Archive for the ‘liberty’ Category

The Western model of democratic government is broken. Successive body blows to individual liberty have left our political system with more than just a bloodied nose. Everywhere you look you see the slow creep of unchecked Executive power,  new restrictions on freedom of speech and all-powerful central planners and technocrats making decisions with absolutely no democratic mandate.

Long cherished and hard-fought for rights, such as freedom of the press are now under serious threat. Your  allegiance to a mainstream political party could exclude you from fostering a  child. The most powerful man in the world is able to send unmanned drones into another sovereign territory to perform ritual executions, without so much as  a whiff of due process. The expression of an opinion that is contrary to the mainstream groupthink will ensure you receive a swift visit from the state’s bully boys in blue. George Orwell move over. 1984? This is 2012.

The state has assumed so much power in part because it has been able to cushion people from the consequences of their own actions. Concentrated gains for some are paid for by dispersed costs for the many, thus ensuring the minimum of hissing from the goose as it is slowly plucked. Decisions are centralized and tax and regulation is harmonized. The pluralism and competition that was responsible for pre-World War II Europe’s staggering growth and innovation has now been stifled by the increasing erosion of national sovereignty by the EU. The state offers it’s citizens answers to many of life’s problems, hilariously unaware that many of these problems exist because of state intervention in the first place. Intervention upon intervention is called for to fix the side effects of previous interventions.

Cui bono? Do you ultimately believe in the maternal/paternal model of the state that runs society to the benefit of it’s incapable of children? Or do you see the modern state as the machinery of a ruling elite for extracting the maximum amount of wealth out of the productive portion of society?

Philip Bagus illustrates the true nature of the state in “The Tragedy of the Euro”  (if you have an e-reader you can download the e-book or PDF from mises.org for free!):

“The state is the monopolist of coercion and the ultimate decision maker in all conflicts in a given territory. It has the power to tax and make all manner of interventions.

The ruling class is exploitative, parasitic, unproductive, and has a strong class consciousness. It needs an ideology to justify its actions and prevent rebellion of the exploited class. The exploited class represents the majority, produces wealth, is indoctrinated into obedience to the ruling class, and has no special class consciousness”

The current ideology of the ruling class is a toxic mix of welfarism,  interventionism and mercantilism. They have cleverly narrowed the field of debate so that any opinions and ideas contrary to the service of their own vested interests are frowned upon as taboo, or even punished by imprisonment.

The elitist left display a staggering level of cognitive dissonance  when they talk about the danger of monopolistic corporations exploiting consumers whilst simultaneously providing hearty support to such paragons of consumer choice as the BBC and the NHS. The elitist right lavishly applaud the wealth generating (sic) financial industry with blind ignorance to it’s priveleged position to create money out of thin air, backstopped by the white-hot ink jets of an independent (sic!) central bank.

It’s enough to drive a man to drink… No wonder minimum alcohol pricing is on the cards.

“Consider the following sequence of cases, which we shall call the Tale of the Slave, and imagine it is about you.

1. There is a slave completely at the mercy of his brutal master’s whims. He often is cruelly beaten, called out in the middle of the night, and so on.

2. The master is kindlier and beats the slave only for stated infractions of his rules (not fulfilling the work quota, and so on). He gives the slave some free time.

3. The master has a group of slaves, and he decides how things are to be allocated among them on nice grounds, taking into account their needs, merit, and so on.

4. The master allows his slaves four days on their own and requires them to work only three days a week on his land. The rest of the time is their own.

5. The master allows his slaves to go off and work in the city (or anywhere they wish) for wages. He requires only that they send back to him three-sevenths of their wages. He also retains the power to recall them to the plantation if some emergency threatens his land; and to raise or lower the three-sevenths amount required to be turned over to him. He further retains the right to restrict the slaves from participating in certain dangerous activities that threaten his financial return, for example, mountain climbing, cigarette smoking.

6. The master allows all of his 10,000 slaves, except you, to vote, and the joint decision is made by all of them. There is open discussion, and so forth, among them, and they have the power to determine to what uses to put whatever percentage of your (and their) earnings they decide to take; what activities legitimately may be forbidden to you, and so on.

Let us pause in this sequence of cases to take stock. If the master contracts this transfer of power so that he cannot withdraw it, you have a change of master. You now have 10,000 masters instead of just one; rather you have one 10,000-headed master. Perhaps the 10,000 even will be kindlier than the benevolent master in case 2. Still, they are your master. However, still more can be done. A kindly single master (as in case 2) might allow his slave(s) to speak up and try to persuade him to make a certain decision. The 10,000-headed monster can do this also.

7. Though still not having the vote, you are at liberty (and are given the right) to enter into the discussions of the 10,000, to try to persuade them to adopt various policies and to treat you and themselves in a certain way. They then go off to vote to decide upon policies covering the vast range of their powers.

8. In appreciation of your useful contributions to discussion, the 10,000 allow you to vote if they are deadlocked; they commit themselves to this procedure. After the discussion you mark your vote on a slip of paper, and they go off and vote. In the eventuality that they divide evenly on some issue, 5,000 for and 5,000 against, they look at your ballot and count it in. This has never yet happened; they have never yet had occasion to open your ballot. (A single master also might commit himself to letting his slave decide any issue concerning him about which he, the master, was absolutely indifferent.)

9. They throw your vote in with theirs. If they are exactly tied your vote carries the issue. Otherwise it makes no difference to the electoral outcome.

The question is: which transition from case 1 to case 9 made it no longer the tale of a slave?”

Nozick, Robert (1974). Anarchy, State and Utopia

From page 154-155, “Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System” by Kevin Dowd and Martin Hutchinson. Referring to the causes of the 2008 financial crisis:

“It is here that one can most ferociously blame Fed Chairmen Alan Greenspan and Ben Bernanke, and their decade and more of irresponsibly cheap money. By distorting price signals throughout the economy and producing burst bubble after burst bubble without any significant improvement in living standards except at the very top, they have not only gravely damaged the economy, but enabled the Left to claim that free markets “don’t work” so we must bring in government and the unfortunate taxpayer to solve our economic problems. Of course, this crisis is not a failure of free markets and not even a failure of capitalism – unless you accuse modern mangerialist crony capitalism, in which case you would be right.”

This quote jumped off the page at me. It surmises the cause the cause of the boom that lead to the bust – low interest rates and loose monetary policy (as the authors point out on page 154, from 1995 the Fed expanded the money supply 5% faster than output for 13 years). It hints at the damage this has caused to the reputation of both free markets and capitalism, even though it had very little to do with either. It also correctly acknowledges that much of the growth and rise in living standards enjoyed during the boom was illusory.

It is a fascinating world we live in. There are few people who suggest that the government should control the price of milk or manipulate the supply of shoes.  Luckily, most people recognise that government is hilariously incompetent at the functions it already performs and would resent it encroaching into areas where the free market already provides a valuable service.

Yet when it comes to money, the masses are blissfully ignorant. Money is a commodity like most other goods, albeit a special one with value added as a widely accepted medium of exchange. So why are we happy that governments (through their central banks) are allowed to manipulate the price (interest rates) of money?

We accept that the government would do a lousy job of supplying milk but simultaneously believe that it’s all knowing bureaucrats can somehow get the supply of money just right. We would rightly shudder at the thought of the government setting the price for a pair of shoes but are perfectly happy to allow  it’s all knowing functionaries the discretion of setting interest rates.

Money is not the creation of the state. Just as the state did not invent money, nor is the state required to manage money. Money came from people, emerging through “spontaneous order”. People, interacting with each other through voluntary exchange gradually realised that certain commodities are uniquely desirable to use as money (due to properties such as divisibility and function as a store of value etc).

So what materials did individuals (free from government coercion) decide to use as their preferred money? The historical record is clear – they chose gold and they chose silver. I know of no example when people, free to choose, have settled upon paper. This is because paper money is intrinsically worthless. It can only function as money via government “fiat”, coercively imposed upon society via legal tender laws.

It shouldn’t take a great deal of imagination to understand why the state likes it this way. The printing press gives the state an unrivalled power – the ability to create money out of thin air. Except it is nothing like as harmless as that. The price is paid for by those who save, those with pensions and those on lower incomes. Inflation is a stealth tax on the poor and the thrifty, simultaneously eroding the value of saved capital and redistributing wealth from the poorest to the richest in society.

The financial sector is largely complicit in this redistribution, benefiting as the first recipients of the freshly printed money. They enjoy the benefits of the new money before inflation has eroded its purchasing power. By the time the new money reaches the poorest in society, any benefit to be derived from it has been wiped out by the increase in prices. Thus are the poor forced to pay more for everyday items and sacrifice a portion of their savings through loss in purchasing power.

Further damage is caused by the “misallocation” of capital as a result of low interest rates. In English, this means that when money is cheap people invest it in products, processes and ventures which are not sustainable. Sub-prime housing bubble anyone?

Interest rates should convey information about the time preferences of society. When people value present consumption more they will save less, driving interest rates up. When people defer consumption they save more, which drives interest rates down. However, in our current, centrally planned monetary system the interest rate is just an arbitrary number decided upon by a central bank committee (sound soviet enough for you?). The entrepreneur looking to invest capital receives a false signal – artificially low interest rates will falsely signal that society is prepared to defer consumption and has saved more capital to be in invested in longer, more marginal production processes. Except that society has done no such thing. Businesses inevitably make foolish investments and begin production of products which later turn out to be unprofitable. The end result? Boom followed by bust.

The neatest trick of all is that somehow all of this is blamed on free market capitalism. It should be clear that there is nothing free market about fiat money and centrally planned interest rates. The blame lies squarely with the state.

The debate between fiat and commodity monetary standards is slowly re-entering the mainstream. See here, here and here. To those new to the subject, this is simply a debate as to whether the money in your pocket is backed by nothing other than government mandate and coercion (fiat) or a by a physical commodity that has value beyond it’s use as money (usually gold or silver).

This is a debate which many had considered to be closed, an argument that only existed on the fringes of academia amongst eccentric free marketeers. Succesive rounds of quantitative easing, coupled with negative real interest rates have thrust this debate back into focus.

It is bizarre that it has taken so long for this issue to re-surface. The intellectual superiority enjoyed by paper money is based on a 42 year experiment that has seen the value of all paper monies race each other toward their intrinsic value – ZERO.

The alternative, a commodity standard based on gold or silver (or a combination) is viewed  by the mainstream as atavistic, “a barborous relic”. This completely overlooks the historical track record of commodity money as society’s choice of preferred choice of exchange media.

The majority of coverage will argue against the gold standard, no doubt citing the flawed gold bullion standard (1925-1931) and Bretton Woods system (1946-1971) as representative of the failings of commodity backed monies.  Neatly overlooking that both standards were not the product of the free market but centrally planned and enforced by government.

The establishment has good reason to fear the return of a TRUE gold standard via the free market, beyond the control and manipulation of government and central bank. Such a gold standard would enforce fiscal responsibility, removing the state’s ability to run up unsustainable debt backstopped by the printing press. The current monetary world order is a top down system, designed, implemented and controlled by state bureaucrats and apparatchiks for the benefit of the establishment and it’s chosen favourites. There are plenty of vested interests who are keen to see it remain that way.

I would encourage the reader to look beyond the standard criticisms. One thing is for certain – the gold standard is back on the radar. This can only be a postive thing, especially as the loose monetary policy pursued by central banks world over causes more people  to wake up to the reality of their savings  being stolen through central bank induced inflation.

I’m becoming more and more interested in the idea of anarcho-capitalism.

We are conditioned to view the world through the paradigm of the nation state, international borders and sovereign power. But just what is the state? Is it relevant? Is it even legitimate?

The more I think about it the more I realize just how arbitrary the state actually is. I certainly don’t think that the state was created to benefit all mankind. More likely it was a cynical power grab by a plutocratic elite who realized that the state could be used to legitimize their use of force to consolidate their privileged position. Some may argue that the state is a means of performing collective action which would not be possible through voluntary interactions between free individuals, such as war. This may be true but how do we actually know? Who is to say that private individuals couldn’t arrange their own defence satisfactorily through private means? If that puts a stop to aggressive war mongering all the better. The record of the state in this regard is well documented, with centuries of war, aggression and killing to stand as testament.

Strike down the state with all of your hatred and your journey towards the anarcho-capitalist side will be complete

The problem I have is this – how can I advocate liberty but at the same time support any kind of state, regardless of how small? How can I decide what the proper remit of the state should be without imposing my own preferences on the rest of society? Nobody can opt out from what the state imposes because it is not a voluntary relationship. I can stop eating at McDonalds, choose to shop at Tesco instead of Asda and wear Nike trainers instead of Adidas. I have no such discretion in matters which involve the state.  The chimera of democracy is offered as a piecemeal sedative to the masses, an illusion that the masses possess some sort of influence over their beneficent masters. But no matter who you vote for, the government always wins. This is the danger when we decide what we think it is appropriate for the state to do – we are forcing others to conform to a way of living which we find desirable but which others do not. Can this ever be justified? Is it not hypocritical to think that state intervention and coercion is morally illegitimate yet only go as far as promoting a “smaller” state?

Truly free markets are just that – free, and do not suffer the interventions of the state. The state has always looked on jealously at the innovation and wealth creation made possible by markets, like a burglar peeking through someone’s front window.  The tendency of the state is always to grow larger, a self replicating monolithic bureaucracy that breeds its own army of foot soldiers on a staple diet of dependency and empty promises. This ever expanding monster needs money to sustain its growth. The private sector is easy prey for a state with a big appetite as the state can always rely upon its monopoly on the legal use of force to extract revenue from private individuals and businesses.

The more the state encroaches on the private sector, the more life it sucks out of the economy. Eventually it becomes trapped in a circle of ever diminishing returns. Every malinvested penny spent by the state  is penny that could have been used by the private sector. Sure, not all money spent by the state is wasted. Likewise, not all money spent by the private sector is invested wisely. But the private sector has a key advantage – prices.

Prices are amazing. They convey information between participants in a market. This allows the private sector to efficiently allocate resources based upon people’s real demands. Of course, markets are never perfect and mistakes are often made. But free markets have the ability to assess this misallocation of resources and adjust accordingly because prices will guide the market to correction. For instance, if a rubber duck costs more to make than people are willing to pay for it  then companies producing rubber ducks will lose money. This signals to entrepreneurs that resources are not being used efficiently and should be redirected towards other activities, such as producing yo-yos. The entrepreneurs could also work out more efficient and productive techniques to produce  the ducks. By doing this they may be able to lower the cost of production to a level which allows  the duck to be sold a price acceptable to the consumer and  also create a profit.  This profit tells the entrepreneur to keep doing what he is doing. It rewards the producer for enriching the lives of his customers. It encourages him to do it more. If profits are big it encourages others into the market, thereby increasing supply to satisfy demand and thus normalize profits. This increased level of competition also makes producers work harder to maintain their market share and profit margins (or in other words, their signal that they are using resources efficiently) by coming up with more efficient and productive processes. This competition drives down the cost of the product and society benefits from cheaper goods.

The public sector has no equivalent to prices. For instance, if a entrepreneur in a company hires a new worker to increase productivity and generate more profits he will be able to use the price system as a way of assessing the success of his investment. If he makes more money as a result then the worker keeps his job, maybe even more people get hired. If he loses money then the price system will tell him that he is not utilizing resources efficiently, the likely result being in the worker losing his job.  The same process can not occur in the public sector. The government can not assess demand like the free market can. Society can not accurately inform the government how much it is prepared to pay for bridges, local council art, flower beds or whatever else the state aims to provide. The government tells you how much you pay for it. Think about that. In every private business individuals co-operate to increase their own wealth by trading for things which they value more than the thing they trade the other way. It’s a two way gain. The shop keeper values your 50pence more than he values his one newspaper. You value the newspaper more than the 50pence or else why would you give the 50 pence up for it? A trade is completed and both parties benefit. Both parties will likely thank each other, which neatly symbolizes the mutual benefit of this arrangement. Now try and remember the last time you thanked the government for taking your taxes. Sure, you get things in return. But you don’t necessarily value them more than the money the state took from you by force.  The cost to you in taxes may be clear, but the cost to your liberty is more subtle.

Is that a price worth paying?

A Healthy Attitude Towards Rights?

What is it about people and free health care? More specifically, what is it which leads people to believe they are entitled to free health care? This may seem a stupid question – people naturally prefer to be healthy as opposed to ill. People also prefer things to be free rather than have to pay for them. But this does not explain the sense of entitlement. Naturally, there is a lot of emotional rhetoric that accompanies this subject as most people will know someone who has or is struggling with an ailment. We tend to empathize with the plight of people who are struggling with serious health issues as it brings home the true reality of our own mortality.  But for some reason we seem to have reached a stage where many people believe that access to healthcare is a divine right and that it would be far too callous to leave such an important function to the speculative whims of a free market. To put it differently, healthcare has become synonymous with government intervention.

How did we get here?

Thanks to modern medicine the human race has never before been is so privileged a position as to be able to tackle many of the bacterial, viral and genetic blights that have afflicted every single previous generation. Life expectancy today is at a level which would of been unthinkable only 100 years ago. Diseases whose names used to be whispered in fear are know dispatched by treatments that are, for the most part, widely available to all of society. Even in preventative terms we now know more about the causes of disease than ever, allowing us to tailor our lifestyles in such a way that common ailments are thus avoided.  It may seem strange to say this but we have never had it so good. Of course, people still get ill and suffer from terrible, debilitating disease but that is part of human nature. No foreseeable advance in medical science or technology promises us life eternal – people will continue to get ill and people will continue to die. The real problem is that alongside the development of new medical science has grown the unerring belief in government intervention and statism. This is part of a wider trend that began in the 20th century that goes in hand in hand with the development of the modern welfare state. Many things that were previously considered as commodities obtained through productive endeavor have now been re-classified as entitlements, rights or handouts. Don’t want to work and be a productive member of society? Simples, sit on your derriere all day and let the state pick up the bill. Not interested in working and saving for your future? Easy, just allow the state to use it’s monopoly on the use of force to obtain the necessary funds from your fellow citizens to allow you to have a cosy retirement. Of all the things the state is now obligated to provide, healthcare is surely the most sacred cow of all. If you don’t want consider to consider the fact that, yes, you are human and your body will break? No problem, let the state pay for the inevitable consequences of your poor diet, addictions and mortality. The modern state has quite simply destroyed the link between actions and consequences.

It is true that disease, illness and disability are quite often not the fault of a person’s own actions (putting aside foolish lifestyle choices – the consequences of which should be borne by the individual). But this is no more a reason to consider that healthcare (or  any other commodity for that matter) is in any way a right. This misinterpretation of rights is a dangerous phenomenon, and was made possible only through the relentless creep of the collective mindset and it’s ultimate proxy – the state.

The belief that things such as food, shelter, healthcare and internet access (if the UN gets it’s way)  is a basic  human right has led to a horrible corruption. The corruption of the true definition of rights, the defilement of liberty and the castration of individual freedom.  Let me make this clear. NOBODY has any right to the product of any one else’s labour. Similarly, NOBODY has any right to the fruits of your own productive labour. Food, shelter, healthcare, internet access, coffee, haircuts, literature and yo-yos are all products of a person’s personal creativity, intellect and physical effort. To say you have a “right” to these products is to say that you have a right to the very things which created them. In effect, you are claiming dominion over your fellow man, enslaving those who would produce them and denying them the opportunity to better their own position using the products of their own mind and hands.

Let us imagine a simplified situation. Imagine that a small number of people are stranded on a desert island. For a short while the sun shines, the coconuts and fresh fish are bountiful and life is generally peachy. One person may be especially good at climbing trees to get coconuts, one may be an expert fisher and another may make a cracking grass skirt. When this is established it will be obvious to the group that rather than each person spend all of their time collecting their own coconuts, catching his own fish and making his own grass garments that it would make far more sense to trade with each other, each person focusing on his own area of expertise. The first stage in the division of labour is therefore accomplished. Each individual is still able to obtain the goods he desires by trading his own produce with that of others.  When these trades between the islanders occur WEALTH IS CREATED. Each person who voluntarily trades with another values the thing he attains more than the goods he sacrificed in order to attain it. This works both ways. Tom has 20 coconuts and is willing to trade 3 of these for one fresh fish which Dave has caught. Tom therefore values the one fish MORE highly than the 3 coconuts he has collected. Likewise, if Dave agrees to the trade then he values 3 coconuts more highly than the one fish he would trade to attain them. By this process both parties benefit, wealth is created and this small society’s resources are efficiently allocated based on people’s real desires. Notice that this whole process can only occur if it is clear who owns each resource (property rights) and if each party agrees not to attain goods by using force or coercion (rule of law). Property rights are especially important – they recognize that an individual’s own ability to perform his specialist task gives him the right to the produce of that task. For example, Dave’s keen eyesight, patience and reactions allow him to catch more fish. These skills are Dave’s and the produce he gains from employing them is therefore his also.  Another important aspect of this scenario is that because each trade is voluntary the value of goods is easily defined by the price each person is willing to pay for each good.  This may sound obvious, but in a society where with no property rights it would be impossible to distinguish how highly goods are desired (and therefore valued). Prices convey important information as to the preferences and desires of individuals. In this way they help ensure that resources are utilized efficiently in line with society’s wants. When someone is entitled to take the product of another’s labour by force then this information is  not apparent and the provision of goods and services will become out of kilter with real consumer preferences.

So, the islanders attain their food by a free market interaction (a voluntary trade between two property owners). They also attain their clothing in the same manner. Let us also presume that their need for shelter is also provided in this way. By doing this each islander recognizes that they have no right to take the produce of others and must voluntarily trade with one another in order to attain the objects they desire. But what of health care? Surely, everybody has a right to be healthy. After all, it won’t be anybody’s fault if they contract a tropical illness. It’s surely bad luck if Tom slips from the coconut tree and breaks his leg. And Dave certainly never asked for the shark to give him a nasty bight on the arm. Surely it is for the benefit of all parties that they remain healthy and able to keep on producing the goods that they themselves and others need. Well, no. At least I don’t think it is as simple as that.

Not many people would think that they have any right that entitles them to be fed, clothed and sheltered by others. That is not to say that charity shouldn’t provide these things to people in need but only on a voluntary basis. But a right to be fed? Try citing this right the next time you walk out of a supermarket with a  trolley full of food without paying. Demand your entitlement to shelter by forcing your way in to the nearest mansion and making yourself at home. We just don’t do things like this because we instinctively recognize that they are morally wrong. We know that the food in the shop belongs to the supermarket until we agree to pay for it. We know that it is wrong to take or use another person’s property via the use of force.

This is the central point. Nobody has the right to take by force (using their own power or the state as their proxy)  anything that has been produced by the productive endeavor of another. The tragedy is that because of the emotional connotations that surround healthcare the debate has become misinformed, distorted and politicized. Until people understand this a rational debate on the future of the NHS and the welfare state in general will be impossible. One thing however is for certain. The need for debate is urgent. There simply aren’t enough coconuts, fish and grass skirts left to pay for it all.