Paul Krugman's Mis-Characterization of the Gold Standard

LvMIC:

With a price hovering around $1,600 an ounce and the prospect of “additional monetary accommodation” hinted to in the latest meeting of the Federal Reserve’s Federal Open Market Committee, gold is once again becoming a hot topic of discussion.

George Soros made news recently when a filing with the Securities and Exchange Commission revealed that he had liquidated his position with major financial firms and had loaded up on gold; approximately 884,000 shares worth.  Jim Cramer, the CNBC personality in constant search of growing business trends, recommends putting at least 20% of one’s assets in gold.  Following the Republican National Convention, the party platform now proposes the establishment of a commission to study “the feasibility of a metallic basis for U.S. currency.”

Like the gold commission before it, this new interest in gold has brought out the critics who regard the precious metal as nothing short of, to borrow the infamous term coined by John M. Keynes, a “barbarous relic.”  Wesleyan University economist Richard Grossman writes in the Los Angeles Times that the idea of a gold commission is a “waste of time and money” because the standard hasn’t “worked for 100 years.”  In The Atlantic, fiat currency enthusiast Matthew O’Brien calls the gold standard a “terrible idea” and presents a few charts demonstrating that linking the dollar to gold failed to keep prices stable.  Economist and New York Times columnist Paul Krugman has praised O’Brien’s article on his blog and makes sure to point out that the price of gold has been highly volatile since 1968 by showing the following chart:

There is a remarkably widespread view that at least gold has had stable purchasing power. But nothing could be further from the truth.

Krugman points out that when interest rates are low the price of gold typically rises.  He claims that as interest rates tend to fall during recessions, gold’s rise in price would lead to “a fall in the general price level.”  Lastly, Krugman ridicules the notion that a true gold standard would prevent asset bubbles and subsequent busts from occurring by calling attention to the fact that America suffered from financial panics “in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933.”

These criticisms, while containing empirical data, are grossly deceptive.  The information provided doesn’t support Krugman’s assertions whatsoever.  Instead of utilizing sound economic theory as an interpreter of the data, Krugman and his Keynesian colleagues use it to prove their claims.  Their methodological positivism has lead them to fallacious conclusions which just so happen to support their favored policies of state domination over money.  The reality is that not only has gold held its value over time, those panics which Krugman refers to occurred because of government intervention; not the gold standard.

Right off the bat, the Nobel Laureate makes the amateur mistake of conflating two different gold standards.  There was not one set standard throughout the 19^th century up to the Great Depression.  Until the first World War, the United States and much of the West was under the classical gold standard.  This meant that the dollar was just a name for a set amount of gold; generally 1/20 of an ounce.  Following the massive inflation used to pay for World War I and the Genoa Conference of 1922, the gold exchange standard was adopted by many Western countries including Britain.  Though the United States remained under an imperfect classical gold standard, other Western countries stopped redeeming gold coins for national currencies.  Instead, they redeemed their currencies for dollars or pounds which allowed for expanded fiscal policies because the constraint of gold was not so prominent.  At the same time, President of the New York Federal Reserve, Benjamin Strong, conspired with the head of the Bank of England, Montague Norman, to keep gold from flowing out of Britain by having the Fed adopt “easy money conditions in the United States” and “increase bank liquidity a great deal” according to economic historian Robert Higgs.  This backroom deal was carried out as England readopted the gold standard in 1926 at the pre-World War 1 parity despite the pound being devalued during the war.  Because trade unions and unemployment insurance made wage rates less flexible downwards, the ensuing deflation was detrimental and combated through further inflation aided and abetted by the Fed.

This new international agreement between central bankers may have appeared to be a maintaining of the classical gold standard but it was nothing of the sort.  The inflationary boom in the later half of the 1920s was a product of the monetary scheming of the Fed and Bank of England.  The final result was the stock market crash of 1929 which ushered in the Great Depression.  Contrary to popular belief, the Depression was not caused by the classical gold standard but because of its rejection.

As for the other panics Krugman mentions, neither were caused by the gold standard but by government intervention in the money market.  As economist Joseph Salerno explains, the pervasiveness of fractional reserve banking, or the expansion of credit unbacked by gold reserves, played a key role in creating financial instability.  The panics were caused primarily by

..the establishment of a quasi-central banking cartel among seven privileged New York banks resulting in the almost complete centralization of U.S. gold reserves in their vaults by the National Bank acts of 1863-1864.  This New York City banking cartel was able to expand willy nilly the monetary base and the overall money supply by expanding their own notes and deposits on top of gold reserves.   Their notes and deposits were then used as reserves by lower tier banks (Reserve City Banks and Country Banks) on which to  pyramid their own notes and deposits.

Moreover, banks, especially the larger ones, were encouraged in their inflationary credit creation by the firmly entrenched expectation that they would be freed from fulfilling their contractual obligations in times of difficulty by the legal suspensions of cash payments to their depositors and note-holders that recurred during panics throughout the 19th century.

In sum, an adherence to a real gold standard was not the main cause of all the financial panics Paul Krugman lists.  It was his favorite institution, the state, and the incessant fiddling around with the economy by the political class that created an unstable monetary system.  It is also worth pointing out that the late 19^th century was a period of incredible economic growth for both the United States and the rest of the world in spite of the flawed gold standard.  Though it is often alluded to as a time of robber barons, worker starvation, and terrible deflation, the U.S. economy experienced its highest rate of growth ever recorded as the 1800s drew to a close.  As Murray Rothbard documents in The History of Money and Banking in the United States: The Colonial Era to World War II:

The record of 1879–1896 was very similar to the first stage of the alleged great depression from 1873 to 1879. Once again, we had a phenomenal expansion of American industry, production, and real output per head. Real reproducible, tangible wealth per capita rose at the decadal peak in American history in the 1880s, at 3.8 percent per annum. Real net national product rose at the rate of 3.7 percent per year from 1879 to 1897, while per-capita net national product increased by 1.5 percent per year…

Both consumer prices and nominal wages fell by about 30 percent during the last decade of greenbacks. But from 1879–1889, while prices kept falling, wages rose 23 percent.  So real wages, after taking inflation—or the lack of it—into effect, soared.

No decade before or since produced such a sustainable rise in real wages.

From 1869 to 1879 the total number of business establishments barely rose, but the next decade saw a 39.4-percent increase. Nor surprisingly, a decade of falling prices, rising real income, and lucrative interest returns made for tremendous capital investment, ensuring future gains in productivity.

When the United States maintained a gold standard to a fairly significant degree, the economy blossomed.  The relative absence of inflation ensured that the dollar acted as a store of value in addition to facilitating transactions.  Without the threat of looming price increases, the public was more willing to put off consumption and add to the supply of capital availability by saving.  The prudent technique of producing more than you consume allowed for a greater number of entrepreneurs to put capital to work.  This set the foundation for mass production and giving consumers access to an abundance of goods never thought possible just a century before.

To the Keynesians’ befuddlement, the economic renaissance of the late 19^th century occurred at a time where prices weren't rising or stable but actually falling.  The fall in the general price level occurred as the production capacity expanded at a faster rate than the money supply.  Today, economists of the Keynesian and monetarist school remain convinced that a stable price level is good thing when common sense dictates otherwise.  Falling prices are a godsend for consumers; not a catastrophe.  As long as entrepreneurs are able to utilize the inherent feedback mechanism of an undistorted pricing system to forecast input costs, falling prices are only a minor problem.  The focus on price stability is why many economists missed the Depression and the Fed-engineered boom of the 1920s.  In a free market, the tendency is for prices to fall as production increases.

Krugman denies not only that sound money leads to economic stability and growth, he does so while attempting to show that gold has been incredibly volatile since Richard Nixon cuts the dollar’s tie to the precious metal in 1971.  But Krugman puts the proverbial cart before the horse with his example as it hasn’t been the price of gold that has fluctuated to a high degree but rather the dollar’s value.  As Forbes editor John Tamny pointed out in August of 2011

as Brookes calculated in his essential book The Economy In Mind, “In 1970 an ounce of gold ($35) would buy 15 barrels of OPEC oil ($2.30/bbl). In May 1981 an ounce of gold ($480) still bought 15 barrels of Saudi oil ($32/bbl).” Fast forward to the present, and an ounce of gold ($1750) buys roughly 20 barrels of oil ($85)

Krugman also asserts that when interest rates fall, the price of gold increases.  But again he makes the same mistake of not recognizing the role dollar manipulation plays in both measures.  Interest rates haven’t been formed by market forces since the Federal Reserve was established.  In a free market, interest rates are determined by the public’s collective time preference or the discounting of future goods against present goods.  When more people are saving, and therefore putting off consumption, there is a higher supply of loanable funds.  This higher supply translates to lower interest rates as the price of present capital lowers.  Under a fiat regime like the Fed which oversees a system of fractional reserve banking, interests rates are manipulated by a few central bankers instead of the market.  These central planners increase the supply of money in an effort to push down interest rates and induce consumers into borrowing. This also has the effect of pushing up the price of gold as investors lose confidence in the dollar’s value.

In his crusade to keep Keynesianism as a legitimate school of thought, Krugman has yet again attempted to mischaracterize gold and blame it for crises caused solely by government intervention. What Keynesianism amounts to is a theory of state worship and the virtue of hedonism.  Its leading proponents declare there is such thing as a free lunch and that it is served directly by the printing of money.  In other words, it is based on backwards logic and remains distant from reality.

The Keynesians admit there was a housing bubble then fret over an “output gap.”  They blame market exuberance for recessions but then prescribe the exact same policies that lead to exuberance to begin with.  This irrationality was best displayed with a remarkable quote by former Treasury Secretary and former director of President Obama’s National Economic Council Lawrence Summers who wrote in an editorial for the Washington Post:

The central irony of a financial crisis is that while it is caused by too much confidence, borrowing and lending, and spending, it can be resolved only with more confidence, borrowing and lending, and spending.

Keynesians have no pure economic theory; they are totally ad hoc in their approach.  Any data point which fits their view is trumpeted.  Any theory that presents a challenge to the idea that the economy can be finely tuned like a child’s trinket is dismissed as right-wing propaganda.  Keynesians ultimately reject the golden rule of economics: savings represents deferred consumption and producing more than is consumed.  Real savings in the form of capital goods (factories, equipment, machinery, etc.) are the backbone of any economy.  Government only squanders these scarce resources through its constant pillaging of wealth.

Keynes himself was contemptuous of the middle class throughout his professional career.  This is perhaps why he held such disdain for gold.  Gold is the market’s choice for money; not the statist ruling class dependent on spending virtually unlimited sums of tax dollars.  Because a true gold standard prevents runaway inflation and budget deficits from occurring in perpetuity, Keynesians will do all they can to discredit gold as a workable form of currency.  Their allegiance lies with the state and paper money; not the natural choices of the common man.

In Defense of Liberty Extremism

LvMIC:

It’s a safe statement to make that when Mitt Romney is finally crowned the GOP nominee for president during the Republican National Convention, any vestige of liberty will be firmly wiped away from the ballot box come this November.  For those who have followed his campaign in the United States, Congressman Ron Paul has been swindled out of the nomination through various underhanded tricks at state conventions.  The explanation is straightforward: Paul’s views are not comfortable within the Republican Party establishment.  Today’s GOP is a party of banker interests, imperialism, and clandestine state empowerment while claiming to represent small, limited government.  Romney embraces this platform while Paul’s decades-long voting record stands in opposition.

For towing the party line, Romney has been anointed the “electable” candidate while Paul has been deemed an extremist.  The GOP declares this while the media parrots the message as it does every election cycle.  To the pundits and writers who cover political affairs, only moderation can win over a large electorate.  The people don’t look kindly upon radicalism or so it’s alleged.

Ron Paul’s campaign manager, Jesse Benton, has even gone as far as to discourage dedicated Paulians from voicing their discontentment with the status quo.  In a recent New York Times article, Benton shares his disinterest with so-called “true believers”:

Some true believers want to “dress in black, stand on a hill and say, ‘Smash the state,’ ” said Mr. Benton, who is married to one of Mr. Paul’s granddaughters. But “it’s not our desire to have floor demonstrations. That would cost us a lot more than it would get us.”

The often referred to rule of American political campaigns is that candidates should appeal to the party’s base during primary season but once nominated, should strive to attract the “center.”  This strategy is totally befitting for a whorish game like politics because it allows those seeking public office to change their rhetoric and tune in order to attract as many voters as possible.  In politics, principle is placed on the back burner for the glory of supreme victory.  The “center” electorate is just a term used for the majority looking to government for what they mistakenly believe to be a free lunch.

To Benton, the political establishment, and the state-worshipping press, moderation is the rational choice of anyone looking to be taken seriously.

But what Benton and like-minded thinkers don’t understand or refuse to acknowledge is that ideas don’t make a lasting impact unless they are logically consistent.  Ron Paul was unique in that he stuck to his message for three decades and never wavered.  He paid the price with being marginalized while his beliefs were portrayed as archaic.  Paul is by no means a radical in that he recognizes a proper role for the state to guarantee the liberties of people are protected yet he was rejected just the same.  For all the abuse and concessions Paulians have had to make, the Republican Party has awarded state delegations with large numbers of Paul supporters “nosebleed” seats at the National Convention; just behind the delegations from Northern Mariana.  Benton’s advice of toning it down and playing nice did little to change the reception from a political party not the least interested in representing genuine liberty.  This rejection, while predictable, should serve as an important lesson for advocates of individual freedom.  Temperance in philosophy may be the less arduous road to take but it will not bring a lasting change.

Because of the forces pitted against it, the incremental approach toward a free society has little chance of succeeding.  For every step forward comes two or more back towards socialism or its ugly cousin of corporate fascism.  The ratcheting effect of state power may not be readily apparent but it is in constant motion.  The heart of the state lies not with the legislature that is still accountable to voters but within the multitude of bureaucracies that are needlessly large and unaccountable. It is the bureaucracies that are given the authority of law enforcement.  They are usually staffed by people who enjoy wielding state power and are always on the search for an excuse to exercise more.

The result has been various states grotesquely inserting themselves into all aspects of Western society.  Chipping away at their stranglehold with half-hearted ideals helps little when the statist influence is everywhere.  It must be opposed without remorse on all grounds for any headway to be made.  Benton’s demeaning characterization of black-clothed activists who refuse to buddy up with what they see as evil undermines liberty’s very cause.  It is the radicals, not the moderates, who hold the water for the freedom movement.  They provide the intellectual vision for what could be achieved.  And when push comes to shove, they will not sell out.

Liberty is far too important to be dumbed down, conceded, or sold for a marginal victory.  The case for freedom is to be unapologetic because it embodies the great desire for justice above all else.  The ruling class within or closely affiliated with the central state operates outside the bounds of moral law.  Murder, theft, and fraud are all dear functions of government.  Behind the propaganda, aggression is always the true nature of the state.  While it is certainly true that easing the burden of taxation or cutting down on the amount of imperial crusades are laudable goals, they should not be ends in themselves.  The goal is liberation from institutionalized coercion and nothing less.  Murray Rothbard once likened the cause of liberty to the oppression faced by the people of Ireland by the British when he wrote:

the goal of ending English oppression — that could have been done by the instantaneous action of men’s will: by the English simply deciding to pull out of the country.

The fact that of course such decisions do not take place instantaneously is not the point; the point is that the very failure is an injustice that has been decided upon and imposed by the perpetrators of injustice — in this case, the English government. In the field of justice, man’s will is all; men can move mountains, if only men so decide.

The pervasiveness of the state is the most compelling crisis of our time and is not limited to the Western world alone.  Economically and morally, those laws and freedoms which sustain civilized life are withering away.  Economists speak in terms of government spending crowding out private investment because the money squandered on political projects must come from the pockets of the public.  The effect also applies to the notions of self-responsibility, a natural right to acquired property, and the unwillingness to employ violence which have all been purposefully tamed and made acceptable through the actions of the welfare-warfare state apparatus.  In essence, the ability to live life with little interference from Leviathan has become crowded out.

Countering this trend is no easy task.  Government attracts large amounts of resources not just through theft but also by attracting power hungry individuals.  Those who earn a living through the police state, the educational establishment, the mainstream press, and the central bank-controlled financial system enjoy their state privileges and will do what it takes to maintain them.  Educating the public on both the benefits of liberty and to withdraw “consent to its own enslavement” as Etienne de la Boetie put it is difficult to carry on against entrenched interests.  It is nonetheless a fight worth carrying on with one clear objective in mind: for all men to live free from coercion.  It is a passion best embodied in a quote from 19^th century abolitionist William Lloyd Garrison who when asked why he spoke so fervently on the need to end slavery immediately, he retorted

“I have need to be all on fire, for I have mountains of ice about me to melt.”

Mark Carney's Zero-Sum Game

LvMIC:

Mark Carney’s recent speech to the Canadian Auto Workers union was quite revealing of the prevailing misunderstanding much of the public still has with simple economic reason.  As Governor of the Bank of Canada, Carney went before the autoworkers in an attempt to ease growing resentment from the Canadian dollar’s recent surge.  According to the Globe and Mail, manufacturing workers have been feeling the sting especially as their labor has lost its competitive edge internationally.  With ongoing negotiations between the workers’ union and the big three auto companies in America, Carney’s allowance of the loonie to appreciate is being heavily criticized.  During his speech, Carney attempted to deflect blame for the workers’ plight and lectured on the need to improve their specialized craftsmanship.  He shifted responsibility for weak economic growth on corporations hoarding cash while not once acknowledging the role government plays in threatening profit motive with costly regulation.  The attack was also disingenuous as Peter Foster points out in the Financial Post:

According to StatsCan, non-financial enterprises’ cash and short-term deposits did indeed rise by about 25% between 2008 and the first quarter of 2012, to $280 billion, but this figure, and the reasons for the increase, have to be put in perspective. This increase means that cash increased as a share of total assets 6.9% to 7.6%, hardly dramatic. When it comes to implications of non-investment, net capital assets in fact increased by $241 billion between 2008 and 2012 — four times as much as the alleged cash pile.

Carney’s condemnation of cash hoarding reveals not just his penchant for thinking that he knows what is best for an economy composed of millions of individuals, but also his belief that markets can be harmful to some instead of beneficial for all.  Carney’s view is far from unique but nonetheless wrong; the state, with its plethora of agencies and forcefully acquired privileges, disrupts the otherwise free and mutually satisfactory actions of people.

Central banking, like all government intervention, is a game where all sums equal zero.  Carney spoke to the autoworkers specifically because his strong loonie policy was directly affecting their competitiveness.  Prior negotiations between the workers’ union and the big three auto manufactures occurred when one Canadian dollar bought only 80 U.S. cents.  This exchange made the workers more appealing since their labor is cheaper when paid for with American dollars.  Industries which specialize in exports also benefit from inflationist policies as goods produced domestically can be purchase relatively cheaper around the world.  To the factory worker who produces goods sold abroad, money printing is a boon as his skills become more in demand.  But, like all economic issues, this is only one side of the coin.  Inflation has a positive effect for some but a negative effect for all.  Common sense says that as something becomes more abundant, it is demanded less and thus sells for less on the market as human needs become more satisfied.  Money is no different; its purchasing power is based on individual subjective valuations.  When the Canadian dollar is in high demand, as it is now as a consequence of the country’s ongoing commodity boom, this raises its asking price.  When a majority of people are shedding their holdings of Canadian dollars, the price lowers and it purchases fewer goods.  A deliberate cheap loonie policy might benefit exporters but it comes at the expense of all consumers who conduct business in the currency.  In short, all Canadians are worse off when the loonie is suppressed; including those manufacturing workers who are in a better position to sell their goods to foreign buyers but have to pay the price of a loss in purchasing power at home.

The inflationist mindset held by Carney, the Globe and Mail, and a great number of thinkers is rooted in Keynesian theory.  In their reactionary view, nominal value is what matters.  Yet this ignores real value which isn’t so immediate.  A laborer may have his wages cut by 10% but if the currency in which he is paid in increases in value by 20%, his real income has increased.  He may be getting less income but it buys more goods and services.  As Henry Hazlitt wrote in The Failure of the New Economics, “what counts in economics is only value productivity.”  Workers who refuse to have their nominal wages cut in the face of falling prices as a result of an appreciating currency are in a sense asking for a raise despite their productivity remaining unchanged.  This puts strain on business which must close its doors eventually if profits can’t be earned and reinvested.  What was once a mutual partnership between worker and manager is turned into a pointless battle which creates unproductive tension.

Centralize authority translates into picking winners and losers because it necessarily interferes with the voluntary interactions of people.  In a society where individuals are free to produce and transact, exchange is mutually beneficial as both parties see themselves as better off.  As economist Jesus Huerta de Soto writes, the capitalist system of private property and free exchange “generates prosperity, increases the population, and furthers the quantitative and qualitative advancement of civilization.”  Contrary to Marx and his followers, the free market is a positive sum game; not based on exploitation.

State intervention distorts this process as those who use government decree to forcefully distribute resources have little persuasion to do so efficiently outside of securing their political ends.  In the market system, buyers and sellers cooperate to improve their lot.  In central planning, those in charge aren’t hindered by someone not being satisfied by their decision.  Through the violent taking of resources, a loser is created for every winner because someone is denied his or her inborn right to use their property as they see fit.

The speech before the autoworkers union is demonstrative of the tug-of-war that central planning creates within society.  Instead of mutual effort, the coercive hand of the state is lobbied by various interest groups.  For unions, it means forcing employers to meet at the negotiating table.  To big business, government regulation can be used to put fiscal stress on small-time competitors.  For a banking industry built upon the continuous pyramiding of credit, it means having the guarantee of money printing to back up its business of maturity mismatching through borrowing short and lending long.  Each of these practices not only violates moral principles; they would never survive on a free market.

Taken to its furthest extent, the social fabric becomes torn and shredded as the authority of planners grows.  It is a dangerous trend where the end result is misery and economic collapse.

As long as the Bank of Canada maintains its monopoly over the creation of Canadian dollars, it will remain the target of special interests looking for an advantage.  Investment that could be made on capital improvements is funneled toward political causes instead.  In a society where the production of an invaluable commodity like money is lies in the hands of the state, the ruling class remains the victor.  Everyone else tries to limit the pain; never fully ridding themselves of it.

Law Enforcement is Not Your Friend

LvMIC:

Across the West, instances of abuse of authority by domestic police forces are becoming more prevalent.  Two weeks ago, two police officers in my hometown accosted my brother as he walked back to his car after purchasing a six pack of beer.  The officers, who thought my brother was up to no good because he parked a few blocks from a bar, questioned him for a full half hour.  All the while, they found it necessary to remind him repeatedly that “he was in trouble” and that the situation was “serious.”  After my brother asked numerous times what he had done and if he was under arrest, the two officers finally let him go.  Though he was never charged with a crime, it was implied that he wasn’t free to leave.  During the back-and-forth, one officer claimed that he and his fellow officers kept the town safe through such tactics like assuming everyone is a criminal.  The sad part is, the officer likely believed his own story.

Situations of police arrogance and abuse like this are now commonplace in many Western countries and especially the United States.  After a decade of civil liberties systematically being slaughtered and the rights of foreigners being stripped away in the name of “fighting terrorism,” even the most egregious acts of crushing natural rights hardly draw any outcry from the greater public.  Just last week on August 16, 2012, former Marine Brandon Raub was forcibly taken from his home in Chesterfield Country, Virginia and is currently being held against his will in a psychiatric hospital.  His alleged crime he has yet to be charged for?  Questioning the federal government’s true motive in all its dealings on his private Facebook page.  Despite having no criminal record and no history of mental health illness, Raub was effectively kidnapped from his home in a coordinated effort by FBI officials, Secret Service agents, and local police.  The pickup hardly differs from the Gestapo tactics used in communist Russia to suppress political dissent.  The arresting officials claim that Raub was not under arrest despite the fact that he was shackled in handcuffs and was not free to return home.  FBI spokeswoman Dee Rybiski assured the Associated Press that many of Raub’s writing were “threatening” and that they had received “complaints” over the violent rhetoric.  But according to The New American, nowhere in Raub’s writing was violent revolution ever suggested.  Thankfully, a judge recently ordered the release of Raub as there was no legal basis to hold him involuntarily.

While the Brandon Raub affair is horrendous, arrest and detainment of political dissent is nothing new to the United States.  From John Adams’ signing of the Alien and Sedition Act  to Abraham Lincoln suspending Habeas Corpus and imprisoning political opponents and those who spoke out against the Civil War, freedom of speech and peaceful protest have never been regarded as sacrosanct.  Should law enforcement feel the need to keep someone against their will, there is little to stand in their way.  And this behavior is not unique to the United States.

In Canada, the home of “peace, order, and good government,” the people’s faith in the goodness of monopolized authority is being challenged.  Last spring after many provincial governments threatened tuition hikes, university students took to the streets in protest.  Police brutality ended up showing its ugly head as riot police arrested as many as 85 protestors.  These students, who naively saw themselves as entitled to a college education paid for by pilfered funds, were served a taste of what government really looks like.  To quote H.L. Mencken, the students believed in the sanctity of democracy and got it “good and hard” as they witness the truth that government amounts to no more than a riot shield, a billy club, and the trigger of a gun.  In Europe, austerity measures have evoked similar objection as many nonviolent protests have been upended by police crackdowns.  Though the anti-austerity crowd generally wants their perspective governments to shower them with entitlement benefits, their childlike desire of something for nothing is not deserving of a tax-funded bludgeoning.

As the state grows in size and scope of authority so must its enforcement apparatus.  The forced taking and distributing of wealth is not a trait found in a peaceful society.  With every ratcheting up of government intervention into civil life comes growth in the police state.  The perpetual War on Terror has only exacerbated this trend as many Americans have shamefully allowed for their inner-most private moments to be violated in the name of feeling safe.  Likewise, prominent governments the world over have bowed down to America hegemony and the sheer arrogance through which a policy of extra-judicial murder and the silencing of criticism is conducted.  As LRC columnist and author Fred Reed explains:

People speak of the onrush of the police state. I think that many do not understand how fast it comes, or how thorough it will be.

The political framework falls rapidly into place. Few or no safeguards exist, and probably few are possible. A growing authoritarianism    rapidly erodes what protections we had. The courts allow random searches of passengers of trains and subways without probable cause. Warrantless tapping of personal communications is rampant, or done with secret warrants from a secret federal judge. TSA has Viper squads that stop cars at random for searches. In many places it is against the law to video the police, who everywhere become more militarized and less accountable. For practical purposes, citizens have no recourse.

It’s quite easy to understand why law enforcement, as a vital enforcement arm of government, uses its authority so recklessly and with little impunity.  The state, as anarcho-capitalist philosopher Hans-Herman Hoppe defines it, acts as “the final arbiter and judge in every case of interpersonal conflict.”  Whatever issue a citizen has with an enforcer of government law, it must be heard and dealt with by another state official; thereby making bias inevitable.  Should a judge declare whatever claim you make against the police as void, the process comes to an end.  There is no appeal to a competing authority.  Law, instead of being concrete and based on moral principles, is bent and formed to fit whatever the enforcers in the state deem necessary.  Instead of protecting person and property, law enforcement seeks to protect itself and the power it has accumulated.  In other words, “protect and serve” does not apply to society but rather to their employer known as the state.

Questioning of monopolized, violent, and easily corruptible authority is not a radical stance by any means.  Believing that society is incapable of functioning without living under a gun is not only a radical view but also one that hides a hatred of humanity.  It is a view based on the ideal that only might makes right and that peace and liberty are impossible conditions for man to prosper in.

The state’s monopoly on violence ultimately acts as a hindrance to social cooperation and rising living standards.  It is regressive in the sense that monopolies have no incentive to meet the needs of consumers.  Government law enforcement is legalized force shielded by the threat of even more force.  There is little accountability or repercussion for police brutality except in some extreme cases.  If a victim is unable to elicit support from a media establishment intoxicated with its position as the government's court reporter, misdeeds go unpunished.  Perpetrators are then more emboldened to commit the same, and even worse, acts in the future.

In the end, law enforcement in its current form should not be looked to as a friend of peace but merely as another branch of the state’s institutionalized thuggery.  There is little justice to be had if one group of individuals operates outside the rule of proper and moral law.  Freedom comes not from a badge and gun but of a recognition that man has an absolute right to not be coerced against his wishes.  Anything else amounts to repression of body and spirit with social degeneration as the final outcome.

Mitt Romney’s Wonderful Low Rate of Taxation

LvMIC:

In early August, Senate Majority leader Harry Reid made the unseemly, but totally befitting for a politician, accusation that the father of presidential candidate Mitt Romney would be embarrassed of his son’s supposed lack of paying taxes for ten years.  According to Reid, an insider from Bain Capital, the private equity firm Romney founded, had spilled the beans to him on the tax dodging.  Reid has since demanded the former Massachusetts Governor release his tax returns for the past ten years.  The Obama campaign has jumped on board and is demanding that Romney release at least 5 years of returns.  This latest request comes on the heels of the presumptive GOP nominee telling supporters at a campaign stop in North Carolina that he never paid less than a 13% rate for taxes for the past decade.


The 13% rate, which is lower than the 15%-25% the typical middle class pays, has predictably lead to outcry among Romney’s critics.  John Hudson of The Atlantic calls the rate “embarrassing.”  Steven Benen over at MSNBC’s Maddow Blog calls the rate “woefully unacceptable” and not “worth bragging about.”
In the course of political campaigns, it is necessary for candidates to portray themselves as devotees of the central state.  It looks bad if someone seeking political office was doing all they could to undermine the very institution they wish to become a part of.  That means paying taxes, unquestioningly supporting the military and the growing, heavily armed police state, defending the creativity-stifling and propagandizing public school system, and evoking patriotism as a means to distort individualism.  If there is any semblance of thwarting the money snatchers of government, political rivals will latch on and use it to their advantage.  For Mitt Romney, the rumor of not paying any taxes has done just that.  It has provided fodder for his detractors who besides denouncing his low rate of taxation have also castigated him for having foreign bank accounts and skirting the I.R.S. by keeping funds stashed in the Cayman Islands.

The goal of these political attacks is to enrage tax-paying Americans into casting their ballot for Obama this November.  The underlying objective is to dupe the middle and lower class into demanding their Congressional representatives raise taxes on the rich.  It is a deceitful attempt to portray big government as the ally of the downtrodden when in the end it is only a friend of scoundrels.

For those not in a position to take advantage of all the legal (and illegal) ways in which the wealthy are better able to keep more of their income, the various loopholes and tax breaks that have been implanted into the U.S. tax code are not the enemy.  It is through these loopholes that individuals are able to avoid the grubby hands of a class of men who survive through pure theft.  If anything, tax exemptions should be extended to more of the public not just for moral reasons but also economical.

Why private individuals are better at spending their own income than bureaucrats and politicians who receive money through force is self-evident.  In a world defined by scarcity, economization becomes a habitual act.  It is often performed with little notice as the human mind is in a constant state of rearranging ordinal preferences.  Limited means makes it necessary to allocate resources more proficiently.  In the marketplace, the only thing certain is uncertainty.  Mass production and rising living standards aren’t the only things capitalism is responsible for; it has allowed for the majority of consumers to become fickle in what they purchase.  In other words, the ability to earn an income through the market process is never a sure thing since consumers are free to choose.

Lawmakers on the other hand are not constrained by satisfying the needs of indecisive buyers.  They acquire money through forceful extraction and combat resistance by locking objectors in cages.  The guarantee of income creates little incentive to spend prudently.  Profit and loss accounting gets little notice in the face of winning reelection and receiving kickbacks.  The entirety of the budget for any level of government amounts to wasteful pork barrel spending in a sense.

To ensure fore a more rational and efficient allocation of goods, tax collectors must be denied of funds to the greatest extent possible.  The state acts as a parasitical drain on society rather than a driver of material progress.  Private entrepreneurship is better capable of economizing and coordinates on an ongoing basis.  The best example of this rule was demonstrated during the communist days of the former Soviet Union.  It is now widely acknowledged that dictatorial rule and central planning would have devastated the Soviet Union at a much higher degree if not for the illegal black markets that developed.  As Arnold Kling notes

Under Communism, the Russians developed black markets which were highly efficient. These markets enabled people to exchange goods and help to alleviate chronic shortages. In a Communist society black markets serve an economic function and improve efficiency.

For these reasons, Mitt Romney should not be lambasted for paying such a low rate of taxation.  Americans, as well as everyone around the world, should strive to lighten their tax load to the smallest amount possible.  Taxation is a noose that chokes the life out of any productive economy.  It prevents capital from coming to market and being invested for improvements in production.  From a moral perspective, taxation is no better than organized robbery.  No government law, no matter how popular with the voting majority or how acquiesced people have become to it, is legitimate when violence is imposed on the innocent.

Taking advantage of loopholes, tax breaks, and tax exemptions are further methods to undermine the state.  Those who do so should be congratulated and imitated.  That isn’t to say Romney himself is a great stalwart of limiting the scope of government.  Like anyone of strives for political office, his intentions are not at all based on returning the United States to a free society.  He is a supporter of the socially eroding welfare state, the morally corrupt warfare state, the legal Ponzi scheme known as the entitlement state, of crony capitalism, and of Wall Street and banker-enriching Federal Reserve System.  His election over Obama will change nothing; not even the pace at which Washington seems dead set on spending itself into oblivion.

Still, Romney’s low rate of taxation is not something to detest but allow everyone to enjoy.  Just as half of all Americans currently pay no federal income tax, the other half of America should strive to rid themselves of their tax burden completely.  As Murray Rothbard wrote:

It is clear that if a certain burden is unjust, blame should be levied, not on the man who escapes the burden, but on the man or men who impose it in the first place. If a tax is in fact unjust, and some are exempt from it, the hue and cry should not be to extend the tax to everyone, but on the contrary to extend the exemption to everyone.

Language Laws and Nationalism

LvMIC:

Nationalism is at all times an enemy of freedom.  At its core, it undermines individualism in favor of the collective.  As part of a greater agenda of power centralization by the state, nationalism perpetuates an “us vs. them” attitude amongst the public.  The outside world is made out to be a threat rather than a welcoming opportunity.  Foreign influence is turned into a menace that threatens everyone’s way of life.  What could possibly enrich society is tossed out and ridiculed in favor of stagnation.  The latest in this astern way of thinking comes to use from the province  of Quebec.

In Quebec, the leader of the Parti Québécois political party is promising to reform the province’s language laws to ensure that the French language remains dominant over the increased use of English.  From the Globe and Mail:

The PQ leader expressed concerns that the English language was becoming increasingly present as the preferred language of communication in Montreal. According to Ms. Marois, data collected by the Office québécois de langue française, the government agency that oversees the enforcement of the language law, showed that between 2010 and 2012 the number of merchants in Montreal who welcomed their customers in French has dropped had dropped from 89 per cent to 74 per cent.

Ms. Marois said the decline of the French in Montreal signals the need for a tougher language law.

“The message has to be clear: in Quebec we live in French, we work in French, we communicate in 

French,” Ms. Marois said during a campaign stop in Montreal on Sunday.

The idea that people need to be directed on what language they wish to communicate in is nothing short of extreme hubris.  Not only do central planners like Ms. Marois think of themselves as fully knowledgeable on how Quebec residents should behave down to the minutest of detail, the compulsory use of a universal language is an insidious attempt to instill a sense of loyalty to the government.  Nationalism, which is best defined as a devotion to one’s nation, is used as an intoxicant to mask creeping totalitarianism.  When the citizenry is enthralled over its government, the ruling class loses all inhibition to hide its conniving ways.  The death of liberty and establishment of socialism is fueled by identity politics.  The most well known example of this tactic was the Nazi regime in Germany but it has been used dating all the way back to ancient Egypt.  Nationalism is guided by the myth that there exists a “national interest” to which all should direct their efforts to.  But of course, there is no “national interest;” only individuals have interests and act accordingly.

Nationalist doctrines like the enactment of tougher language laws are based on a mistaken bond many develop with national borders.  Yet the boundaries which separate today’s nation-states are largely arbitrary in the sense that they no longer represent pure organic divisions but segregations established and enforced by international bureaucracies.  As famed investor and commentator Doug Casey describes it:

…almost none of these other nation-states today are truly “a people.” They’re cobbled together hodgepodges of various mutually antagonistic racial, ethnic, linguistic, and other classifications of people, resulting from war and conquest. Most people in most countries today don’t have anything significant in common, except the name of the government on their ID papers.

Like patriotism, the belief that a common language is necessary for a given geographic territory is more finely-spun propaganda rooted in collectivist thought.  To central planners and their obedient band of court reporters commonly referred to as the mainstream media, the goal is to promote a feeling of unanimity between citizens and the state.

But society is not the state or vice versa.  Society, or what may be called community, is formed by the free association of individuals.  Instead of eking out a life of meager, hand-to-mouth existence, primitive man banded together in order to better their productivity and take advantage of economies of scale.  The division of labor, that is the ability to specialize in a given task, can only form when goods that sustain minimal life are produced in abundance.  To put it plainly, living residences can’t be erected on a grand scale if the builders must harvest their own food.  What is known as the marketplace developed from the simple, but nowadays maligned, concept of producing more than you consume.  This flurry of activity is driven precisely by the fact that individuals are always seeking to obtain a level of material satisfaction.  As Adam Smith famously wrote in An Inquiry into the Nature and Causes of the Wealth of Nations

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interests.

Contrast state-mandate language laws with what may occur in the marketplace.  In the realm of buyers and sellers, the goal is satisfaction on both ends.  If someone is attempting to increase their share of the market, and hence their profits, they will find a way to attract as many patrons as possible.  This has usually meant advertising in different languages or hiring bilingual employees.  Instead of mandating that potential customers be versed in a certain language, savvy businessmen will attempt to meet their needs.  Likewise, someone looking to purchase a good or service will try to “make a deal” in any language, not excluding hand signals.  Markets amount to little more than people trying to better their well-being through cooperation.  Thanks to the wonders of technology and instant communication, the hurdle of speaking two different languages has been rendered almost nonexistent for international commerce.  This has allowed for an extension and deepening of the limitless division of labor for all of mankind.

The marketplace adapts to changes rather than sending in armed goons to keep things neat, orderly, and easy to govern.

The above explanation isn’t to suggest a businessman doesn’t have the right to deny service to someone who doesn’t speak the native tongue.  In a society where property rights are sacrosanct, nobody should be forced into serving another.  The alternative is servitude where meeting the needs of another take precedence over oneself.

The state’s weaponry consists only of compulsion or the threats thereof.  Those who refuse to abide by government edict have no alternative but to suffer the forceful consequences.  Mr. Marqois is also proposing that the children of immigrants be forced into what are known as Cegeps or post-secondary colleges that would teach French if they wish to attend university.  Under current law, prospective students have a choice in the matter.  Marqois regards such a choice as “intolerable.”  Being disgusted over the ability of others to choose is quite revealing of her thinking.

The freedom to exchange with others leads to a more efficient allocation of goods and ultimately rests upon man’s moral character and natural right to do as he pleases as long as he abstains from harming others.  Humanity can’t be content living under a gun.  As Albert Jay Nock put it:

The practical reason for freedom, then, is that freedom seems to be the only condition under which any kind of substantial moral fibre can be developed. Everything else has been tried, world without end. Going dead against reason and experience, we have tried law, compulsion and authoritarianism of various kinds, and the result is nothing to be proud of.

If the people of Quebec prefer to use English over French, then so be it.  The situation does not need “remedied” to borrow Ms. Marqois’ phrase.  Customs, etiquette, and the like are far better changed when done voluntarily.  Force causes agitation even to the most timid of people.  Those who bask in the righteousness of some state decree will likely take offense to another scheme launched by their elected leaders somewhere down the road.

Without free will, capitalism cannot function properly.  And without capitalism or any semblance of a market economy, civilization stagnates and regresses.  Deteriorating economic conditions provide the perfect fodder for the state to expand its scope of authority.  That is why freedom is the enemy of the state and those who seek it are disenfranchised at every opportunity.  In the war between liberty and compulsion, he who does not speak up for those stripped away of a simple choice will have no one to speak for him when his rights are inevitably whisked away by government decree.

Paul Ryan As a Fake

LvMIC:

In an effort to inject a bit of “spunk” into his otherwise dry presidential campaign, former Massachusetts Governor Mitt Romney has chosen Wisconsin Congressmen Paul Ryan to be his vice president in his face-off with President Barack Obama this fall.  Ryan, who currently serves as the Chairman of the powerful House Budget Committee, was seen a risky choice due to his controversial budget measure that is seen as a radical restructuring plan for the national entitlement state.  Titled “The Path to Prosperity,” Ryan’s plan has received a lot of attention over the past few days.

The mainstream media has predictably chosen sides with the announcement of Ryan as the veep nominee.  The praise and criticism launched at Ryan by the usual suspects amounts to little more than predetermined clichés that fall within the simple paradigm of elephant versus jackass.  On the left side of the political spectrum, Ryan has been charged with proposing draconian spending cuts that leave the poor to wallow in destitution without any assistance from Uncle Sam.  The New York Times has lead the charge in accusing Ryan’s blueprint of being “cramped” and creating a government” that will be absent when people need it the most.”  Over on the right, the Wisconsin Congressman has been extolled for his braveness in meeting Washington’s fiscal challenges head-on.  Stephen Moore of the Wall Street Journal has written that Ryan’s “policy roots lie in the growth and opportunity wing of the GOP.”

In short, Paul Ryan is being depicted with regurgitated slogans that have little to no bearing on reality.  The state-supporting media needs a story and is desperate to keep the American people convinced they still have an actual choice in policies come this November.  The clearly unsustainable status quo is of no concern to the two major political parties that act as “two wings of the same bird of prey.”

On the progressive side, what the demagogues fail to admit is that without substantial alteration there will be no Medicare, Medicaid, or Social Security.  Recent research by professor Laurence J. Kotlikoff of Boston University calculates that the U.S. government’s unfunded liability gap exceeds $211 trillion.  Social Security itself is currently paying out more than it takes in.  As Gary North puts it

Social Security is broke.

How do I define “broke”? When you have no assets to pay your bills and you must borrow money to pay old bills, you’re broke.

No politician, commentator, or economist should be taken seriously if they speak or write as if the entitlement state in its current form is sustainable.  The numbers don’t lie; the situation is dire and for good reason.  The post-war boom brought an abundance of tax revenue into the Washington’s coffers in time to save the New Deal and provide the cash flow for additional federal programs.  Like reckless teenagers who stole their parent’s bank card, politicians were too enticed at the prospect of buying more votes than to think in the long term about the public debt burden they happily passed onto another generation.

None of this is to say that Ryan’s proposed budget is just what America needs.  Despite all the labels of “social Darwinism” or “extremism,” Ryan’s so-called “Path to Prosperity” hardly makes a dent in the looming debt and fiscal crisis that is Washington’s balance sheet.  Over the next ten years, Washington would spend $40.135 trillion under Ryan’s plan compared to the $46.959 trillion proposed by the Obama White House budget.  The federal budget itself wouldn’t be balanced till 2040; practically guaranteeing that the plan will be altered by a new generation of Congressmen much too focused on buying reelection.  And though Ryan’s plan lowers the income tax rate, it would do so in a revenue-neutral manner by closing loopholes and deductions.  These loopholes have yet to be explained in detail.  What Ryan or his supporters fail to mention is why revenue neutral is such a laudable goal. The federal government spends close to $4 trillion a year ($3.7 trillion in 2011).  That means nearly $4 trillion in resources are siphoned out of the private sector and spent on political purposes rather than productive ones.  So why is maintaining Leviathan’s current appetite so appealing to a supposed endorser of laissez faire economics?

The answer is that for all his talk on the positives of capitalism, Ryan is no patron saint of limited government judging by his voting record.  He has voted for the bank bailout known as TARP, the bailout of the auto industry, the use of military force in Iraq, the Medicare part D entitlement, continued funding for the war in Afghanistan, the National Defense Authorization Act, in support of the union bolstering Davis-Bacon prevailing wage mandate, and to raise the debt ceiling numerous times.  Even the revamping of Medicare in Ryan’s budget ends up being similar to Obamacare in a number ways in that it still gives discretion to the government over who receives care.  Under Ryan’s proposal, the government would dole out vouchers worth up to $8,000 a year to seniors in order to replace the current system.  The catch is that only insurance companies given the approval by Washington would be eligible to accept those vouchers.  Under the pretenses of a market solution, Ryan keeps ultimate discretion in the hands of the ruling class.

If any more evidence is needed to finally take a wrecking ball to Paul Ryan’s image as a big government fighter, just consider his allegiance to the military industrial complex and the American empire.  While his budget plan is touted as the equivalent of taking an axe to spending, it eliminates the mandated cuts in defense spending coming at the beginning of 2013 and increases the Pentagon’s budget by billions of dollars every year thereafter.  Ryan sees the cuts as detrimental in maintaining America’s leadership abroad.  In a speech before the Alexander Hamilton Society in 2011, he declared that the United States must “remain committed to the promotion of stable governments that respect the rights of their citizens and deny terrorists access to their territory.”  These are awfully ironic words for a Congressman who has made no objection to affiliates of Al Qaeda in Syria being funded by U.S. tax dollars.  Ryan closed the speech by declaring “we must renew our commitment to the idea that America is the greatest force for human freedom the world has ever seen.”  Again, these words are puzzling when considering that the current drone campaign being waged by President Obama is responsible for the deaths of hundreds, possibly thousands, of civilians.

In the end, Paul Ryan’s devotion to the empire is rooted in the Trotskyite origins of the neoconservative movement.  No self respecting lover of liberty can be an advocate for global democratization.  War, like all government spending, sucks resources away from private society.  You can’t pay for freedom by stripping it away from others.  The warmongers masquerading as champion of small government are nothing of the sort.  They are as feverishly dedicated to the mother state as their more leftist colleagues.

To put it in simple terms, all the talk of Ryan’s “Path to Prosperity” being in any way draconian has been greatly exaggerated.  The cuts are minimal; bordering on insignificant in the short term.  The revenue projections are overly optimistic and assume robust economic growth with no major wars or recessions on the horizon.  It is no solution but yet another exercise in kicking the can.  Former director of the Office of Management and Budget David Stockman is on point when he calls the Ryan plan “devoid of credible math or hard policy choices” and that neither he nor Romney have put forth a trustworthy plan “to take on Wall Street, the Fed, the military-industrial complex, social insurance or the nation’s fiscal calamity and no plan to revive capitalist prosperity.”  Their campaign thus far has amounted to no more than “empty sermons.”

Still, the critics continue to make “Path to Prosperity” out to be a product of ideological hatred of government.  Worse is the assertion by Reverend Thomas J. Reese of the Woodstock Theological Center at Georgetown University who claims “survival of the fittest” visions like Ryan’s are not fit for “followers of the gospel of compassion and love.”  Comparing the moral teachings of the Bible to a government spending programs is like comparing Mother Theresa to a roving band of highway robbers.  The state is a necessarily coercive institution that can only acquire revenue through taxation, the threat of future taxation by borrowing, or the printing of money which necessarily devalues the currency in everyone’s wallets.  There is nothing good natured in forcing someone to do something against their will.  In other words, morality does not come forth from the barrel of a gun; only malevolence does.

Reese’s statement is representative of how radicalized the idea of living freely has become.  Those who value liberty dearly to the extent where they regard coercion of the innocent as unjustified are made out to be heartless, utopian dreamers who refuse to buck up and face the real world.  The truth is, and this can’t be stressed enough, that the people who endeavor to have government involve itself in every aspect of daily life are the real radicals.  They value top-down rule over the free assembly and exchange by individuals.  The statist mind stands in opposition to the very aspects that allow society to thrive.

Paul Ryan may not be a genuine voice for liberty but many have taken him at his word and have shown their utter disgust at the prospect of a slight rolling back of the monstrous federal government.  If he, along with Romney, should win the Oval Office, it is incredibly doubtful they will retract the parasitical reach of the state.  And all the problems the develop from a Romney-Ryan presidency will hence be blamed on the inadequacy of the free market.

We have yet to see if the choosing of Ryan will be beneficial for the Republicans or Democrats.  One thing for sure is that no matter who emerges victorious in November, liberty will be the real loser.

Politics, Air Pollution, and Capitalism

LvMIC:

The only redeeming element of political campaigns is that, no matter the winner, the reputations of candidates involved are tarnished by the end.  In a mugger’s game like politics, the more individuals vying for public office are criticized, the better.  Far from a gentlemen’s sport, what politics really breaks down to is scraping enough votes away from your opponent on Election Day.  Doing so requires character assassination attempts similar to those employed by modern pro wrestlers.  It all makes for wonderful political theater as candidates try to paint each other as the worst human beings to ever walk the planet.  And because scum invariably rises to the top in government, there can never be enough mud slung around during campaign season.

The latest gem of a political attack comes from the pro-Barack Obama SuperPAC Priorities USA which released an ad that makes a casual connection between opponent Mitt Romney and the death of a woman from cancer.  In the ad, titled “Scrap Steel,” Bain Capital, the equity firm Romney founded, is accused of laying off numerous steel workers at a mill in Kansas City, Missouri.  One of those laid off employees lost his health insurance and therefore couldn’t provide for his cancer ridden wife.  It turned out that the man’s wife didn’t lose her health insurance till at least two years after the mill’s closing and that she passed away four years later.  Priorities USA has since rescinded the ad but is determined to still cast Bain Capital in a negative light.  To make matters worse for the Romney campaign, Bain’s legacy has also come under scrutiny from the mainstream media.

It is now being reported that in addition to the mill in Missouri, Bain Capital also purchased its sister steel mill in Georgetown, South Carolina.  Like the mill before it, the Georgetown mill would also end up going through bankruptcy.  However there was another issue besides financial difficulty that plagued Georgetown Steel; which was that of pollution.  As the Associated Press informs:

In 1998, Ms. Carter and her neighbors sued Georgetown Steel, then owned by the company Republican presidential candidate Mitt Romney co-founded, Bain Capital. They sought millions in cleanup costs and accused the mill’s owners of leaving their historic Southern neighborhood looking like it had been hit by a “chemical bomb.”

As the class action lawsuit progressed, South Carolina officials determined that the mill was largely at fault for the pollution.  What the pollution entailed exactly was the emission of a red-colored dust that wound up staining surrounding cars, homes, and boats.  While the plant attempted to adjust its methods of production and seal gaps in its buildings, the staining kept occurring.  Eventually, GS Industries, the company that owned Georgetown Steel, declared bankruptcy and settled with the plaintiffs.  The payout was split a number of ways and some parties involved in the lawsuit did not receive adequate compensation.

It should come as no surprise that a story such as this is being accentuated.  Environmentalism has always been a blanket progressives wrap themselves in to justify their support for big government.  As economist Joseph Schumpter brilliantly put it:

Capitalism stands its trial before judges who have the sentence of death in their pockets. They are going to pass it, whatever the defense they may hear; the only success victorious defense can possibly produce is a change in the indictment.

But should supporters of the free market defend Bain Capital or Georgetown Steel for allowing this pollution to take place?  Was it necessary to preserve a way of life?  The answer to both questions is an unwavering no.  Capitalism has nothing to do with pollution; it is a system where the means of production are under private control and individuals are free to conduct market transactions.  Pollution is an aggression against somebody’s property and should therefore be combated with the full force of tort law.

In order to establish if the residents of Georgetown would have a case against Bain Capital under proper, normative law or the application of the non-aggression and homesteading principles, it would have to be determined if the steel mill was established before the community developed.  If so, then whatever emissions came forth from the mill would act as an easement over the surrounding unowned land.  In other words, the owners of the steel mill would have homesteaded the land by releasing the so-called dust upon it.  As Murray Rothbard points out in his invaluable essay “Law, Property Rights, and Air Pollution,”

This homesteaded easement is an example of the ancient legal concept of “prescription,” in which a certain activity earns a prescriptive property right to the person engaging in the action.

According to the report, the red dust admitted by the Georgetown Steel mill didn’t appear till after Bain Capital took over.  Under the control of Bain, wire rods were mass produced which is what likely lead to the increase in pollution.  The ramp up in production occurred during the mid 1990s.  Because the town of Georgetown is the third oldest city of South Carolina, it is clear that most residents bringing the lawsuit were justified because their property was damaged by the emissions.  The red dust that was a byproduct of the mill’s production methods interfered with the resident’s enjoyment of their property and constituted an aggression.  The charge appears to hold up under the application of strict causality.

As for the common misconception that barring all unjust air pollution would put the brakes on economic progress; it does not necessarily follow.  New technology is constantly in development to reduce emissions.  It can be applied and the cost would “ultimately be borne by the consumers of the firms’ products, i.e., by those who choose to associate with the firm, rather than being passed on to innocent third parties in the form of pollution (or as taxes)” as systems engineer Robert Poole Jr. suggests.  Just because a way of life is supported by aggression toward the innocent should not shield it from prosecution.  It certainly doesn’t make sense to claim that because a roving band of thieves is dependent on robbing mansions to maintain their lavish lifestyles, the law should not apply to them.  The same reasoning goes for air pollution.

In all likelihood, this new revelation of Bain Capital owning a steel mill responsible for environmental damage will be used by the Obama campaign to attack Romney.  The $30 million in profits Bain received over the course of managing GS Industries will be vilified and Romney will me made out to be a heartless, Scrooge-like figure concerned with profit above all else.  This is a mistaken premise however.  Bain should be attacked to the extent that it owned Georgetown Steel at the time of it releasing pollutants onto the property of others.

That would be the logical argument.  But like a strict code of ethics, politics is always bound to reject logic.  Making rational arguments doesn’t win elections after all.

Moral Relativism and Patriotism as Weapons of the State

LvMIC:

Over the weekend, a suicide bomber suspected of being a member of Al Qaeda struck a funeral in Yemen, killing forty five individuals.  The funeral was attended predominantly by members of a militia which aided the Yemeni Army in recapturing a town held by Al Qaeda.  The attack was rightfully condemned by major media outlets.  Viciously killing mourners at a funeral is the very definition of terrorism as it sends a message that no time or place is off limits from a surprise attack.  It shows a complete lack of respect for the sanctity of life.  Al Qaeda has become known for these attacks in recent years.  American national security officials and politicians have reacted by denouncing such attacks as a sign of the utter savagery of the terrorist group.

Yet Al Qaeda is not alone in this tactic.  The CIA’s not-so-secret drone campaign is also guilty of targeting funerals attended by civilians.  According to the Bureau of Investigative Journalism, drone attacks have been responsible for the deaths of “dozens of civilians who had gone to help rescue victims or were attending funerals.”  As of February of this year, at least 535 civilians have been killed by drone strikes since President Obama took office; 20 of which were killed while attending funerals.  Last June, a gathering of mourners was targeted for a strike in Pakistan.  The 10 people killed in that attack had come together to grieve over the death of a “brother of a militant commander” killed just a day before in another drone strike.

There is little denouncement of the civilian casualties that are a product of the U.S.’s foreign policy.  The narrative presented by Washington lawmakers and the press is that of a struggle between the forces of good and evil.  The terrorists of the Middle East are ruthless barbarians while the troops and Pentagon officials are goodhearted protagonists trying to liberate an oppressed people.  The blood of innocent women and children on the hands of Al Qaeda is damming evidence of their depravity.  That same blood on the hands of the U.S. defense establishment is a sign of triumph.  It is moral relativism on a national scale; slaying of the innocent is terrible on one hand while honorable on the other.  As LRC columnist Laurence Vance notes in regard to how atrocities committed by private individuals are perceived differently than those committed by the military:

I don’t know if there are theaters in Afghanistan, but if U.S. soldiers enter a building in Afghanistan and kill twelve and wound fifty-eight – like James Holmes allegedly did in Colorado – they are lauded as heroes.

Military officials frequently go on television and tell not just Americans but the rest of the world that they are making a sacrifice for maintaining safety and freedom around the globe.  They invoke patriotism to justify their actions.  Taxpayers forced into picking up the tab for the endless warfare repay the favor by unquestioningly handing their respect over to crusaders of state-sanctioned mass murder.  From the perspective of enhancing and enlarging the central state, it’s the prefect scheme.  Force feeding the concept of “patriotic duty” is a great way to get people to accept the otherwise deplorable actions of government officials.  It is why Randolph Bourne aptly recognized war as the “health of the state.”

Today, the conduct committed by state enforcement officials, whether they be imperialistic endeavors or the negation of human liberty at home, are rationalized by the way of apologetic relativism.  This relativism stands in opposition to absolute moral principles.  Theft, murder, eavesdropping, lying, issuing threats, and beating upon others are all actions looked down upon by sensible individuals.  They lead society astray from an amicable coexistence.

The state, by the doings of its executors and administrators, embodies everything you were told was wrong as a child.  Children are usually taught straightforward rules of acceptable behavior at a young age.  As they grow older, they are bombarded with propaganda from school, television, and even their own parents that attempt to remove the government away from basic considerations of right and wrong.  These efforts are part of an ongoing agenda to convince the public what they see as morally repugnant behavior is justified when done under the refuge of government authorization.  The institutional predation of the state is supported by a kind of war on reason fought by those seek most fervently to maintain the exploitive status quo.  The objective is enough consent on the part of the people to overwhelm any high-spirited protest.  While independent and intellectual criticism is the state’s worst enemy, unthinking acceptance is its greatest ally.
The ruling establishment sees little danger in violent uprising.  What they fear most is the turning of public opinion against their legitimacy.  They fear losing consent above all things because soon after, their lordship must come to an end.   Support among the people is what keeps tyranny alive; not a violent clenching down upon personal freedom.

Though the American Revolution is frequently evoked as a display of this truth, a better example exists in colonial Pennsylvania nearly a century before the Declaration of Independence was penned.  Upon being granted the lands of Pennsylvania by King Charles II in March of 1681, William Penn proceeded to establish a colony governed over by a constitution of sorts.  The positions of governor and proprietor were created along with an elected Council that saw to executive and judicial functions.  An appointed Assembly was also formed which had the authority to levy taxes and veto laws passed by the Council.  Because of the liberties guaranteed in the new colony, the low tax burden, and Penn’s selling of land at cheap prices, immigrants flooded into Pennsylvania in its formative years.  Penn would eventually return to England in 1684 but upon doing so found that the colonists were refusing to pay taxes including the land taxes he counted on to maintain a hefty profit.  The Council, which was elected by the people and had the sole authority in executing laws, refrained from collecting taxes and left the colony autonomous.  Penn would eventually appoint a commission to restore his lost opportunity of compensation through force.  The colonists simply ignored the commission which led to its collapse.  Penn then instituted a deputy governor to ensure for the collection of taxes but that effort was also came to be in vain.  As Murray Rothbard summarizes

William Penn had the strong and distinct impression that his "holy experiment" had slipped away from him, had taken a new and bewildering turn. Penn had launched a colony that he thought would be quietly subject to his dictates and yield him a handsome profit. By providing a prosperous haven of refuge for Quakers, he had expected in turn the rewards of wealth and power. Instead, he found himself without either. Unable to collect revenue from the free and independent-minded Pennsylvanians, he saw the colony slipping gracefully into outright anarchism—into a growing and flourishing land of no taxes and virtually no state.

The peace-loving Quakers and colonists were able to dissolve an intrusive government by their sheer unwillingness to recognize its legitimacy.  They properly regarded the various attempts at governance and taxation imposed upon them as thuggish means of exploitation.  In short, they saw through the facade of the state being above moral considerations.  Rejecting state rule did not make them bad citizens but admirable in the sense that they ended up living harmoniously with each other in its absence. As Penn would lament in the midst of Pennsylvania’s brush with halcyon anarchism, he and his appointed rulers had lost “their authority one way or another in the spirits of the people.”  The idea that men are born to be free instead of in shackles was enough to overcome government compulsion.

The first step toward liberty is to see through the masking fog the state engulfs itself in to carry out its deeds of conquest.  It is the realization that murder is murder no matter if it is committed by a street thug or an army captain piloting a remote controlled aircraft armed with hellfire missiles.  It is the realization that debasing of the currency by a select few central bankers is no different from the shysters of old who would shave off small portions from gold bullion so that it would appear to retain the same weight.  Finally, it is the realization that glorifying war in the name of “loving thy country” is a grand swindle used to deceive the simple-minded into falling in line like a herd of sheep soon be slaughtered.

Using reason to discover absolute truths is an essential part of determining how one should live their life in accordance with sound ethics.  Relativism denies this.  It can deny that evil is committed by the state and that reprehensible acts are perfectly okay when done by individuals with guns and badges.  All it takes to reverse such destructive thinking is the realization that state authority deserves no pass in moral scrutiny.  Withdrawing consent comes next on the path to a free society.