As is often the case, it’s from dL, author of the Liberale et Libertaire blog. And the reason it’s the quote of the week is that brings together several things I’ve been thinking about in a way that I hadn’t managed to yet:
Our age of State Capitalism-intertwined in a million different knots with a political economy of State Security-promises to sever the remaining myth: the relationship between capitalism and opportunity, or the “opportunity society.” To be more precise, we are about to be given an object lesson that there is no logical relationship between Capitalism and Markets. The collapse of this paradigm, of course, is conveniently timed with the maturation of our State Security Apparatus. The reason you have a National Security State, of course, is largely because of a loss of legitimacy. Our era of State Capitalism will be marked by a general decline in popular sentiment regarding legitimacy. But our “bleeding heart libertarians” seek to reposition libertarianism as the legitimizing face of State Capitalism. You know the thing that served to hollow out your political freedom while reneging on its bribe of eternal economic growth. Now that’s quite a historical turn.
I’ve been kind of outlining a piece I’d intended to call “Why I am not a ‘Bleeding Heart’ Libertarian.” Now I’m not sure I need to bother.
INTRODUCTION: ORDER OF BATTLE
If we place the ongoing “purist”-”pragmatist” conflict within the libertarian movement under a metaphorical microscope, it immediately becomes apparent that what we’re looking at is not one conflict, but rather a bundle of conflicts composed of numerous intertwined disputes with overlapping intra-movement constituencies for particular outcomes. While the movement can be reasonably viewed as split between overall “purist” and “pragmatist” camps, the vast “No Man’s Land” between them is a constantly swirling milieu in which it’s not always perfectly clear who is shooting at whom — or why. Various constituencies raise their flags over specific coordinates and give battle, hoping to temporarily claim some patch of territory for their concern of the moment or, perhaps, to extend the lines of some larger alliance to encompass more of the disputed field.
The hill upon which I intend to raise my flag — the banner of the “purist” faction, broadly defined — in this paper encompasses the notion of “incrementalism.” Whoever controls that hill in turn overlooks, and may exploit, a key route across the plain of “realpolitik.”
May, I say, or might: The incrementalist high ground has been occupied, for some time and without substantial opposition, by “pragmatist” forces which have declined to actually sally forth versus the state, preferring instead to simply occupy it, hold a few grandiose parades on its slopes, and deny its use to “purists” who might actually use it as a base from which to strike real blows for liberty.
However, it’s come to my attention of late that the hill is only weakly occupied:
- Its garrison’s composition greatly resembles that of a Confederate “home guard” militia regiment during the Late Unpleasantness, as described by an inspecting general: “3 field officers, 4 staff officers, 10 captains, 30 lieutenants, and 1 private with a misery in his bowels.” To put it bluntly, for all their guff about holding the heights over the plain of realpolitik, the “pragmatists” have thus far proven themselves signally unsuccessful, to an even greater degree than the “purists” they disdain, at achieving political victories.
- The “pragmatist” garrison — which had at its disposal the heavy artillery of genuine incrementalism had it cared to use it — chose to mothball that formidable weapon and instead field a lighter piece, of shorter range and minimal power — one more suited to twirling, slapping and shouldering at ceremonies held for the purpose of congratulating themselves on their superior political acumen than for actual use in battle. The popgun I refer to is, of course, “compromise.”
The hill is, in other words, ripe for a bayonet charge. It is occupied by troops who are not interested in fighting, and who, if forced to, have at their disposal a weapon guaranteed to fizzle half the time and explode in its firer’s face the other half. It is the “purists” — unabashed and uncompromising libertarians who may differ on how far to go but who know which way they’re going — who have a rightful claim to, and know how best to exploit the advantages of, an incremental approach.
THE FIGHT THAT NEVER WAS: INCREMENTALISM VERSUS ABOLITIONISM
Things are not always what they seem. For years, “pragmatist” reformers in the libertarian movement have exercised a virtual monopoly on advocacy of incrementalism, caricaturing “purist” abolitionism as its mutually exclusive opposite. Even a cursory examination of the two concepts, however, reveals that this is not necessarily the case.
Incrementalism involves setting (and achieving) incremental goals — taking “baby steps” in one’s chosen direction. Incrementalism is a proposed means.
Abolitionism is the notion that wrongs should be abolished rather than simply minimized (and, at the abstract anarchist extreme — no insult intended, that happens to be where I live myself — that all wrongs must be abolished in order for the abolitionist to claim victory). Abolition is a proposed end or set of ends.
It is certainly possible to conclude (and some “purists” do) that limiting issues advocacy to abolition, and only abolition, is an appropriate means (perhaps even the only appropriate means) to achieve abolitionist ends.
“Pragmatists,” in turn, have exploited the possibility of such a reification of abstract end into concrete means. By encouraging the erroneous conclusion that that reification is universal within and necessary to “purism,” they create two useful and reciprocally dependent misimpressions:
1) That incrementalist means are not available to “purists;” and
2) That incrementalist means are therefore only available to “pragmatists.”
The theory implied by these misimpressions disintegrates on examination. I could fill a book with the documentary evidence of that disintegration, but I don’t have to: Even one example of a theory’s failure invalidates the theory. I’ll provide two:
- I consider the claim that Alan R. Weiss is a “purist” and an “abolitionist” to be indisputable. He describes himself as an “anarcho-libertarian,” he writes for “purist” publications including Rational Review and The Libertarian Enterprise, and he has a long record of continuous association with “purist” associations and projects. In 2002, Weiss was elected to the Northwest Austin (Texas) #1 Municipal Utility Board. During his tenure on that board, he led a successful effort to reduce taxes associated with its operations by 50%, and then resigned. In other words, he used incremental means (seeking and gaining electoral office) to accomplish an incremental objective (cutting a particular tax rather than eliminating that tax or all all taxation), even though his strong preference would have been, and his ultimate goal is, the elimination of both the board to which he was elected and the retention by government of that board’s powers.
- If you don’t think I’m a “purist” and an “abolitionist,” then you haven’t been paying attention. I have personally engaged in incremental political action numerous times. I’d like to eliminate the US government. Having so far been unable to figure out a way to do so, I serve as an appointed member of a federal board so that I can affect its operations in a pro-freedom way. I’d like to eliminate my city’s government. Having so far been unable to figure out a way to do so, I have personally managed two (winning) campaigns to keep one of its public offices (city marshal) elected rather than appointed, and another (winning) campaign to elect a person (Tamara Millay) to serve in that office who discharged the duties of that office in a more liberty-friendly way than others might have been expected to.
QED, incrementalist means are not only available to “purists” and “abolitionists,” but used by them, and are therefore not available only to “pragmatists.”
Sadly, this issue should never have required the current argument. The de facto “pragmatist” monopoly on incrementalism, and their use of it as an anti-”purist” cudgel, has been made possible only by an inexplicable “purist” reticence toward contesting the matter. Nearly 30 years ago (at the latest!), “purist” icon Murray N. Rothbard — the bogeyman of the “pragmatists” — was already explicitly endorsing incrementalism:
[I]t is legitimate and proper to advocate transition demands as way-stations along the road to victory, provided that the ultimate goal of victory is always kept in mind and held aloft. In this way the ultimate goal is clear and not lost sight of and the pressure is kept on so that transitional or partial victories will feed on themselves rather than appease or weaken the ultimate drive of the movement. — “Strategies for a Libertarian Victory,” Libertarian Review, 1978
Must the libertarian necessarily confine himself to advocating immediate abolition? Are transitional demands, steps toward liberty in practice, therefore illegitimate? Surely not, since realistically there would then be no hope of achieving the final goal. It is therefore incumbent upon the libertarian, eager to achieve his goal as rapidly as possible, to push the polity ever further in the direction of that goal. Clearly, such a course is difficult, for the danger always exists of losing sight of, or even undercutting, the ultimate goal of liberty. But such a course, given the state of the world in the past, present, and foreseeable future, is vital if the victory of liberty is ever to be achieved. — The Ethics of Liberty, Part V: “Toward A Theory of Strategy For Liberty,” 1982
Not only do “purists” have a rightful claim to incrementalist means but, as we shall see next, “pragmatists” have severely undermined their own claim to those means by attempting to smuggle other, unsupportable, means into play under the rubric of incrementalism.
COMPROMISE: THE POVERTY OF PRAGMATISM
As we’ve previously seen, there is no real, defensible “pragmatist” monopoly on incrementalism. That the “pragmatists” have postured as the possessors of such a monopoly raises the question of why they are so interested in controlling the term and denying its use to “purists.”
The obvious answer is that incrementalism is a visibly worthy political tool. Insofar as the “pragmatist”-”purist” feud manifests itself in demonstrations (or at least protestations) of efficacy and success with the intent of recruiting libertarian newcomers to one side or the other, the side which can (even falsely) claim sole possession of such a tool benefits.
That there are less obvious answers is, well, less obvious. However, there’s good reason to believe that less obvious answers exist.
Assertion of a monopoly on incrementalism is simply not strictly necessary for the purpose of demonstrating efficacy and success. Such a purpose could be more effectively fulfilled by using incrementalism to build a record of electing public officials, winning referendum votes, etc., and then stacking up the results versus those achieved by the allegedly incrementalism-deprived “purists” for comparison. The “pragmatists” have avoided any such comparison — not only because it would explode their pretensions to a monopoly on incrementalism but because it would explode their implicit claim that they use incrementalism effectively, or for that matter at all.
The “pragmatists” have effectively used incrementalism as an advocacy cudgel in intra-movement disputes, but evidence that they’ve used it in, um, “real politics” is sorely lacking. The “pragmatist” case for primacy in the libertarian movement is a hodge-podge of horror stories about “purist” failure and grandiose projects of future victories which can be achieved only after the “purists” have been swept aside. What’s missing from that case is a portfolio of “pragmatist” successes: “We did this, and it worked.”
Why would a movement faction assert a (fake) monopoly on a tool it doesn’t even use? Why would it insist, contrary to fact and evidence, that its opponents don’t have that tool in their kit, even though those opponents have visibly and successfully used the tool numerous times? And why would it refuse to take that tool out of its own kit and visibly use it to tighten some bolts or drive some nails?
The answer is that the “pragmatist” version of incrementalism is a counterfeit tool. Its dark silhouette against the bottom of the toolbox drawer looks, in form, like the genuine article. But when pulled out and examined closely, it turns out to be a “drop-forged in Pakistan” fake. Deep down inside (in their pockets, next to the receipt for $4.95), the “pragmatists” know that their tool — compromise — won’t turn a bolt. And they know that if they pull out their shoddy instrument and hold it up next to the “purist” version, nobody who wants to turn a bolt will select theirs.
As defined above, incrementalism involves setting (and achieving) incremental goals — taking “baby steps” in the right direction.
Compromise, on the other hand, involves trading steps in the wrong direction for other steps in the right direction.
When pressed, many “pragmatists” argue that incrementalism and compromise are not only not mutually exclusive, but that they are actually indispensable one to the other. Suspicion on this point is natural, however, given the lengths of obfuscation to which the “pragmatists” have gone in order to avoid reaching the issue.
That suspicion is well-founded — for, as I shall demonstrate below, compromise destroys, rather than augments, the utility of incrementalism. To put a finer point on it, the inclusion of compromise as a means in libertarian strategy requires a radical and un-quantifiable re-definition of ends.
COMPROMISE’S CALCULATION PROBLEM
In the larger libertarian movement, the difficult question of end-states is a constant topic of discussion. Anarchist and minarchist factions do daily battle over the propriety of particular and general long-term goals. As a practical matter, however, the discussion has been framed in terms of “how to deal with a problem we’ll have to deal with later.”
The anarchist who wants to abolish the state entirely may disagree with the minarchist who wants to retain an ultra-minimal “night watchman” state, but they are able to co-exist beneath the “libertarian umbrella” because their goals are, for the most part, commensurable. While the minarchist might only cut government’s size, scope or power in a particular area by 80%, where the anarchist would cut it by 100%, both agree that pretty much every function of government should be slashed significantly.
Even if we posit a bigger “libertarian umbrella” under which other, additional groups might cluster, that commensurability is present. The geolibertarian and the constitutionalist may make exceptions in that which they subject to “libertarian measurement,” but those exceptions are defined exceptions. The constitutionalist may advocate a specific level of taxation for the specific purpose of “providing for the common defense.” The geolibertarian may argue that a community “ground rent” is not taxation as normally defined. And so on, and so forth.
These kinds of exceptions may be problematic, and they may raise questions as to which groups truly belong under the metaphorical umbrella or just exactly which piece of ground falls or should fall under that umbrella’s shade. What they don’t do, however, is make it impossible to answer those questions.
When compromise is introduced into a libertarian strategy, however, the quality of commensurability disappears, and with it the ability to define any particular end, let alone any end-state, as compatible or incompatible with libertarianism per se. More specifically, the “pragmatist” justification for compromise relies on the adoption of non-measurable or non-quantifiable goals.
While pro-compromise “pragmatists” are understandably shy about explaining their reasons for advocating something they don’t want to admit they are advocating, some cues and clues are available.
When “pragmatist” Brian Holtz states that he stands for “minimizing the overall incidence of coercion” or implicitly characterizes himself, in contrast to someone else, as advocating “the policies and tactics that have the highest expected value in terms of minimizing the net amount of aggression suffered by humanity,” we should pay close attention to exactly what he’s saying.
Ditto when Carl Milsted, head of the Libertarian Reform Caucus, asks “Why should I never endorse an action that employing [sic] aggression even it results in a substantial net reduction in aggression?”
For the sake of uniformity, I’ll refer to the goal which Mr. Holtz and Dr. Milsted implicitly hold out for adoption as “reduced overall net aggression.” It’s a fine-sounding goal, and one to which an approach of compromise lends itself well. Unfortunately, it’s also utterly impossible in most cases to determine whether, or to what degree, such a goal has been achieved.
Mr. Holtz, Dr. Milsted, meet Dr. Mises:
Judgments of value do not measure; they merely establish grades and scales. Even Robinson Crusoe, when he has to make a decision where no ready judgment of value appears and where he has to construct one upon the basis of a more or less exact estimate, cannot operate solely with subjective use value, but must take into consideration the intersubstitutability of goods on the basis of which he can then form his estimates. In such circumstances it will be impossible for him to refer all things back to one unit. Rather will he, so far as he can, refer all the elements which have to be taken into account in forming his estimate to those economic goods which can be apprehended by an obvious judgment of value — that is to say, to goods of a lower order and to pain-cost. That this is only possible in very simple conditions is obvious. In the case of more complicated and more lengthy processes of production it will, plainly, not answer. — Ludwig von Mises, Economic Calculation in the Socialist Commonwealth, 1920
The notion of “reduced overall net aggression” requires a system for classifying all of aggression’s varying forms into commensurable units. It’s relatively non-controversial to assert that picking a pocket is less onerous than assault, which is in turn less onerous than murder, but unitizing these forms of aggression for bulk comparison is a different story entirely.
Does it take 2.5 armed robberies to equal a rape, or 3.1?
Is the prevention of two murders a fair trade for 100 unreasonable searches?
Even when aggression is nominally measurable in known units, it’s not necessarily true that the factor of aggression itself will be perceived or valued in terms of those units.
If I can reduce the taxes of Person A by two dollars in trade for raising the taxes of Person B by only one dollar, is that a net reduction in overall aggression? What if Person A’s two dollars would otherwise have been spent on country club initiation fees while Person B’s one dollar would have otherwise been spent buying food for his starving child? Would the decrease in aggression versus Person A truly be commensurate with the increase in aggression versus Person B?
The value of a dollar may be uniform for certain purposes, but it is highly subjective for most. Most people would agree that stealing a piece of 18 holes on the golf course is less onerous than stealing a baby’s bottle of milk, even if the dollar values of the two say otherwise.
Even leaving such questions aside, precisely why should Person A accept an obligation to be aggressed against more, so that Person B will be aggressed against less, specious “overall net” claims notwithstanding? Under what moral calculus should anyone be considered fair game for aggression in any amount?
The unitization problem only grows worse on a political scale: For not only is it impossible to quantify the “amount” of Aggression X versus that of Aggression Y on an individual basis, but American polity deals with wholesale decisions which affect a population of 300 million individuals (excluding those outside US borders, who may also be affected).
The idea that some central “Pragmatic Libertarian Planning Board” could accurately forecast aggregate increases and reductions in the various forms of aggression spawned by particular policy compromises and compare them to reveal which actions would produce “reduced overall net aggression” is pure … well … I was going to say “science fiction,” but no science fiction author I know would touch the idea with a ten-foot pole. Sapient space-faring beer-drinking anarchist squid are one thing, but there’s a limit to the suspension of disbelief.
The commensurable characteristic which unifies libertarianism, however narrowly or broadly defined, is opposition to — not redistribution of — aggression. Assuming the burden of aggression redistribution would rip the fabric of the “libertarian umbrella.” Treating aggression as a commensurable, tradeable commodity would mean that some factions would be required to accept increased aggression on issues dear to them in order to “pay for” decreased aggression in areas held dear by other factions. No libertarian coalition could hold together under such stresses — it would fall to pieces as soon as the compromisers “traded” an increase in the top tax rate for legalization of marijuana, or vice versa, or whatever.
A single focus on institutionalized aggression, i.e. the aggression of the state, and a proposed solution of reducing — never in any case increasing — the ability of the state to aggress, are indispensable to the success (nay, the survival) of any broad-based libertarian political movement.
“Pragmatism” is popularly defined as an emphasis on that which “works.” Compromise does not, and cannot, work in the context of a libertarian political movement.
Peter Boettke recently wrote a paper entitled: ‘Is the only form of “reasonable regulation” self regulation?’ (GMU Economics Paper 10-05).
This paper draws attention to the potential for self-regulating communities (governance without government) to achieve benefits of social cooperation even in unpromising situations. The subtitle describes the contents of the paper: ‘Lessons from Lin Ostrom on regulating the commons and cultivating citizens’.
Boettke attributes the concept of reasonable regulation to Anne Krueger. He tells us that Krueger got him thinking about the concept when she said at some conference that rather than central planning or unfettered markets we need reasonable regulation – regulation that is not capturable by special interests. Having read some of what Krueger has written about rent-seeking societies I imagine she put forward the concept of reasonable regulation as an ideal worth striving for rather than as something that could easily be achieved.
Boettke argues that self-regulation systems apply reasonable regulation. He suggests that since self-regulating systems are operating outside the formal realm of politics they so not face the problem of protecting against the unwarranted influence of politically empowered special interest groups.
I think this is a good point, but it may be over-stated a little. Community organizations do have to cope with the problem of protecting against the unwarranted influence of special interest groups among their members. They also have to deal with free-rider problems. The main difference is that when decisions are made within such organizations opportunistic behaviour is more easily seen to be opportunistic. It is more difficult for any individual or group to argue for unwarranted preferential treatment when the people who have to pay for this are members of the same community. It is also easier for the opportunistic tendencies of individual members to be restrained by subtle (or not so subtle) threats of retaliation by other members. It would be more defensible to argue that self-regulating systems are able to deal more effectively with the unwarranted influence of special interest groups.
Self-regulation systems seem to have some attractions for everyone opposed to statism, including self-styled commie libertarians and anarcho-capitalists (as well as sensible people like myself . Such systems would presumably also be attractive to Burkean conservatives who emphasize the importance of the ‘little platoons’ i.e. the spontaneous social groups that arise spontaneously in society.
Yet self-regulation may appear to be too utopian to play a major role in modern democracies. Everyone can understand that tribal groups were able to self-regulate to ensure that forests and fisheries were sustainable. They can understand that their ancestors were able to run schools and hospitals through local community organisations without help from governments. But I expect that many people would feel that there are powerful reasons why self regulation of many areas of life has been displaced by the regulatory apparatus of the democratic state. Is there something about democracy that leads inevitably to taking decisions out of the hands of local communities and placing them into the hands of governments, and then centralizing those decisions at the highest level of government?
This is a big question that I don’t think I can answer adequately at the moment. But I will make a few relevant points.
First, I think it is inevitable that a lot of people will look to politicians to offer solutions to local problems and that politicians will offer such solutions. Politicians do not win many votes by telling voters that they aren’t interested in local problems.
Second, I think that most people are aware that when a politician offers to solve problems by displacing self regulation, then someone has to pay for the costs involved. When people weigh up the benefits of regulation that will take the trouble out of things (to borrow a phrase from Charles Murray) against the additional taxes involved, there doesn’t seem to be any a priori reason why they should choose regulation. Perhaps the problem is that they think other people will pay – which could stem from confusion over tax incidence.
Third, to borrow another thought from Charles Murray (which he may have borrowed from Friedrich Hayek) I think the tendency for government regulation to displace self regulation is related to a tendency for people to see problems from an engineering perspective rather than a healing perspective. There is a tendency to try to solve problems by designing new systems to replace self regulating systems, rather than to think in terms of solutions that will enable self regulating systems to work better. I don’t think there is any fundamental reason why politicians should see themselves as engineers rather than healers.
These considerations provide grounds for optimism that reasonable regulation might be sustainable in a democracy.
The references to Charles Murray are from his book, ‘In Pursuit of Happiness and Good Government’, which I wrote about here and here.
People who refer to themselves as “libertarians” spend a lot of time arguing over exactly what they mean by “libertarian.”
Personally, I try to be fairly “big tent,” figuring that people who self-identify as libertarian tend to get more libertarian after doing so, if a) accepted and b) encouraged to explore libertarian ideas.
So, when I disagree on this or that issue with someone who self-identifies as a libertarian, I generally try to frame that disagreement not as a negative verdict on the other person’s libertarianism, but rather as a possible error on their part as to how libertarian ideas apply to that particular issue.
But the fact is that there are some people who call themselves libertarians who … well, just ain’t libertarians. And the facts on some issues are so incredibly clear that it’s possible to use those issues as litmus tests. If you’re on one side of the issue, you may be a libertarian. If you’re on the other side, no, you aren’t.
One such issue is — to use the phrase fraudulently coined by its opponents — is the “Ground Zero Mosque.”
We’ll get to the fraud in a moment, but it’s really a secondary thing, a side effect. The important part in treating it as a litmus test is this:
If you support private property rights and freedom of religion, you may be a libertarian.
If you don’t support private property rights and freedom of religion, you aren’t a libertarian.
Cordoba House, the project being fraudulently referred to as a “mosque” by those attempting to prevent its construction, is planned for construction on private property and with private funds.
The opponents of Cordoba House are attempting to stop its construction by persuading a government board to declare the building currenly standing at the project’s prospective location “historic” so that the owners can be forced to “preserve” it and forbidden to demolish it and build a structure more to their liking there.
The opponents of Cordoba House oppose private property rights. Their opposition to private property rights stems from their opposition to freedom of religion. They are, therefore, not libertarians.
They’re also either liars or idiots, and the evidence points strongly to the former. Here’s the skinny:
Cordoba House is not a “mosque.” It’s an “Islamic cultural center,” which is no more a “mosque” than your local YMCA is a “cathedral.”
The construction site for Cordoba House is not at “Ground Zero.” It’s two blocks away, on Park Place between West Broadway and Church Street (and, FWIW, farther away than St. Peter’s Roman Catholic Church or St. Paul’s Chapel).
The opponents of Cordoba House generally claim to have knowledge of Islam beyond that of us non-Muslims who don’t obsess over who’s worshiping where. For example, they like to cite chapter and verse on the historical penchant of Muslim conquerors for building mosques on prominent conquered sites.
If they know that much, then presumably they’re not idiots — and if they’re not idiots they also know by now that Cordoba House isn’t a mosque. From that, it follows that they are just lying about it because lying seems more likely to get them what they want.
If they can use Google Maps (and if they can blog, they can surely use Google Maps) they also know that Cordoba House’s construction site isn’t at Ground Zero. From that, once again, it follows that they’re lying because they know that the facts aren’t as emotionally compelling as the fairy tale they’re pushing.
The whole “Ground Zero Mosque” meme is fraudulent in the classic sense: It’s an attempt at theft by deception. By convincing people that a cultural center is a mosque, and that “Ground Zero” is located two blocks north of where it’s actually located, they hope to build popular support for their call on government to steal some things — a piece of land, a building, and the religious freedom of the land/building’s owners — for them.
And fraud, a/k/a theft by deception, isn’t libertarian either.
One persistent problem in America’s political discourse is the misuse of the term “free market.” So-called “conservatives” like President Bush and his Republican acolytes like to claim that they support the “free market,” and liberals, normally skeptical of everything that comes out of conservatives’ mouths, take their word for it. The Right defends the system we have as “free market capitalism,” which aids the Left in its straw-man attacks against it. A side effect of this inexact taxonomy is that real free-market partisans are misconstrued as defenders of “Big Business.” But as Austrian theorist and Cato blogger Roderick Long demonstrates , this is far from being the case.
There is currently a debate raging between the so-called “left” and “right” factions of the libertarian underground. The so-called “left” faction, led by Professor Long, insists that businesses would be smaller and more democratic in the absence of the state. The “right” faction, while not defenders of the current system (which many of them consider to be “fascist”) argue that businesses would be even larger under completely laissez-faire, and this would probably be a good thing.
The libertarian-right’s case is based on the size-limiting effects of anti-trust laws and protectionist trade policies, among other regulations. At first, this argument is compelling, but as Long points out, these effects are likely very minimal when compared to the tremendously destructive impact the government has on would-be small businesses. Just imagine, he says, if there were no longer any licensing requirements for starting a taxi service: tens of thousands of cab companies would start up tomorrow. What if you could open a restaurant in your living room? What if you could start a daycare without jumping through burdensome regulatory hoops? What if you could hire people at any wage at which they were willing to work? Indeed, there would likely be no unemployment under laissez-faire.
It should be stressed that, for the most part, the “left” and “right” factions of anarcho-libertarianism agree on the proper role for government: none . Neither faction supports the regulations that keep firms small or prevent them from starting up at all. This is largely an academic debate about how laissez-faire would work if ever adopted, but both sides agree that it would work better than the current system, and that it is more moral.
Personally, I come down on Professor Long’s side, and I think it’s important for libertarians to differentiate themselves from conservatives at every turn. Libertarians are not conservatives — they are liberals in the classical sense. In fact, modern liberalism is merely a variant of classical conservatism, which is one reason there’s so little difference between the two Establishment parties. Long says that today’s liberals attempt to use conservative means to achieve liberal ends, such as full employment. But in reality, classical liberal ends (laissez-faire) would achieve those ends more effectively, and more morally, too.
To the surprise of most observers, Ron Paul – who claimed he would stay neutral between the presidential candidates of the Constitution and Libertarian parties – endorsed the Constitution Party’s Chuck Baldwin in a blog post made on September 22. Baldwin acknowledged and accepted the endorsement the following day.
Paul, whose candidacy brought together people from diverse ideological backgrounds, is taking a lot of heat for endorsing a man who cites the divisive Jerry Falwell as a hero and mentor. However, where Paul and Baldwin differ most greatly is on the issue of international trade – a subject of particular interest to economics buffs.
Ron Paul, love him or hate him, is one of the world’s most prominent advocates for pure laissez-faire. In fact, many supposed capitalists think Paul goes too far, so it’s important to note that in opposing NAFTA, the WTO, and other “free trade” deals, Paul does so because they put too many rules and regulations on trade.
Baldwin and other right-wing populists – as well as many left-liberals – oppose NAFTA because they’re against international trade. They are protectionists, and as such, they believe in “protecting American jobs.” Paul thinks the best way to create jobs is through real free trade – the exact opposite position.
The Constitution Party’s platform calls for tariffs on all foreign imports to cancel out any price advantages. Baldwin says he favors a 10% across the board tariff on all foreign imports. Ron Paul says that tariffs are “simply taxes on consumers” that “protect politically-favored special interests…while lowering wages across the economy as a whole.”
Baldwin and Paul could not possibly be more different!
You might say, “Yeah, but this is just one issue. Free trade isn’t really that big of a deal, is it?” Well, Ron Paul is a long-time student of the Austrian school of economics, and as a fellow adherent, I’d say that devotion to free trade is perhaps the defining issue – as big as abortion is to Republicans and Democrats.
So why would Ron Paul endorse a candidate who goes against him on a core issue? There are three reasons:
- The Libertarian candidate, Bob Barr, made Paul angry by refusing to participate in the press conference he set up for the four leading “alternative” presidential candidates.
- Ron Paul cares deeply about issues of “national sovereignty,” on which he and his good friend Chuck Baldwin are of the same mind.
- There is one other core economic issue of the Austrian school and the Paul campaign: opposition to the Federal Reserve, and on this issue, Baldwin scores.
If asked to sum up Ron Paul’s campaign in two words, I’d say “anti-war, anti-Fed” (or is that four words?). Baldwin passes that litmus test for Paul, but it’s up to the Congressman’s million-plus followers to decide if Chuck Baldwin makes the grade for them.
Economically speaking, the Democratic and Republican conventions were exercises in massive self-delusion. Barack Obama and his party acolytes bragged about how they would spend money we don’t have (we’re $10 trillion in the hole, by the way), and McCain and the Republicans promised to balance the budget, strengthen the dollar, and close the $70 trillion Medicare/Social Security shortfall, all without a tax hike or fundamental changes to the monetary system.
Neither party talked about the Federal Reserve. The “debate,” if it can be called that, is between a top tax rate of 39.5% (Obama) or 35% (McCain). On economic matters, there is considerably more agreement between the two, supposedly competing American political parties than between factions within the Communist Party of China – and the ChiComms are considerably more economically literate, too.
But ten miles down the road from the Republican Party’s Orwellian big-government love fest, Ron Paul’s Rally for the Republic drew more than 10,000 economically educated patriots, who stood and cheered at the mention of the “Austrian theory of the business cycle,” and repeatedly broke out into impromptu chants of “End the Fed!” Imagine asking John McCain what he thought of the Austrian theory – “we might as well be speaking Chinese,” said author and historian Thomas Woods.
The speakers at Ron Paul’s Rally were a little more diverse than those at the GOP’s official convention, from which Paul – a Republican congressman – was banned. There were arch-conservatives such as Howard Phillips, the founder of Constitution Party, and John McManus, president of the John Birch Society; there were “paleolibertarians” such as Lew Rockwell and the aforementioned Thomas Woods, both of the Ludwig von Mises Institute; and there were fairly mainstream Republicans, such as former New Mexico Governor Gary Johnson and a pair of former Reagan aides, who have come to believe that their party has been hijacked by a dangerous cabal known as the neocons. Oh, and there was the unpigeonholeable Jesse “The Mind” Ventura, who railed against the two-party system for giving us our national debt and also floated some questions about 9/11.
Yes, it was a bit of a motley crew assembled in St. Paul, but that’s what’s great about America: it’s not the land of the lame and home of the homogeneous but the land and home of the free and brave. The conformist conventions of the duopoly, with all of their rules and restrictions, represent an America I don’t want to visit, let alone live in. But if you want diversity, look to the Ron Paul movement: there are pro-lifers and pro-choicers. There are Christian fundamentalists and gay-rights activists. There are border hawks and free-immigration libertarians.
What the heck could unite all these people?
The answer: a sound understanding of economic reality. The Paul crowd is not agitating for an income tax of 35% or even 25% but zero percent. Why? Because they know that the power to tax is the power to destroy. And they don’t pay lip service to “strengthening the dollar” without specific proposals; they know what must be done: the Fed must go the way of Enron, for it is just as corrupt and infinitely more destructive; and gold must be restored to its proper status as monetary base.
Sure, there are “mainstream” economists who would debate these radical proposals. But at the Democratic and Republican national conventions, there was no debate. Four and a half percentage points cannot possibly distinguish a “conservative” from a “liberal” if those terms are to have any meaning. And that the banking and currency system of the U.S. is above reproach – even in light of the recent bubbles, busts, and bailouts – is a black mark against American “democracy.”
A hundred years ago, the people of America were smart enough to debate economic issues. William Jennings Bryan built an entire presidential campaign on silver coinage. The Rally for the Republic showed the American people are still smart enough to consider issues of money and banking.
Last week, I discovered a new rap artist named Tahir Jahi had recorded and released a song called “Man Make Da Money” on his MySpace page. No, this isn’t another “bling-bling” materialistic tune – though those can be good, too – but a rap song critical of…the Federal Reserve?
You bet! Jahi heaps scorn upon the president under whom the Federal Reserve Act of 1913 was passed, Woodrow Wilson, and bemoans the transition from sound money to government fiat currency. Here are some lyrics of interest:
If you don’t know where this nation is headed
our nation is controlled by a system of credit
Woodrow Wilson is the one you can thank
birthed the Federal Reserve a privately owned bank
Each dollar bill includes interest from lender
got rid of gold, paper is legal tender
No Constution, will use our little clause
control the nation’s money who cares about its laws
Jahi is not the only rap artist to criticize America’s central bank, either. The much more well-known Prodigy, of the legendary hip-hop group Mobb Deep, also voiced his opposition to the Fed and support for Republican presidential candidate and anti-Fed crusader Ron Paul. Now Prodigy’s in jail on weapons charges.
But anti-Fed expression in media goes beyond the world of hip hop and of music in general. Last year’s Mad Money – the movie; not to be confused with the CNBC show hosted by mad inflationist Jim Cramer – was, in the opinion of radical free-market economist Doug French, an anti-Fed film. Here’s what he said in an article written for LewRockwell.com, the most widely read libertarian site on the Internet:
Heroically, Mad Money portrays the higher-ups at the KC Fed as pompous and clueless, while normal entrepreneur Junior (Mathew Greer), owner of Junior’s Blues BBQ joint where the three ladies meet to hatch their plans over Budweiser and peanuts, is the sharpest guy in the movie.
It’s about time us hard-money folks had an anti-Federal Reserve movie to enjoy. I’m with Lew, “May this be only the first of a string of anti-Fed movies.”
And finally, there is a new novel out: The Flight of the Barbarous Relic. I was sent a promotional copy of this book, and I haven’t been able to put it down. It tells the story of a free-market, gold-standard-loving economist who “sells out” and becomes Fed chairman, much like Alan Greenspan. The difference is, this fictional Fed head plots the destruction of the fiat-money based monetary system. The novel is a suspense thriller that deals with the government’s efforts to thwart a return to sound money and explains why a fiat-money system is good for only one class of people: those in power. I haven’t finished the book yet, but so far, I’ve found it enormously entertaining, and I highly recommend it.
Mainstream economists like to pretend that monetary theory is something only they care about. They’re deluding themselves, though. There is a growing awareness of the damage caused by the Federal Reserve System among the general public, and Ron Paul’s historic presidential campaign – largely fueled by anti-Fed, pro-free market rhetoric – showed this. Now, these pop-culture anti-Fed works are driving the point home. When will anti-Fed beliefs reach critical mass, and how will the government react when they do? The Flight of the Barbarous Relic offers some insights into this question.
Last Wednesday, Gideon Gono – Zimbabwe’s equivalent of Federal Reserve Chairman Ben Bernanke – issued a $100 billion note.
What can you buy for $100 billion in Zimbabwe? Not quite one loaf of bread.
Zimbabwe is experiencing 12,500,000% inflation – 12.5 million percent. How does inflation get this far out of control? Who can be blamed for it? According to the nation’s dictator, Robert Mugabe, “entrepreneurs” are to blame.
This is, of course, an absurd allegation. How can entrepreneurs possibly cause inflation? “By raising prices,” you might say. But if the total supply of money within an economy is stable, then an entrepreneur raising prices in one industry would necessitate prices falling in another industry. And that’s assuming people were willing to pay the higher prices, for they would be unable to if they lacked the money.
Entrepreneurs can cause a shift in prices, whereby prices rise in one industry and fall in another. But they can only do this in response to the actual desires of people. After all, if I have a shoe store and try to charge US$10,000 for a pair of $20 loafers, people simply will not buy from me – they’ll go to a competitor of mine. Thus, I can’t possibly cause inflation.
“But what if all of the shoe-store owners collude to raise prices?” This is an impossibility, of course, because even if all the existing shoe-store owners did collude to raise prices by, say, 10%, there would be nothing to stop new shoe stores from opening and charging lower prices. There would, however, be an incentive for new entrants to the market, so in the absence of government intervention, this is undoubtedly what would happen.
Now we’re starting to get to the real culprit: the government. If the free market is left undisturbed, then there can be no monopolization of industry, as the example above demonstrates. But let’s just keep going with the example and imagine that somehow a monopoly on shoes – or even a more vital product, such as gasoline – were achieved. Could this cause inflation? If gasoline were more expensive, wouldn’t that have a ripple effect throughout the economy causing all prices to rise?
That’s what we’re told, but it too is an absurd argument. After all, if there is no new money in circulation, prices in the aggregate cannot rise. If the price of gasoline went up, then prices would have to go down elsewhere – even in gasoline-dependent products and industries. People simply cannot spend more money than they have, and thus, something has to give somewhere.
And now we reach the real crux of the matter: prices can only rise, in the aggregate, when there is new money in circulation. What’s more, prices will inevitably rise as more new money is created.
In the U.S., we’ve had massive build-ups in the money supply under former Fed Chairman Alan Greenspan and Bernanke. Prices haven’t gone up nearly as much as we might have expected them to because the new money flowed into real estate in the early nineties, and then tech stocks in the late nineties, and then real estate once again. Now the bubbles have burst and that new money is making it into commodities of real value – like oil and gold.
Last Friday, Zimbabwe – by fiat – revalued its currency so that $10 billion are now equal to $1. We Westerners can look at this Third World country in mockery, but the same thing essentially happened to the U.S. in the aftermath of the Revolutionary War. That’s why the founders put a prohibition on “bills of credit” (debt-based paper money) in the Constitution which also says that only gold and silver can be legal tender.
Strangely, I don’t remember the constitutional amendment that overruled either provision.
So while we may laugh at Mugabe and his people’s plight, my guess is it won’t be so funny when the same thing happens to us. Just as David Ricardo said, “money that costs nothing will eventually be worth nothing.” Changing the number of zeros on a bill does not change this timeless principle.
Conservatives talk about how great America’s “free market” is, while those on the political left are critical of the “free market’s excesses.”
What are they talking about?
We have nothing even closely resembling a “free market” in the United States, and the latest news surrounding Fannie Mae, Freddie Mac, and the Federal Reserve underscores that point.
People are generally confused about Fannie and Freddie: Just what or who are they? Well, let’s start with Fannie: Fannie Mae is the nickname given to the Federal National Mortgage Association (FNMA), an agency created four years after the Federal Housing Administration (FHA), which was one of FDR’s New Deal programs. The FHA, born in 1934, sought to “standardize” mortgages by insuring loans that conformed to government guidelines. The FNMA (Fannie Mae) would then buy these mortgages from the originators and pool them into marketable securities – i.e. financial assets that could be bought and sold by investors. An FNMA security might contain 100 mortgages, for example, and that way, if five of those mortgages failed, investors would only lose out on 5% of their investment. In this way, the government sought to lower the “credit risk” premium of mortgages and make homeownership more affordable to average Americans.
Sounds good, right? Well, there’s always a catch. But first, let’s continue with Freddie Mac.
In 1970, the government gave Fannie Mae the authority to purchase and securitize any mortgage – not just those that adhered to FHA guidelines – and created the Federal Home Loan Mortgage Corporation (FHLMC – “Freddie Mac”) to do Fannie’s old job. Now the government had it’s hands in virtually every kind of mortgage imaginable – though exactly where this power was enumerated in the Constitution is unclear.
Of course, Fannie and Freddie aren’t truly government agencies. In rejecting socialism, the government opted for fascism: government partnership with business. Fannie and Freddie are “privately owned” publicly traded stocks on the New York Stock Exchange, so their profits are privatized…but their losses are always socialized.
Since the mortgage meltdown – created by the Federal Reserve’s inflationist monetary policies – Fannie and Freddie’s stocks have been in the toilet. Over the past couple of weeks, each of the firms has lost billions in market capitalization. On July 10, Fannie closed at $13.20 and Freddie at $8 – the 52-week highs for the stocks are $70.57 and $67.20, respectively. During the next day’s trading, Fannie and Freddie hit session lows of $6.68 and $3.89.
And then the Fed intervened.
Chairman Bernanke announced that the Fed would stand by to bail out the firms, and the stocks – down as much as 40% for the day – rebounded, closing at $10.25 and $7.75, respectively.
Think this isn’t a big deal? Consider this: The swing from $6.68 to $10.25 for Fannie Mae represented a change in value worth nearly $3.5 billion, and Freddie’s swing from $3.89 to $7.75 was worth $2.5 billion. In all, $6 billion changed hands on Friday, all based on a few words from the Fed chairman. The investors who threw in the towel, recognizing that, in a free economy, Fannie and Freddie would be done-for, were suckers. Those who stepped in to buy the stocks at that point, confident that the government would intervene, profited by billions.
And they call this a “free” market?
Just imagine if some investors might have had some advance knowledge that Bernanke would make those comments.