blogger Matt Yglesias on this widely held belief:
Writes Masket,
“To say that governments should be run like businesses is to reveal ignorance about what either governments or businesses — or both — are. Businesses exist to turn a profit. They provide goods and services to others only insofar as it is profitable to do so, and they will set prices in a way that ends up prohibiting a significant sector of the population from obtaining those goods and services. And that, of course, is fine, because they’re businesses. Governments, conversely, provide public goods and services — things that we have determined are people’s right to possess. This is inherently an unprofitable enterprise. Apple would not last long if it had to provide every American with an iPad.”
Remarked Yglesias,
“a state is fundamentally an ethical enterprise aimed at promoting human welfare. A business isn’t like that.”
I’ll give them both credit for at least acknowledging there are distinct differences between the State and a privately owned business. As to what those differences are, both gentlemen completely missed the mark.
Both Masket and Yglesias seem to be under the impression that the State not only has the authority but the duty to determine what things individuals have a right to possess and to promote human welfare. As I’ve discussed previously, no one has a “right” to any thing in regards to a good or service.
Where so many miss the boat with this concept is a lack of understanding that governments produce nothing. Whereas private firms invest their own resources into each business venture, the State operates solely by extracting wealth owned and produced by private individuals. Every program and initiative of the State is an act of consumption as nothing is created by government; therefore even if it had the authority to do so, government “providing” anything would be an impossibility, since it relies entirely on the production and resources generated by the voluntary sector of society.
The voluntary nature between individuals and businesses during commerce is seldom understood or appreciated. This is a significant point because it helps to illustrate why the institution of monopolized force known as government is incapable of being ran like a business. The idea that wise businessmen could possibly create a more efficient government that could streamline us into prosperity is a misconception because the nature of government cannot be altered.
Were Wal-Mart or Apple to hold a monopoly on the use of force to fund themselves, they would find themselves bankrupt as well. Any business that had the ability to spend and borrow at will with other people’s money is inevitably going to take advantage of such a circumstance and abdicate any and all responsibility for any debts aqcuired. The irredeemable nature of man cannot be trusted with such power. As Lord Acton once said, “power corrupts, absolute power corrupts absolutely.”
Yet another reason why proposing to run government as a business is dangerous, is because of the stark difference between who takes the risk in government versus a private firm. Entrepreneurs and CEOs only have the ability to take risks with the resources that have been voluntarily invested in their company, (provided the State does not steal taxpayer money to bailout said company) whereas governments force every citizen to take gambles they would never choose for themselves. Human beings make mistakes on a daily basis, this is unavoidable. Not to say that the private sector is flawless, but aside from the fact it faces competition to incentivize responsibility and improvements, should businesses make fatal flaws in their ventures; millions of Americans are not forced to foot the bill.
The nature of human beings aside, there is a more fundamental economic argument that makes governments functioning as businesses impossible: they lack a price system. As Ludwig von Mises argued, governments, (particularly under socialism) have no price system. The market system of profit and loss accounting is either completely disregarded or in effect eradicated under State control. In the marketplace, individuals and business owners make decisions based on incentives. These incentives direct their actions to account for their profits and losses and mandates that resources are allocated and used in the most efficient manner possible. Governments have no such incentives because of their being an institution of force that faces no competition and also due to the fact that when government uses resources it’s for the “public good”, meaning private property does not exist, rendering a lack of market signals as funds are completely used arbitrarily or attempted to be disbursed to the collective. It should be no surprise programs such as Social Security and Medicare hold unfunded liabilities of over $80 trillion while the U.S. Post Office is $5 billion in the red; and let’s not forget our now $15 trillion debt.
If this is a business, at what point do we give our "employees" their pink slips?

More Freedom Means More Security

I originally wrote this piece for RevoluTimes on November 26, 2011

 “I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it.” -Thomas Jefferson

The latest Republican debate over national security issues raised some very significant questions and was probably the most substantive debate thus far. Key among the concerns raised was the balancing act Americans continue to tolerate between preserving their rights and seeking security. The heated exchange between Congressman Ron Paul and former Speaker of the House Newt Gingrich has gone viral and exhibits a fundamental difference between the two candidates. Many Paul supporters and libertarians rightfully grew indignant at Gingrich’s casual dismissal of the rule law and the Fourth Amendment in particular; but what should be more telling to conservatives and libertarians alike is Gingrich’s lack of support or understanding of the free market and his unwavering faith in government.

When asked if he opposed the Patriot Act, Congressman Paul stated:

“I do. I think the Patriot Act is unpatriotic because it undermines our civil liberties […] we can still provide security without sacrificing our Bill of Rights.”

Paul would go on to argue that Oklahoma City Bomber, TimothyMcVeigh was indeed a “vicious terrorist” who was tried and convicted of his crimes without the use of any legislation such as the Patriot Act.

To this Gingrich shot back,

“Timothy McVeigh succeeded. That’s the whole point…I don’t want a law that says, ‘after we lose a major American city, we’re sure gonna come and find you…’

…I want a law that says if you try and take out an American city, we’re gonna stop you.’”

Ironically, the former Speaker’s candid statements in support of circumventing the Constitution drew a rousing applause from a Republican crowd that claims to revere the founding document. Though Gingrich’s line of thinking may be of some use as a bumper sticker, it fails to ask some vital questions. Why must we trust government for our security when it was government that failed in the first place to protect us from terrorists? Should we not be free to provide for our own security or to choose someone else to provide the service?

Nothing exemplifies this dilemma more than the Transportation Safety Administration, (TSA). Created in the wake of the 9/11 attacks, like the Patriot Act, it too has urged many to ask if Washington has crossed the line in infringing civil liberties for the sake of national security. The TSA’s enhanced security measures such as pat-downs and full-body scans of passengers have triggered many travelers to seek other forms of transportation or to resist the invasive measures altogether. Some airports are looking to provide safety precautions by other means to quell the growing animosity of their customers towards the TSA.   This is where Congressman Paul’s belief comes in that restoring our liberties, (in this case, economic) will actually make us safer.

Congressman Paul has been a staunch critic of the TSA for many years and has even promised to abolish the agency altogether if elected president. Paul supports the idea of turning airline security back to the private airlines themselves rather than depending on a government bureaucracy. The twelve-term congressman from Texas argues that private businesses are far more equipped and have greater incentives to provide sufficient security measures without violating an individual’s rights. But is such a position realistic? How would passengers know the airlines were safe?

These very questions came into play in a recent discussion between Democratic commentator Alan Colmes and former advisor to then Governor Jeb Bush, Justin Sayfie. When prompted with the question of whether or not he disagreed with Congressman Paul’s opposition to the Patriot Act, Sayfie replied,

“…I have to agree with Speaker Gingrich on this…Timothy McVeigh was able to commit an act of terrorism and the goal of the Patriot Act is to prevent acts of terrorism…I also don’t think Ron Paul got it right when he said you don’t have to sacrifice freedom for security or the Bill of Rights.
The Second Amendment is a very important right-to bear arms. Yet millions of Americans are going to be traveling on airplanes today and they forfeit their right to carry arms; and I don’t think most Americans believe that the Second Amendment believes–states that you should be able to bring rifles, and handguns and shotguns onto airplanes. That’s one example where Ron Paul’s philosophy is bumper sticker politics and it’s just wrong.”

Aside from the fact Sayfie seems to believe your rights are in reality privileges from the government and that Americans “forfeit their right to carry arms”; what is more striking is his blatant disregard, (and apparent acceptance) that this relinquishing of rights is not a voluntary act, but one compelled by government force. It’s reasonable to assume in any other scenario Sayfie would strongly decry the notion that your right to self-defense must be annulled; but in this case he makes even Alan Colmes come off as a conservative, (this is no small task).

Said Colmes in response to Sayfie,

“…You [Sayfie] should ideally be against the Patriot Act like Ron Paul is because part of the Patriot Act is they can look at your gun records. They can look at your library records…”

The news anchor prodded Colmes further,

“So you’re completely comfortable Alan, with someone getting on a plane with you-say you’re headed home for Thanksgiving-and they’re armed? You’re completely comfortable with that?”

Colmes responed saying,

“I didn’t say that. However, there’s no evidence the Patriot Act is going to prevent that. There’s no evidence that the Patriot Act would have prevented Tim McVeigh [from carrying out the Oklahoma City Bombing].”

What was neglected in this conversation and the recent GOP debate is the government imposed monopoly over security. As the mainstream media and politicians debate over symptoms of larger problems, they fail to comprehend the root cause of their dispute: lack of competition. Imagine private airlines free to manage and provide for their own security. The market would provide new and innovative techniques to ensure their customers’ safety without invading their privacy and develop various types of security measures tailored made to suit your demands. To those who ask what incentive a company has to provide better services than government, I ask what incentive does government have? No government employees were fired after 9/11, can you imagine any corporation not firing those responsible for allowing such a tragedy?

Had the airline companies retained their right to run their airlines as they pleased and pilots were given the opportunity to carry firearms, (which was forbidden at the time by government) it is likely that 9/11 would have never occurred. Though Justin Sayfie claims Americans would prefer a plane without armed passengers, in which scenario would terrorists armed only with box cutters, (or anything for that matter) be more likely to attempt to hijack a plane: when the government forbids firearms from being on board, or when the passengers and the pilots are likely to be packing heat?

Should you not feel comfortable flying under such conditions, (as it appears Mr. Colmes wouldn’t) or still feel TSA style screenings are necessary, the market would respond to this demand by providing alternative services to ensure your safety because they value your business and seek to make a profit. Losing customers to hijackings and plane crashes isn’t exactly good for business. Everyone expects airlines to provide multiple flight plans to accommodate their needs, why not extend that to the most vital part of the airline service?

To overcome the many ills we’re facing today, from national security threats, high unemployment, poverty and violence, we must first turn away from the institution that has not only failed to remedy such problems but has perpetuated them; and look to ourselves, to our families and our communities and build voluntary networks to protect that which we hold dear. A friend of mine once said, “The freer the market, the freer the people,” and a free people are what we should be protecting. If we must compromise our liberty and rights for security, what exactly is it that we’re trying to secure?