On the Notion of Sacrifice

By Thersites, on July 24th, 2009

One of the central messages of President Obama’s inaugural speech was that Americans now must sacrifice in a time of great hardship. This sounds noble, but also is rather vague. What kind of sacrifice is Obama talking about?

It would be fair to venture to guess that sacrifice for Barack Obama means a number of things that our forefathers would have shunned. Sacrifice means higher subsidization of the masses by those at the top of the economic scale through increased taxation. Sacrifice means imposing the will of the government on the people in the name of “fairness,” “equality” and “justice.” Sacrifice means that everyone must be required to bail out the few who are reckless and irresponsible. Sacrifice means coercive taking of our life, liberty and property for the “greater good.”

At root of all of this is collectivism. How did we end up here? We had an economy that was mixed as opposed to a true, free-market one. We had a small republican government that grew to be a massive democratic one. We had a society built on success and failure, that gave way to one of success and protection against failure. We took the middling path, which inevitably led us to this socialistic mentality. I posit that democracy mainly paved the way for this collapse, but that will be addressed in a post in the near future.

Prior to the Great Depression, we lacked a government-imposed social safety net because of the sacrifice of individuals. Some voluntarily chose to provide for those who were less fortunate, not always with just a handout, but for some like Rockefeller by providing an education for those who showed aptitude in the hopes that they could better themselves. Our forefathers fought for our country, sacrificing their lives so that they could build a society where they would not need to sacrifice their liberty and their property. They sacrificed so they could establish a country built on the natural rights granted to them by G-d, not the rights so determined by the new Messiah, Mr. Obama.

People labored in steel mills and coal mines not out of the goodness of their hearts, but out of self-interest, and this work helped pave the way for unprecedented economic growth. It all brings to mind Adam Smith’s line in 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 interest.”

We did not achieve our prosperity from forced sacrifice, but from voluntary trade predicated on the self-interest of individuals seeking to better their lot. People could dispose of their wealth for the most part as they so chose. Universities, libraries and medical institutions were established by wealthy folks, and charitable institutions were able to provide (probably much more efficiently than the public) services for those who were needy. But this charity again was voluntary.

You have to wonder why it was the case that the government stayed out of the business of charity. Was it because individuals knew that politicians would only use these programs out of their own self-interest to gain votes? Was it because of the belief in a government with limited responsibilities? Was it because of the belief that it wasn’t the job of all of society to take care of those who were broke?

I think it was probably a combination of all of these things. Also, I think that while individuals may have acted out of self-interest in giving charity like politicians (be it for PR purposes or for religious reasons), they were still making this decision unto themselves, not forcibly requiring all others to sacrifice as well. There just is not this sense of individualism anymore. It is one for all and all for the banks. We all own a piece of Wall Street, we all own a piece of Fannie and Freddie over on Main Street and we all own a piece of Detroit too. Of all cities, I mean come on…Detroit?!

We did not build the most prosperous nation in the world through sacrifice and collectivism. We built it through the self-interest of the skillful, visionary individuals that immigrated to this land. Our forefathers did not sacrifice themselves during the Revolution for more sacrifice; they sacrificed themselves for freedom. To forget this fact would be to tarnish their efforts.



Leave a comment   Politics and Government   , ,  

Oligopoly or a Free Market – A Realistic Choice?

By Stephan Zimmermann, on July 24th, 2009

The study of economics should be clearly divided into its factual, quantifiable aspects (more commonly referred to as “econometrics”) distinct from the more philosophical and abstract study (generally known as ‘normative economics’). This is becoming increasingly important as the world has become ever more interdependent. The global financial crisis attests to this.

The argument in the United States increasingly rages between “free market” advocates, such as Friedrich von Hayek and Milton Friedman, and advocates of governmental social planning from Horace Mann to Barack Obama.

Vocal anarcho-capitalists would ideally do away with all forms of governmental influence or control, preferring a reliance on the sovereignty and sanctity of an individual’s decision-making ability. Ardent social planners would prefer to regulate everything from “Joe Six-Pack’s” beer consumption to private sex.

Few “free market” adherents attach economic importance to the desired social, racial or sexist equality that a majority of Americans espoused over the past fifty decades. These issues are perceived more in the realm of sociology or political science rather than economics. When the issues are addressed, it is often felt that the “free market” theory would solve them, just as Adam Smith and his “invisible hand” led the way to theoretical capitalistic freedom.

Unfortunately, the “free market” theory in the United States certainly did not, by itself, do away with the social injustices of segregation or discrimination, poverty or the exploitation of labor that plagued the country. It ultimately took government planners to lead society in what a majority of the country’s citizens considered proper.

Was a conscious exception made for state intervention on these issues to promote increased control for economic purposes?

Even more perplexing is the apparent lack of discussion of oligopolies in “free market” discourses.

Significantly more measurable than the normative verbiage about the“free market,” economists have achieved a number of factual measures to determine when an oligopoly exists. The “four firm concentration ratio,” the Herfindahl Index or other closely allied measures can show with little dispute than an oligopoly structure exists. Most economists agree that four or five companies controlling more than forty percent of an industry’s market share indicates an oligopoly market.

While collusion, pricing fixing or cartels have been illegal in the United States for a century or more, economists agree that “price leadership” in an oligopolistic structure is inevitable, as are upwardly rising prices an downwardly “sticky prices” despite a free market.

Oligopolistic firms are not generally controlled in the United States, unless there is clear evidence regarding collusion or other gross legal violations, such as safety laws.

Through most of last century, oligopolies maintained roughly forty percent of GNP. Through government deregulation during the early part of the nineteen eighties, however, oligopolies dropped to a mere eighteen percent.

However, there are few consumer goods that are not directly controlled by oligopolies. From airlines to automobiles to soft drinks, movie studios to fossil fuel energy and distribution, government action for deregulation helped, rather than hindered, oligopoly in the country. Sheer financial size dictate the difficulty of market entry.

Individuals and private companies, not government, foster the never-ending race to maximize profit margins, to outsource and downsize employee labor in favor of more efficient technologies, or to move physical manufacturing to less expensive nations.

The most competitive industries, however, such as apparel, furniture and – yes, the mortgage business – are those that most failed in the market..

Norman Jewison’s 1975 science fiction film “Rollerball” (and the panned 2002 remake) envisioned a world not run by politicians, but corporations. Only a handful of companies control the industries responsible for communications, energy, food, medicine, sports and so forth. Despite its violence, the film tries to point to the power of the individual versus either a state or a corporation.

If we accept today’ realistic global trends, oligopoly is likely to win over both: the concept of state monopolies or a stateless “free market” of some nine billion people.  Already American, European and Asian firms dominate their industries and compete within the structure of oligopolies irrespective of national political borders or mores. Their outlook on people’s wants is similar to Roman emphasis on bread and circuses.

Ideally, a fundamental change in the nature of mankind would solve the many pressing physical problems facing the globe. That, however, seems totally unrealistic.

Much of economics recognizes the facts of proven theories, instead of clinging to outdated, normative ones. It changes as the times change, albeit very slowly.

Join the forum discussion on this post - (1) Posts


5 comments   Economic Theory   , ,