The Tyranny of Government Courts and Prisons
[Excerpted from For a New Liberty (1973)]
Compulsory labor permeates our legal and judicial structure. Thus, much-venerated judicial procedure rests upon coerced testimony. Since it is axiomatic to libertarianism that all coercion — in this case, all coerced labor — against everyone except convicted criminals be eliminated, this means that compulsory testimony must be abolished as well. In recent years, it is true, the courts have been alive to the Fifth Amendment protection that no alleged criminal be forced to testify against himself — to provide the material for his own conviction. The legislatures have been significantly weakening this protection by passing immunity laws, offering immunity from prosecution if someone will testify against his fellows — and, furthermore, compelling the witness to accept the offer and testify against his associates. But compelling testimony from anyone for any reason is forced labor — and, furthermore, is akin to kidnapping, since the person is forced to appear at the hearing or trial and is then forced to perform the labor of giving testimony. The problem is not only the recent immunity laws; the problem is to eliminate all coerced testimony, including the universal subpoenaing of witnesses to a crime, and then forcing them to testify. In the case of witnesses, there is no question whatever of their being guilty of a crime, so the use of compulsion against them — a use that no one has questioned until now — has even less justification than compelling testimony from accused criminals.
In fact, the entire power to subpoena should be abolished, because the subpoena power compels attendance at a trial. Even the accused criminal or tortfeasor should not be forced to attend his own trial, since he has not yet been convicted. If he is indeed — according to the excellent and libertarian principle of Anglo-Saxon law — innocent until proven guilty, then the courts have no right to compel the defendant to attend his trial. For remember, the only exemption to the Thirteenth Amendment's prohibition of involuntary servitude is "except as a punishment for crime whereof the party shall have been duly convicted." An accused party has not yet been convicted. The most the court should be able to do, then, is to notify the defendant that he is going to be tried, and invite him or his lawyer to attend; otherwise, if they choose not to, the trial will proceed in absentia. Then, of course, the defendant will not enjoy the best presentation of his case.
Both the Thirteenth Amendment and the libertarian creed make the exception for the convicted criminal. The libertarian believes that a criminal loses his rights to the extent that he has aggressed upon the rights of another, and therefore that it is permissible to incarcerate the convicted criminal and subject him to involuntary servitude to that degree. In the libertarian world, however, the purpose of imprisonment and punishment will undoubtedly be different; there will be no "district attorney" who presumes to try a case on behalf of a nonexistent "society," and then punishes the criminal on "society's" behalf. In that world the prosecutor will always represent the individual victim, and punishment will be exacted to redound to the benefit of that victim. Thus, a crucial focus of punishment will be to force the criminal to repay — make restitution to — the victim. One such model was a practice in colonial America. Instead of incarcerating, say, a man who had robbed a farmer in the district, the criminal was coercively indentured out to the farmer — in effect, "enslaved" for a term — there to work for the farmer until his debt was repaid. Indeed, during the Middle Ages, restitution to the victim was the dominant concept of punishment. Only as the State grew more powerful did the governmental authorities — the kings and the barons — encroach more and more into the compensation process, increasingly confiscating more of the criminal's property for themselves and neglecting the hapless victim. And as the emphasis shifted from restitution to punishment for abstract crimes "committed against the State," the punishments exacted by the State upon the wrongdoer became more severe.
As Professor Schafer writes, "As the state monopolized the institution of punishment, so the rights of the injured were slowly separated from penal law." Or, in the words of the turn-of-the-century criminologist William Tallack,
It was chiefly owing to the violent greed of feudal barons and medieval ecclesiastical powers that the rights of the injured party were gradually infringed upon, and finally, to a large extent, appropriated by these authorities, who exacted a double vengeance, indeed, upon the offender, by forfeiting his property to themselves instead of to his victim, and then punishing him by the dungeon, the torture, the stake or the gibbet. But the original victim of wrong was practically ignored.
At any rate, while the libertarian does not object to prisons per se, he does balk at several practices common to the present judicial and penal system. One is the lengthy jail term imposed upon the defendant while awaiting trial. The constitutional right to a "speedy trial" is not arbitrary but a way of minimizing the length of involuntary servitude before conviction for a crime. In fact, except in those cases where the criminal has been caught red-handed and where a certain presumption of guilt therefore exists, it is impossible to justify any imprisonment before conviction, let alone before trial. And even when someone is caught red-handed, there is an important reform that needs to be instituted to keep the system honest: subjecting the police and the other authorities to the same law as everyone else. As will be discussed further below, if everyone is supposed to be subject to the same criminal law, then exempting the authorities from that law gives them a legal license to commit continual aggression. The policeman who apprehends a criminal and arrests him, and the judicial and penal authorities who incarcerate him before trial and conviction — all should be subject to the universal law. In short, if they have committed an error and the defendant turns out to be innocent, then these authorities should be subjected to the same penalties as anyone else who kidnaps and incarcerates an innocent man. Immunity in pursuit of their trade should no more serve as an excuse than Lieutenant Calley was excused for committing atrocities at My Lai in the course of the Vietnam war.
The granting of bail is a halfhearted attempt to ease the problem of incarceration before trial, but it is clear that the practice of bail discriminates against the poor. The discrimination persists even though the rise of the business of bail-bonding has permitted many more people to raise bail. The rebuttal that the courts are clogged with cases and therefore cannot grant a speedy trial is, of course, no defense of the system; on the contrary, this built-in inefficiency is an excellent argument for the abolition of government courts.
Furthermore, the setting of bail is arbitrarily in the hands of the judge, who has excessive and little-checked power to incarcerate people before they are convicted. This is particularly menacing in the case of citations for contempt of court, because judges have almost unlimited power to slap someone into prison, after the judge himself has acted as a one-man prosecutor, judge, and jury in accusing, "convicting," and sentencing the culprit completely free from the ordinary rules of evidence and trial, and in violation of the fundamental legal principle of not being a judge in one's own case.
Finally, there is another cornerstone of the judicial system which has unaccountably gone unchallenged, even by libertarians, for far too long. This is compulsory jury service. There is little difference in kind, though obviously a great difference in degree, between compulsory jury duty and conscription: both are enslavement, both compel the individual to perform tasks on the State's behalf and at the State's bidding. And both are a function of pay at slave wages. Just as the shortage of voluntary enlistees in the army is a function of a pay scale far below the market wage, so the abysmally low pay for jury service insures that, even if jury "enlistments" were possible, not many would be forthcoming. Furthermore, not only are jurors coerced into attending and serving on juries, but sometimes they are locked behind closed doors for many weeks, and prohibited from reading newspapers. What is this but prison and involuntary servitude for noncriminals?
It will be objected that jury service is a highly important civic function, and insures a fair trial which a defendant may not obtain from the judge, especially since the judge is part of the State system and therefore liable to be partial to the prosecutor's case. Very true, but precisely because the service is so vital, it is particularly important that it be performed by people who do it gladly, and voluntarily. Have we forgotten that free labor is happier and more efficient than slave labor? The abolition of jury-slavery should be a vital plank in any libertarian platform. The judges are not conscripted; neither are the opposing lawyers; and neither should the jurors be.
It is perhaps not a coincidence that, throughout the United States, lawyers are everywhere exempt from jury service. Since it is almost always lawyers who write the laws, can we detect class legislation and class privilege at work?
The headlines scream, "Is this Baby in Danger Due to Hoarding Grandma?"; "The Horrors of Hoarding"; and "Animal 'Hoarding' Often Tied to Mental Illness." Meanwhile, a popular TV series entitled Hoarders focuses upon people whose "inability to part with their belongings is so out of control that they are on the verge of a personal crisis"; like drug addicts, they require an intervention. The vilification of hoarders as mentally ill, child-endangering animal abusers is in full swing.
What is this vile and dangerous thing called hoarding? The noun "hoard" is defined as "a store of money or valued objects, typically one that is secret or carefully guarded." The verb means to "save up as for future use." In common usage, anyone who stores more of a good than their neighbors do is often viewed as a "hoarder."
A common example of hoarding is stocking up on durable grocery items — such as canned goods, rice, or pasta — when they are on sale, so that your family has a year's supply of staples in the house. In rural areas, this is known as "keeping a good pantry."
Historically, governments have frowned upon hoarding. Especially in bad economic times, stigmatizing the hoarder for "causing" high prices or shortages because he buys more than his "share" serves a useful political purpose. They divert attention away from government policies, such as tariffs, that are the true cause of empty shelves and high prices. By stirring up resentment toward neighbors who own one more can of peas than you do, politicians avoid the full and just brunt of public anger.
In times of economic crisis, when governments flirt with rationing and price controls, the frown can turn into a scowl; laws against hoarding are then passed and goods are sometimes confiscated. The most notorious confiscation in America came in 1933 when President Franklin D. Roosevelt signed Executive Order 6102, ostensibly as a measure to combat the Great Depression. The order commanded the American people (with a few exceptions) to relinquish all but a still-permitted $100 worth of gold coins, bullion, and certificates to the Federal Reserve in exchange for a payment of $20.67 per troy ounce. Less than a year later, the government raised the trade rate to $35 per troy ounce. Thus, the government reaped huge profits at the expense of private investors and savers — a.k.a. hoarders of gold.
Hoarding, like any other human activity, can become obsessive. But in its common form, hoarding is nothing more than preparing for the future by laying aside a store of items you and your family may need. This is an especially valuable practice during economic instability, when necessary supplies can become scarce or suddenly double in price.
The Austrian investment counselor Jack Pugsley once explained another perspective on hoarding: it is an investment. A low-income family may not be able to afford precious metals, but they can afford to invest in dry or canned consumables. Last year, with some frequency, my grocery store sold a 900-gram package of pasta for 99¢. With wheat shortages, and with the American government diverting almost 30 percent of corn crops into producing ethanol, food products dependent on grain have skyrocketed. The same package of pasta now regularly costs $2.99. If a struggling family bought 60 packages of the 99¢ pasta for a future consumption of one package a week, then their hoarding would have knocked perhaps $100 off their grocery bill. By consistently buying more than they immediately need of bargain items, the family can build a solid pantry to sustain them through unemployment, inflation or scarcity.
Unfortunately, during economic crises, the government also acquires an interest in hoarding — specifically, in punishing the hoarder as unpatriotic. A historical example is the Food and Fuel Control Act, which became law in 1917, during World War I; the acts official name was "An Act to Provide Further for the National Security and Defense by Encouraging the Production, Conserving the Supply, and Controlling the Distribution of Food Products and Fuel." In short, the government became a food dictator, and anyone possessing more than a 30-day supply of food (which was considered reasonable by food administrator Herbert Hoover) could be arrested.
The May 30, 1918, New York Times carried the headline, "Navy Man Indicted for Food Hoarding." It reported on a man who had invested his wife's inheritance in a year's food for storage; and so they were held on a $3,000 bail each. The food was confiscated.
The navy man's fate is a cautionary tale in more than one way. The store of food for his family was discovered because a grocer and neighbors informed upon him. Thus, a sad corollary to the wisdom of hoarding food for your family is the need to do so with discretion. This is sad, because the natural impulse of people in a community is to assist those in need. Measures like the Food and Fuel Control Act mean that sharing food with a neighbor who has hungry children is no longer simply a gesture of compassion and generosity; such government acts make sharing into a danger to your safety and your own children's well-being.
There is still time to hoard the items upon which your family depends. Prices are rising, to be sure, but the full force of inflation and shortages is probably several months in the future. Hoard now; hoard quietly.
The Austrian School's Critique of Marxism
Council republics were established in Hungary and Bavaria according to the Russian Soviet model shortly after World War I. Violent revolts erupted in many places in Germany. Vienna, too, was dominated by this revolutionary atmosphere, which middle-class circles embraced with calculated opportunism. Ludwig von Mises, who at that time was a civil servant in the chamber of commerce of Lower Austria, recalled the following:
People were so convinced of the inevitability of Bolshevism that their main concern was securing a favorable place for themselves in the new order. … Bank directors and industrialists hoped to make good livings as managers under the Bolshevists. (Mises 1978/2009, pp. 14–15)
Otto Bauer was state secretary in the foreign department at this time, the leading Austro-Marxist, and later chairman of the nationalization commission. Mises knew him very well; they had attended Böhm-Bawerk's economics seminar together. "At the time," Mises wrote of the winter of 1918–1919 in his Memoirs,
I was successful in convincing the Bauers that the collapse of a Bolshevist experiment in Austria would be inevitable in a very short time, perhaps within days. … I knew what was at stake. Bolshevism would lead Vienna to starvation and terror within a few days. Plundering hordes would take to the streets and a second blood bath would destroy what was left of Viennese culture. After discussing these problems with the Bauers over the course of many evenings, I was finally able to persuade them of my view. (Ibid.)
In January of 1919, Bauer finally made the announcement in the Arbeiter-Zeitung that he wanted to carry out expropriations, with reimbursements in heavy industry and large-scale land holding. Organizational measures were to be taken in preparation for "nationalization" in other industries as well (cf. Bauer 1919).
The convincing Mises did in those memorable nighttime discussions was directed toward socialist political intentions that had the potential of endangering the short and unstable store of supplies available to the Viennese population even further. Of all the voluminous literature circulated during the subsequent debate on socialization — Schumpeter noted that even the most able were writing the most banal things (cf. Schumpeter 1922–1923, p. 307) — Mises was one of the few who kept his focus on the possible consequences of state intervention with sobriety and a sense of reality. The government-run "war and transitional economy" had provided numerous examples of the inevitable failure of central economic planning, and had also proven the "lesser economic productivity" of public enterprises (Mises 1919/1983/2000, pp. 220–221). Moreover, Mises realized early on that the interests of the Viennese Sozialisierungskommission ("Commission for Nationalization") were by no means identical to the interests of the federal states (Mises 1920b).
In any case, these nightly talks put such a strain on his relationship with Bauer that Mises tended to believe Bauer had tried to have him removed from the teaching staff at the University of Vienna (cf. Mises 1978/2009, p. 15). Mises was indeed no longer considered for the position of tenured professor in Vienna when it became vacant in 1919. It was given instead to Othmar Spann (1878–1950), a former colleague of Bauer in the Wissenschaftliche Komitee für Kriegswirtschaft ("Academic Committee for War Economy") in the royal-imperial Ministry of War.
During the course of the nationalization debate of 1919, Mises defended private property and the market economy with the argument of economic efficiency of supply. But he had to argue the position almost single-handedly, as many members of the Austrian School had been appointed to senior positions in the central "war and transition economy" offices, thereby joining the statist camp. It almost seemed as if they had — over the course of their careers — completely forgotten that the academic dispute with Marxism had at no university been so profound and productive as it had been in Vienna.
When the subjective theory of value had begun to take hold in the 1880s, other theories that competed with those of the Austrian School had also come to the fore, for example the labor theory of value. In Capital and Interest: A Critical History of Economical Theory (1884), Eugen von Böhm-Bawerk devoted a complete section to socialist notions ("The Exploitation Theory") and subjected them to fastidious and detailed criticism. In 1885, Gustav Gross authored one of the first biographical sketches on Karl Marx. In the very same year he produced a separate biography: Karl Marx: Eine Studie ("Karl Marx: A Study"). Shortly thereafter he reviewed the second volume of Das Kapital (Capital). Hermann von Schullern zu Schrattenhofen's first scholarly publication was Die Lehre von den Produktionsfaktoren in den sozialistischen Theorien (1885) ("Study of the Factors of Production in Socialist Theories").
The dispute with the socialists was soon to become a permanent fixture of the Austrian School. It is an irony of history that it was this school of thought that first introduced academic discourse about socialism into the seminar rooms and libraries of established economics departments. Criticism was aimed primarily at the labor theory of value, whose contradictions and shortcomings were thought to have been overcome once and for all with the subjective theory of value. The socialist theory did not represent progress, but rather regression (cf. Zuckerkandl 1889, p. 296). Fierce controversy between Böhm-Bawerk (1890 and 1892a), Dietzel (1890 and 1891), and even Zuckerkandl (1890), among others, brought competition between the two doctrines to a head. Dietzel held to the labor theory of value, and held fast to the view that the principle of marginal utility was, in the end, nothing more than the good old law of supply and demand (Dietzel 1890, p. 570).
Disputes with socialism soon went beyond the labor theory of value and brought the "socialist state" into question in many respects. Böhm-Bawerk, for example, regarded interest as an economic category wholly independent of the social system; interest would exist even in the "socialist state" (Böhm-Bawerk 1891/1930, pp. 365–71). Wieser criticized socialist writers for their inadequate teaching of value's role in the socialist state. He came to the conclusion that "not for one day could the [socialist] economic state of the future be administered according to any such reading of value." For Wieser, "in the socialist theory of value pretty nearly everything is wrong" (cf. Wieser 1889/1893, pp. 64–66). Johann von Komorzynski extended the analysis to political science: he distinguished between a "true," "philanthropic socialism," and a "delusory socialism" aimed purely at class interests (Komorzynski 1893).
After the posthumous editing of the third volume of Das Kapital (1895), two in-depth contributions of the Austrian School marked the temporary cessation of its critique of Marxism. In one perceptive essay, Komorzynski tried to prove that Marxist theories were "at the greatest possible odds with the real economic processes." The contradiction stemmed "from the basic principle, not from the utopian thinking" (Komorzynski 1897, p. 243). In his famous Zum Abschluß des Marxschen Systems (1896) (Karl Marx and the Close of His System, 1949), Böhm-Bawerk summarized his previous critique and came to the conclusion — based on the well-known contradictions between the first two and the third volumes of Das Kapital — that the final Marxist theory "contains as many cardinal errors as there are points in the arguments." They "bear evident traces of having been a subtle and artificial afterthought contrived to make a preconceived opinion seem the natural outcome of a prolonged investigation" (Böhm-Bawerk 1896/1949, p. 69). "The Marxian system," according to Böhm-Bawerk,
has a past and a present, but no abiding future. … A clever dialectic may make a temporary impression on the human mind, but cannot make a lasting one. In the long run, facts and the secure linking causes and effects win the day.
Böhm-Bawerk foresaw, that the "belief in an authority, which has been rooted for thirty years" in Marxist apologetics "forms a bulwark against the incursion of critical knowledge" that "will slowly but surely be broken down." And even then, "Socialism will certainly not be overthrown with the Marxian system — neither practical nor theoretical socialism" (ibid., p. 117).
By the end of the 1880s, the law faculty of the University of Vienna became a center of research into socialism. In his sensational work Das Recht auf den vollen Arbeitsertrag in geschichtlicher Darstellung (1886) ("A Historical View of The Right to Full Labor Revenue"), Anton Menger (1841–1906), one of Carl Menger's brothers, professor of civil litigation law and the first socialist of the monarchy with a tenured professorship, made a case for the nationalization of the means of production. Carl Grünberg (1861–1940), a "scientific Marxist," taught economics there starting in 1892, and was one among many of Mises's teachers. In 1924 he was appointed to Frankfurt where he founded the Institut für Sozialforschung ("Institute for Social Research") and edited the works of Marx.
Anton Menger, Carl Grünberg, and later even Böhm-Bawerk came to attract the young socialist elite: Max and Friedrich Adler, Otto Bauer, Karl Renner, Julius Tandler, Emil Lederer, Robert Danneberg, Julius Deutsch, and Rudolf Hilferding. From Hilferding's pen came the first Marxist anticritique directed at Böhm-Bawerk (cf. Rosner 1994). And his Das Finanzkapital (1910) (Finance Capital, 1981) was a remarkable outcome of the culture of the seminar. In it he comments on the role of banks and their symbiosis with the state, seemingly anticipating the monetary and business-cycle theory of the Austrian School, which was skeptical of both (cf. Streissler 2000b). On the eve of World War I, the continuing exchange of ideas between these talented young people nurtured in Böhm-Bawerk the belief that the labor theory of value had "lost ground in theoretical circles in all countries … in recent times" (Böhm-Bawerk 1890/1959, p. 249n.21).
Theoretical arguments that had evolved over the years did not play much of a role in the postwar debate on nationalization at first. In fact, ideas about the organization of the economy and economic policy were prevalent. But it soon appeared that the ideas of nationalization functionaries had been openly inadequate. Many nationalized business establishments fell upon economic hard times (cf. Weissel 1976, pp. 299–320). Entrepreneurs proved reluctant to invest when expropriations were announced, and amazingly enough, Otto Bauer seemed surprised at this reaction (cf. Bauer 1923, pp. 163, 173). In the federal states, state claims made the process of nationalization stall or fail altogether. But most notable was the threat of starvation in Vienna: in 1919, 150,000 of 186,000 school children were undernourished or severely undernourished. This was an indirect consequence of a controlled war economy that had led to a quadrupling of fallow land (cf. Bauer 1923, pp. 118–119). Schumpeter, who in 1919 had had to resign as finance minister over the question of nationalization, took stock two years later:
Though it has political appeal, nationalization accompanied by a comfortable lifestyle and a simultaneously abundant provision of goods — and the childish ideal of bedding oneself in existing affluence — is just nonsense. Nationalization which is not nonsense is politically possible today, but only so long as no one attempts it in earnest. (Schumpeter 1922–1923, p. 308)
Just when the politics of nationalization were beginning to lose momentum, Mises gained recognition for his spectacular essay, Die Wirtschaftsrechnung im sozialistischen Gemeinwesen (1920a) (Economic Calculation in the Socialist Commonwealth, 1935). It was expanded substantially two years later and published as the book, Die Gemeinwirtschaft: Untersuchungen über den Sozialismus (1922) (Socialism: An Economic and Sociological Analysis, 1936). Mises made the point that "rational" economic management, i.e., resource-conserving production and distribution of goods, which takes consumer preferences into account, can only be guaranteed with a free price system — the free exchange of goods and freedom to implement all possible uses of the goods — and that with central planning these goals can never be achieved. If the means of production are not privately owned, then efficient business leadership and the consequent satisfying of consumer interests cannot be ensured.
The core problem, according to Mises, is that
in the socialistic community economic calculation would be impossible. In any large undertaking the individual works or departments are partly independent in their accounts. They can reckon the cost of materials and labour, and it is possible at any time … to sum up the results of [their] activit[ies] in figures. In this way it is possible to ascertain with what success each separate branch has been operated and thereby to make decisions concerning the reorganization, limitations or extension of existing branches or the establishment of new ones. … It seems natural then to ask why … a socialistic community should not make separate accounts in the same manner. But this is impossible. Separate accounts for a single branch of one and the same undertaking are possible only when prices for all kinds of goods and services are established in the market and furnish a basis of reckoning. Where there is no market there is no price system, and where there is no price system there can be no economic calculation. (Mises 1922/1936/1951, p. 131)
Socialism, therefore, is not able to calculate. This is the main assertion of Mises's argument, otherwise known as the "calculation problem." There would be "neither discernible profits nor discernible losses … ; success and failure remain unrecognized in the dark. … A socialist management would be like a man forced to spend his life blindfolded" (Mises 1944/1983, p. 31).
Mises did not allow for the argument made by many "bourgeois" economists: that socialism could not be realized because humans were still too underdeveloped in a moral sense. According to Mises, socialism would be bound to fail, not because of morality, "but because the problems, that a socialist order would have to solve, present insuperable intellectual difficulties. The impracticability of Socialism is the result of intellectual, not moral, incapacity" (Mises 1922/1936/1951, p. 451).
Mises's brilliant and overpoweringly logical analysis was not new. Its main features were already part of an inventory belonging to the early marginal-utility theoreticians — but this was little acknowledged. Hermann Heinrich Gossen (1810–1858) had already established that only in a society based on private property could the economy be "adequately" and "most expediently managed": "The central agency assigned by the communists to allocate various jobs," Gossen said, would "learn very soon it had set itself a task whose solution was beyond the ability of human individuals" (Gossen 1854/1987, p. 231).
In terms of the earlier Austrian School, Friedrich von Wieser had already placed clear emphasis on the necessity of economic calculation (cf. Wieser 1884, pp. 166–67, 178). He was one of the first economists to recognize the relevance of the informational nature of "value" in an economy: "Value," Wieser stated, "is the form in which utility is calculated" (Wieser 1889/1893, p. 34), and "thus value comes to be the controlling power in economic life" (ibid., p. 36).
Apart from a few sporadic contributions in the foreign literature (cf. Schneider 1992, p. 112), the problem of economic calculation in socialism was scarcely considered until 1919 — not even by socialist economists. Erwin Weissel (1930–2005), the Viennese economist and historiographer of the Austro-Marxist debate on socialization, even claimed that "one wanted to ignore the problem" (Weissel 1976, p. 235). At the height of the socialization debate in spring 1919, Menger student and business attorney Markus Ettinger warned that "only market price … [could be] a reliable regulator of demand" and for the "in- and outflow of capital and labor from one area of production to another" (Ettinger 1919, p. 10).
It is interesting that Max Weber (1864–1920), who was in close contact with Mises during his stay in Vienna in 1919, also characterized "money calculation" in a book manuscript, unpublished at the time of his death, as a "specific device of the purposive-rational procurement economy" (Weber 1921/1972, p. 45).
Mises's fundamental critique received international recognition into the 1920s. The notion that central planning without a price system would automatically be inefficient was seldom denied. But in the early 1930s, economists in the English-speaking world began responding with models for a socialist calculation — in answer to Mises — that included the idea of "competition socialism." It prevailed and survived in socialist circles until the 1980s (cf. Socher 1986, pp. 180–94). The idea was that planners could adequately simulate market development with "trial-and-error loops" in between individual planning periods; subsequent calculations could then be made.
Both Mises and Hayek responded in detail and Hayek presented a concise summary of the complete debate in 1935 (Hayek 1935). He first and foremost centered on the hubristic notion of being able to plan economic and social systems comprehensively: socialism in all its right- and left-wing varieties was "an ideology born out of the desire to achieve complete control over the social order, and the belief that it is in our power to determine deliberately in any manner we like, every aspect of this social order" (Hayek 1973/1976/1979, vol. 2, p. 53). In contrast to Mises, Hayek emphasized the indispensable information function of market-induced prices: "that a market system has a greater knowledge of facts than any single individual or even any organization is the decisive reason why the market economy out performs any other economic system" (Hayek 1969a, p. 11). Amid heated debate, the Austrians were hardly aware of the fact that Hayek and Mises were pursuing two ultimately different paradigms (cf. Salerno 1993, pp. 116–117).
Mises's massive attack on the utopia of an economically efficient socialism did not evoke much in the way of a direct counterreaction (cf. Mises 1923). Because the instigators of nationalization were aiming only at partial socialization, they were able to "get out of a tight spot" (Weissel 1976, p. 234) by pointing to organizational issues. The counter attack came only after two years, when Helene Bauer (1871–1942) diagnosed the "bankruptcy of the marginal theory of value" in the party organ of the Socialist Party (Bankerott der Grenzwerttheorie, 1924). Using revolutionary rhetoric and warlike language, she insinuated that the marginal-utility theory served a frightened bourgeoisie as a bulwark, and was used as the predominant theory to agitate against Marxism at the university level (Bauer 1924, pp. 106–107). But Bauer touched the Achilles's heel of the marginal-utility theories on one point: she called their imputation theory inadequate (ibid., p. 112). The denunciatory intention of depicting the marginal-utility theory as an ideology of the "bourgeois" owner class was particularly obvious in Russian theoretical economist and philosopher Nicolai Ivanovich Bukharin's (1888–1938) Economic Theory of the Leisure Class (1919/1927). Bukharin's personal attacks on Böhm-Bawerk occasioned an unemotional counter criticism (Köppel 1930).
Ludwig von Mises was an especially easy target for this kind of appraisal on the part of socialist authors. Mises held the conviction that liberalism was the only idea that could effectively oppose socialism (cf. Mises 1927/1962/1985, p. 50). Liberalism, said Mises, is "applied economics" (ibid., p. 195); in another work from the previous year he had even stated that "classical liberalism was victorious with economics and through it" (Mises 1926, p. 269; and Mises 1929/1977, p. 22).
The theory of marginal utility nevertheless found some support in Germany in the 1920s — even from socialist writers or others with socialist leanings (cf. Kurz 1994, p. 56). While preparing for the Dresden convention of the Verein für Socialpolitik in 1932, Mises repeated his junction of modern economics and liberalism (cf. Mises 1931, p. 283) and was promptly criticized, even by advocates of the subjective theory of value (Weiss 1933/1993, pp. 51–52). Despite the polarization, a young participant of the Dresden convention, the postdoctoral graduate, attorney, and political scientist Hans Zeisl (1905–1992; in the United States he named himself Hans Zeisel) — sports correspondent of the socialist Arbeiter-Zeitung and until 1938 contributor to the now classical Marienthal-Studie — attempted the first synthesis in Marxismus und subjektive Theorie (1931) ("Marxism and the Subjective Theory of Value").
According to Zeisl, the notion of value had developed into a concept of "human elective action." The "goods concept" had "given way" to the "relational concept of possible uses" (Zeisl 1931/1993, pp. 180–81). The so-called laws of the subjective theory of value were of a "statistical nature" and received their cognitive value "when they are applied to empirically discerned demand systems" (ibid., p. 191). If one were to replace demand systems with "demand with purchasing power," one would immediately recognize that demand is allocated "according to class." The "crucial Marxist line of thought — that the level of wages and interest rates, etc., are dependent on 'class structure' — could be precisely articulated in the subjectivist theory of value" (ibid., pp. 192–193).
Subsequent changes in the political arena rendered any continued development of this interesting synthesis of praxeological thinking and the Marxist theory of distribution impossible.
by Richard W. Rahn
So you have just finished preparing your income taxes, but did you understand the tax code? If you said yes, you do not know what you do not know. The U.S. tax code has become so long, complex, contradictory and devoid of common sense that no one can fully understand it — and this includes tax professionals and Internal Revenue Service (IRS) personnel. Can honorable persons of good conscience harass, fine and even imprison their fellow citizens for an alleged violation of laws and regulations they themselves do not completely know? But that is a topic for another column.
Tax economists have long argued that the U.S. income tax causes an enormous — and largely unnecessary — dead-weight loss to the economic system. The sheer cost and time burden of businesses and individuals trying to comply with the tax system — let alone the cost of the more than 100,000 bureaucrats at the IRS who claim to be administrating it — waste hundreds of billions of dollars. This waste of resources unnecessarily reduces economic growth and job creation. A major reason this obscenity persists is that few lawmakers and IRS rule makers think seriously about the consequences of what they have done and are doing, or just don't care.
One person who does think seriously about tax and other financial issues, including the morality of the tax code, is California venture capitalist and financial scholar Kip Hagopian. Mr. Hagopian has a most timely and provocative article in the April-May issue of Policy Review (a publication of the Hoover Institution at Stanford University) titled "The Inequity of the Progressive Income Tax." The U.S. has had a progressive income tax (in which rates rise at higher income levels) since the beginning of the income tax in 1913. The progressive income tax is considered fair by many people. But is it? Mr. Hagopian argues that if people really think through the issue, they are likely to come to a very different conclusion.
Tax scholars have been debating the pros and cons of tax systems for centuries. Taxes on consumption — what people take out of an economy — are generally considered less destructive than taxes on labor and capital, which are inputs into an economy. As Mr. Hagopian notes, there are basically four (broadly defined) income tax systems debated in the literature:
- A per-capita, or "head" tax, which would require each person to pay his per-capita share of the costs of government.
- A proportionate or "flat" tax, which would tax each dollar of income at a single rate, usually with few if any exemptions or credits.
- A degressive tax, which is a proportionate tax only on income above a certain threshold or exemption. The exemption makes the system progressive but typically much less so than a system of graduated rates.
- A progressive tax, which taxes incremental income at higher marginal rates as income rises, resulting in an increase in taxes as a percentage of income as income increases.
The United States has one of the most progressive tax systems in the world. The top 1 percent of taxpayers pay 38 percent of all the income taxes despite having just 20 percent of the income. The top 10 percent of taxpayers pay 70 percent of the income tax while having just 46 percent of the income. At the other end, the bottom 50 percent of taxpayers pay just 2.7 percent of the income tax while having 13 percent of the income.
The income tax has become much more progressive in the past 30 years, resulting in a situation in which a relatively small minority of taxpayers pay the bulk of the taxes, while most American pay little or any income tax. This is causing an increasing disconnect between benefits from government and what most citizens pay for. One result is a greater polarization in the political realm where a majority of citizens increasingly demand more government benefits for which they want others to pay.
The Swedes were on this same destructive path, but they reversed course over the last couple of decades and made their tax system far less progressive even though their tax rates at all levels are above most of those in the United States. The result has been a tempering of demand for new government services as people at all income levels realize they will be the ones paying for those services and not some mythical "rich" person. The side benefit is that Sweden, as a result of tax and other reforms, now has one of the highest economic growth rates in the world.
Mr. Hagopian has carefully looked at the pros and cons of each system in a most dispassionate way, and concludes, "Since there is no perfectly equitable tax system, the goal must be to design the least inequitable system." He concludes that the degressive system is the least inequitable. It is not possible to summarize Mr. Hagopian's arguments for and against each tax system in a newspaper column; hence, I will not attempt the impossible. But for those who think a progressive system is equitable, please explain the equity in taxing one person at a higher rate on each extra hour he or she works to make life better for his family while taxing the less responsible and less industrious person at a lower rate.
The Disaster of Me Libertarianism
Libertarians are just conservatives who like drugs!
Libertarians are only concerned about themselves!
Libertarians don’t care what happens to other people?
Libertarians are selfish!
This libertarian is dismayed by such comments, but I have to admit that they are often true, at least about many individual libertarians, though they are not true about the philosophy of libertarianism per se.
I just spent a couple days at a libertarian conference. It is an experience that I find increasingly dismaying and disappointing because there has been a clear rightward shift in the libertarian movement toward some clearly anti-libertarian viewpoints, if not toward some pure nonsense from the fringe right. It is as if no libertarian today can critique the Federal Reserve without appealing to the pseudo-history conspiracy theories of G. Edward Griffin of the John Birch Society.
But what is interesting is listening to libertarians dismiss issues that are important to people who aren’t like them. Let us be truthful: the typical libertarian, and certainly the typical attendee at this conference, is a middle-aged, white, straight male. And they seem utterly incapable of seeing freedom through the lenses of anyone who isn’t the same.
Mention equal marriage rights for gay people and they simply dismiss it as unimportant. If they aren’t actively opposed—and some were—they see it as inconsequential. If you talk about guns they often are interested since so many of them own firearms. If you talk about pornography they are interested. But when it comes to the barriers to immigration they don’t give a damn since they aren’t immigrants. They hate tax laws but then they pay taxes.
They really are libertarians who only see liberty as an issue as it applies to white, middle-aged, straight men (WMASM).
David Boaz wrote about the same thing by implication:
The Cato Institute's boilerplate description of itself used to include the line, "Since [the American] revolution, civil and economic liberties have been eroded." Until Clarence Thomas, then chairman of the Equal Employment Opportunity Commission, gave a speech at Cato and pointed out to us that it didn't seem quite that way to black people.
Clarence Thomas saw the fallacy in the claim because he views history through his own experiences as a black man. He realized that during the “golden age” of liberty, which so many libertarians pine for, that black people were held in slavery. Even after slavery was eventually abolished, government policy actively discriminated against black people. They were subjected to laws mandating they be treated badly by public transportation. They were easily convicted of crimes, including those they didn’t commit, and were happily lynched by rabid mobs of whites who would then slice them up and take body parts as souvenirs. There is a reason Justice Thomas questioned whether the trend in liberty was entirely in one direction—as so many libertarians see it.
Women certainly have it much better today than they did during any other period of American history. They can own property on their own. They can easily escape abusive relationships. They can sign legal contracts without the permission of their father or husband. They have control over their reproductive abilities which had previously been denied them by the force of law—and this doesn’t just mean the right to abortion but the right to birth control, something that was previously illegal.
What about freedom of religion? Did you know that there were periods where the states made it illegal to be a practicing Catholic? No state does so today. The Pilgrim Fathers—you know the ones you were told came to America for religious freedom—executed Mary Dyer because she was the wrong kind of Christian. Virginia banned the Puritans, Quakers, Catholics and Jews. Maryland had the death penalty for anyone who challenged orthodox Christian beliefs and later made a crime of being a Catholic priest, with a life sentence attached. They also legislated that only Anglicans could hold office and that Catholics were not allowed to vote.
Today the main claim of religious persecution made by Christians is from those who feel persecuted when they can’t impose their religious beliefs on others through the force of law. They think that not being allowed to teach religious dogma in public schools is oppressive. But their churches operate openly, they still go door-to-door annoying the unwilling, and they enjoy something denied their secular opponents—tax exemption.
All of this is what I call “me” libertarianism. That is the tendency of individual libertarians to interpret political trends only through their own experience,s without caring what the broader reality happens to be.
Consider the Gadsden flag, popular with many libertarians, as another example. The motto is “Don’t tread on me.” Again the state of liberty is interpreted only in the self-centered way of how government impacts my life and my life alone.
Listening to those libertarians who only see liberty as important to them infuriates me. I realize that their false perceptions of what it means to advocate liberty actually makes it harder to achieve liberty. First, they routinely exclude oppressed people from the liberty movement because they aren’t like them.
I don’t mean they actively tell women, gays, blacks, immigrants, Jews, etc., that they are unwelcome. They usually don’t go that far. But what they do is routinely dismiss the concerns of these people as trivial and unimportant. That sends the message that only what impacts WMASM is of importance.
I defended Boaz’s comments to a libertarian who immediately dismissed it as worthless and then he recounted ways that WMASM are worse off today than before. That WMASM pay more in taxes today is more important than the fact that blacks are no longer routinely lynched. That WMASM feel hard pressed by affirmative action is a major issue, but the fact that millions of gay people no longer dread imprisonment for loving someone of the same gender is inconsequential.
There was a minor controversy in the on-line gaming community when Dragon Age 2 included some characters that are gay. One gamer complained because all previous games were designed for straight males and he didn’t see why it had to change. He wanted an option to ban gay characters from the game. David Gaider, the writer of the game, responded. He said that the decisions he made were not about “political correctness”—a favorite scapegoat of the WMASM—but about how “privilege always lies with the majority.” He said that that those who are used to “being catered to… see the lack of catering as an imbalance. They don’t see anything wrong with having things set up to suit them, what’s everyone’s fuss all about? That’s the way it should be, as everyone else should be used to not getting what they want.”
Many libertarians are guilty of this. They look at the privileged positions that WMASM have enjoyed for much of human history and then decide the fate of freedom only by how it impacts that privileged minority. That blacks and women and gays make up more of the population than WMASM is irrelevant because they only see history through WMASM eyes.
The libertarian tradition was founded by people who were deeply concerned about the liberty of others. The classical liberals did want freedom of thought for themselves but they fought for freedom of thought for religious minorities, even when they themselves were not religious. Jefferson defended freedom of religion even for the Calvinists, whom he despised. The great classical liberals were in the forefront of abolitionism. They wanted to free the black race from the shackles of slavery even though they themselves were not black, nor enslaved.
Our namesake, Moorfield Storey, is one of the great unsung libertarian heroes. Yes, he advocated free markets, property rights, and limited government. But he was a leader in the earliest civil rights movement. He was the first president of the National Association for the Advancement of Colored People. He was a lawyer to fought for the rights of black people in the Supreme Court and who defended men who were railroaded by a white mob and sentenced to death. He fought these battles long before Martin Luther King was even born.
Two of the greatest classical liberals in England were Richard Cobden and John Bright. Bright and Cobden were relatively privileged men, a manufacturer and a mill owner respectively, wealthy by the standards of the day, who enjoyed all the birthrights of the freest Englishmen of the day. Yet these men poured their heart and soul into the fight to abolish the Corn Laws.
The Corn Laws were a plethora of legislation that protected the landed elite in England by banning the importation of grains from outside England. The people who suffered from the laws were the poor who were forced to pay higher prices for bread. Cobden and Bright had little to gain from repeal and managed to offend many of the wealthiest people in England because of their efforts. But they realized that freedom is indivisible. Freedom exists when it applies to all people, not just to the few and privileged.
We have millions of our fellow citizens who are freer today than they would have been had they lived in the golden age of liberty—whenever you think that might be. We have to be aware of their concerns as well. “Me” libertarianism references liberty only as it effects the speaker, without consideration of the freedom of others. It does send the message that libertarianism is selfish and about protecting privilege for white males only.
Others, who were not so privileged in the past, have trouble seeing how liberty will help them because so many advocates of liberty simply don’t care about how others are oppressed today. These libertarians do care about the issues that impact their own lives, but everyone else is inconsequential. Is it any wonder that so many African-Americans don’t see libertarians as interested in them? Is it really a surprise that libertarian meetings are so overwhelmingly male? Why is anyone surprised when the LBGT community ignores libertarianism, after libertarians have spent decades ignoring them?
Oppressed people everywhere ought to be our natural allies in advocating the extension of liberty. But for that to happen we have to prove ourselves advocates for the extension of their liberties as well. As long as issues that impact WMASM take precedence over all other groups libertarians will send the message that they don’t want allies who aren’t like them. I note that young libertarian groups, who often speak of libertarianism as it impacts others, are more racially diverse, have a lot more females (which ought to please straight males) and attract more support from their gay peers.
Alexander McCobin, the head of Students for Liberty, was invited to speak at the Conservative Political Action Committee conference and made it clear he was glad that gay people had been included. He noted that liberty does not come in pieces, but applies to all people. The libertarian students applauded and the conservatives heckled.
While the Libertarian Party has become a refuge for the WMASM, and seems to be dying, Students for Liberty has exploded on the campuses with over 400 active chapters. They can reach out to everyone because of the message that McCobin, and other young libertarians, are sending. The LP nominated the author of the Defense of Marriage Act for president and seems confined to political oblivion.
We need to actively work to abolish “me libertarianism” and focus on "liberty and justice for all" instead. We can still lament the ways that liberty is being denied to WMASM but we should also fight for issues like marriage equality, the rights of immigrants, and reproductive rights for women (which is now again under attack by the Republicans). We need to actively acknowledge that the “golden age” of liberty treated black Americans badly. We need to listen to people who are not like us. We have to solicit the life experiences of people who are not our gender, not our race, not our sexual orientation, not in the economic conditions we experienced, and who had very different experiences from our own.
Once we understand some of their life experiences and their views we need to expand our freedom concepts so that we are also trying to liberate others, not just those most like ourselves. We need an outward libertarianism that focuses on the rights of all people if we ever wish to attract all people to our cause. Liberty is doomed if it is perceived as merely a refuge for the privileged few. Self-centered libertarianism gives precisely that impression.
US: President Obama’s weak message to Latin America – The Washington Post
Though it was inevitable that it would be overshadowed by events elsewhere in the world, we thought President Obama was right to go ahead with his tour of Latin America. To cancel the trip only would have strengthened the view that, as Mr. Obama put it, “there have been times when the United States took this region for granted.” And there is, in fact, much to be done in and with Latin American nations, from strengthening U.S. partnerships with some key countries to standing up to the dismantling of democracy and violations of human rights in others.
Unfortunately, while Mr. Obama took the time to travel to Brazil, Chile and El Salvador, his effort to advance this agenda ranged from weak to nonexistent. In Brazil and Chile, the president rightly heaped praise on those countries’ democratic and economic development. He made a strong public pitch for partnership between the United States and South America’s emerging power, saying “the United States doesn’t simply recognize Brazil’s rise, we suppport it enthusiastically.”
Yet when it came to issues of particular concern to Brazilians or other Latin Americans, the president had little to offer. Instead he delivered warmed-over restatements of his broad positions on immigration and trade, without mentioning any meaningful new measures. He said his administration “has intensified our efforts to move forward on trade agreements with Panama and Colombia,” but he did not visit either country and offered no timetable for submitting those deals to Congress.
Most curious was Mr. Obama’s decision to simply ignore the fact that in large parts of Latin America, the “shared values” that he said bind the hemisphere are being trampled. In a speech directed to the region that he delivered in Santiago, the president declared that “today, Latin America is democratic” – even though rulers in a number of countries are shutting down media, eliminating judicial independence and rigging elections. He said “Latin America is contributing to global prosperity and security,” even though many of those same rulers are forging ties with Iran and have been defending the regime of Libya’s Moammar Gaddafi.
Mr. Obama mentioned the Inter-American Democratic Charter, which nominally binds the governments of the hemisphere to act against those who commit political abuses, and said “we have to speak out when we see those principles violated.” Yet he himself did not speak out. Not once during his tour did he mention Venezuela, Nicaragua, Ecuador or Bolivia or their increasingly autocratic rulers.
The president did bring up the people of Cuba, who, he said, “are entitled to the same freedom and liberty as everyone else in this hemisphere.” But Cuba, as he pointed out, has been stuck in “this history that’s now lasted for longer than I’ve been alive.” Venezuela and Nicaragua, on the other hand, are teetering between the democracies they had a decade ago and the autocracies their current leaders hope to install. By failing to discuss those fateful struggles, Mr. Obama did a great disservice to those Latin Americans who are fighting to save freedom in their countries, at great personal risk.
US: Change the Words, Not Your Mind – by Greg Walcher
If, despite that clear distinction, you still don’t feel good about multi-trillion-dollar deficits, it’s because you must understand one of the most important techniques in the art of debate – when you’re losing, change the terms. Successful politicians must master that art if they want to push unpopular policies. If “illegal alien” sounds bad, change the words to “undocumented workers.” If “estate tax” sounds OK to people who have no “estate,” call it the “death tax” and it affects everyone who might eventually die. A simple change in terms often changes the outcome of debates, legislative votes, and even elections.
Changing the words is a long and proud tradition in the world of conservation, too. That’s how national forest timber management became “below-cost timber sales” and “logging old growth,” the result of which was an almost complete end to active forest management (and today’s dead and dying forests). That’s also how vast tracts of public lands became “the last great places,” which must be protected from public use. It is a technique both sides practice regularly, but that doesn’t make it any more honest or less cynical.
One of the great examples is being played out in today’s debate over global warming. As average global temperatures leveled off in the past decade, “global warming” became “climate change,” since that includes both warming AND cooling. As more recent scientific research makes the causes of climate changes less certain, an increasingly skeptical public has begun to shy away from “solutions” that seem harsh, expensive, or difficult. Thus, Congress could not muster enough votes to pass the proposed cap-and-trade bill several years in a row, and the effort now appears dead.
Not to be deterred, however, advocates have resorted once again to the tried-and-true technique of changing the terms. It has become unpopular in a time of spiking gas prices to propose the ban on drilling for oil and gas that many environmental activists actually want. They recognize that an end to the use of fossil fuels to power our economy is simply not achievable in the foreseeable future. That’s why they have tried for several years to convince the public that our use of natural resources to create prosperity is evil, and that our pursuit of the good life is destroying the planet. But we all learned about carbon dioxide in school science classes, and we certainly do not intend to stop exhaling. That is why it is now known as a “greenhouse gas” – because “emitting” any “gas” sounds like something we should stop doing. It is a debate such advocates are losing in the court of public opinion, for several reasons:
- There is a limit to how much Americans can pay for gas, heat, and electricity;
- Many people are no longer convinced of a direct link between their use of energy and any catastrophic change in the Earth’s climate;
- Revelations about fraudulent manipulation of scientific data has damaged the credibility of man-made global warming alarmists;
- The economic recession has “cooled” Americans’ willingness to raise taxes, hinder businesses, and slow job creation – for any reason.
Does this mean advocates of a cap-and-trade policy will give up the effort? Of course not. It means they will change the terms, and that effort is well underway now. Witness the new desire on the part of state and federal administrations across the country to adopt policies that promote “clean energy.” What exactly is “clean energy?” At the risk of stating the obvious, it means energy that comes from sources other than oil, gas, coal, methane, biomass, biofuels, nuclear, shale, tar sands, hydropower, or any source that requires pipelines, power lines, or other infrastructure (can we use wind and solar power without power lines?). In a nutshell, it means we should stop using so much energy. It means the same thing all the previous debates meant, just with different words.
Expect to hear the term “clean energy” repeated across the political landscape non-stop for the next several years. Experts know that repetition is the key to successfully changing the terms of a debate. As Berkeley Professor George Lakoff advises liberals, “Repetition of such articulations is the key to redefining these words…”
The Republican “Word Doctor” Frank Luntz explains the importance of repetition: “There’s a simple rule: You say it again, and you say it again, and you say it again, and you say it again, and you say it again, and then again and again and again and again, and about the time that you’re absolutely sick of saying it is about the time that your target audience has heard it for the first time.”
That is why the debate of the next few years will be about “clean energy.” It is a legitimate debate, so long as everyone knows exactly what it is really about. Just remember, the story you are about to see is true; only the names have been changed to protect the political agenda.
US: Power for the People – by Paul Driessen
In a scene reminiscent of Colonial Williamsburg, for 16 years Thabo Molubi and his partner had made furniture in South Africa’s outback, known locally as the “veld,” using nothing but hand and foot power. When an electrical line finally reached the area, they installed lights, power saws and drills. Their productivity increased fourfold, and they hired local workers to make, sell and ship far more tables and chairs of much higher quality, thereby also commanding higher prices.
Living standards soared, and local families were able to buy and enjoy lights, refrigerators, televisions, computers and other technologies that Americans and Europeans often take for granted. They could even charge their cell phones at home! The area was propelled into the modern era, entrepreneurial spirits were unleashed, new businesses opened, and hundreds of newly employed workers joined the global economy.
People benefited even on the very edge of the newly electrified area. Bheki Vilakazi opened a small shop where people could charge their cell phones before heading into the veld, where instant communication can mean life or death in the event of an accident, automobile breakdown or encounter with wild animals.
Thousands of other African communities want the same opportunities. But for now they must continue to live without electricity, or have it only sporadically and unpredictably a few hours each week. Over 700 million Africans – and some two billion people worldwide – still lack regular, reliable electricity and must rely on toxic wood and dung fires for most or all of their heating and cooking needs.
Mothers with babies strapped on their backs must bend over open fires, breathing poisonous fumes and being struck down by debilitating, often fatal lung diseases. Homes, schools, shops and clinics lack the most rudimentary electrical necessities. Impoverished families must live in mud-and-thatch or cinderblock houses that allow mosquitoes to fly in, feast on human blood and infect victims with malaria. And parents and children must carry and drink untreated water that swarms with bacteria and parasites which cause cholera, diarrhea and river blindness. When the sun goes down, their lives shut down.
The environmental costs are equally high. In Rwanda gorilla habitats are being turned into charcoal, to fuel cooking fires. In Zambia, entrepreneurs harvest trees by the thousands along highways, selling them to motorists heading back to their non-electrified homes in rural areas and even parts of cities. As quickly as First World charities hold plant-a-tree days, Africans cut trees for essential cooking.
If eco-activists have their way, it will be like this for decades to come.
In his DotEarth blog for the New York Times, columnist Andrew Revkin lamented this intolerable situation. “Access to the benefits that come with ample energy trumps concerns about their tiny contribution of greenhouse gas emissions,” he wrote. But despite agreeing with the Committee For A Constructive Tomorrow on this central issue, Revkin took issue on several items.
CFACT’s “Stop energy poverty” slogan is clever, he wrote. But where are its “substantive proposals for getting affordable energy” to those who don’t have it? Africa sits on vast deposits of natural gas and liquid condensates. Perhaps CFACT could find a business model that can lead to capturing, instead of flaring, those “orphan fuels,” Revkin suggested, while wondering why the Committee offers solar ovens to a Yucatan village and uses its slogan in part to challenge global warming scares.
Converting orphan fuels to productive uses is a terrific idea. That’s why CFACT opposes restrictions on using these fuels and wants to help find investors and build local support for gas-fired power plants that can electrify and modernize homes and businesses, create jobs, improve health and living standards, purify water, and launch companies that can build modern homes. Non-orphan deposits of oil, “tight oil,” natural gas, shale gas and coal could do likewise.
Unconventional US shale gas reserves alone are now estimated at about 57 trillion cubic meters (2000 trillion cubic feet) – enough for 100 years at current US consumption rates, on top of conventional reserves. Africa almost certainly has large gas, oil, coal and uranium deposits of its own, lying untapped beneath numerous poor countries, waiting to fuel an economic boom – if environmentalists, self-interested companies and government agencies would stop using global warming and other scares to justify their opposition to large-scale generating plants.
Until then, the Committee will continue providing interim measures – solar ovens, used laptops and small solar-powered charging systems – while also training people in computer and business skills, and assisting Yucatan and Ugandan villagers with tree farm and other projects.
All these are akin to the help that first responders provide, before getting disaster victims to hospitals. They are important steps toward individual and community empowerment that comes from having property rights, free enterprise, and full access to modern technologies that improve, enhance and safeguard lives. But none of this is possible without reliable, affordable energy to power those technologies.
“If abundant, affordable, clean energy and water were readily available to everyone, all the other problems would become much easier to solve,” Nobel Laureate Richard Smalley observed. Of course, “clean” does not have to mean non-carbon dioxide emitting, though Mr. Revkin seems reluctant to support energy that comes from fossil fuels, notes CFACT executive director Craig Rucker. “However, you cannot champion the poor, while supporting policies that perpetuate poverty,” Rucker emphasizes.
Modern coal-fired power plants are far cleaner than their predecessors, posing few environmental or health problems, except in the minds and propaganda of eco-activists. They are infinitely cleaner than the open fires that provide pitiful, polluting, often deadly energy for the barest necessities. Gas-fired plants are cleaner still, and safe, modern nuclear plants could also support major economic booms.
To suggest that impoverished nations must worry more about CO2 than about tuberculosis, cholera or malaria is absurd. To tell them their energy options must be limited to expensive, unreliable, insufficient wind and solar power is immoral. To impose anti-hydrocarbon restrictions on poor countries ensures that they will remain poor and diseased, with life expectancies in the low forties.
As Dambisa Moyo and others suggest, it is time for rich Western nations to provide less aid, fewer restrictions – and much more trade, investment and banking expertise and opportunity; business, agricultural and property rights know-how; and energy technologies that will harness and utilize abundant, reliable, affordable hydrocarbon energy. They also need to stop propagating scare stories and imposing restrictions on the use of hybrid and genetically modified seeds to reduce malnutrition, and insecticides to reduce disease.
CFACT’s goal is simple, says Rucker. “Give poor families, communities and nations the same opportunities we had, the same freedoms to chart their destinies, the same rights to create and manage their own wealth, develop their own free and healthy institutions, solve their own environmental and health challenges – and even make their own mistakes along the way.”
Brazil, China, India and Indonesia are not about to stop building new coal-fired power plants; nor are developed countries going to tear their plants down or abandon their fossil fuel-powered vehicles. Africa and other poor regions need to adopt the same attitude – and also seek investors and trade opportunities, rather than just more aid that is often merely life support for corrupt dictators and bureaucrats.
CFACT’s plan is also simple, Rucker adds. Help now with solar ovens, laptops and other first aid. Challenge and change harmful, immoral, lethal policies that limit access to energy and other modern technologies, hobble job creation, impair health and kill millions. And help persuade investors and Third World communities to provide the energy technologies that will make health and prosperity happen.
“We hope Andrew Revkin and millions of other caring people will join us in supporting a global energy quest that advances human progress, while limiting actual environmental risks.”
* Paul Driessen is senior policy advisor for CFACT and the Congress of Racial Equality.
U.S. Trade Deficit Narrows Less Than Forecast on Soaring Commodity Prices
The U.S. trade deficit narrowed less than forecast in February, indicating soaring commodity prices hurt the world’s largest economy at the start of the year.
The gap shrank 2.6 percent to $45.8 billion from a larger- than-previously-estimated $47 billion in January, according to figures from the Commerce Department today in Washington. Another report showed the cost of imported goods jumped in March by the most in almost two years.
Economists at Morgan Stanley and Barclays Capital Inc. were among those cutting estimates for first-quarter growth after the data showed exports dropped along with imports, failing to make up for a slowing in consumer spending. The earthquake and tsunami in Japan may further reduce trade in coming months after parts shortages caused some factories to close.
“Everything was weaker across the board,” Ted Wieseman, an economist at Morgan Stanley in New York, said, referring to the trade data. “Import prices are reflecting surging energy prices,” he said, they “are going through the roof and that has been weighing on consumer spending.”
Prices of imported goods rose in March at the fastest pace since June 2009, led by a gain in crude oil and the biggest jump in food costs since 1994, according to figures from the Labor Department. The 2.7 percent increase in the import-price index followed a 1.4 percent rise in February. Costs excluding fuel rose 0.6 percent.
Federal Reserve Vice Chairman Janet Yellen is among policy makers saying the increase in food and fuel costs will have only a temporary impact on inflation and consumer spending and warrants no reversal of record monetary stimulus.
Yellen on Prices
“The surge in commodity prices over the past year appears to be largely attributable to a combination of rising global demand and disruptions in global supply,” Yellen said yesterday in a speech in New York. “These developments seem unlikely to have persistent effects on consumer inflation or to derail the economic recovery and hence do not, in my view, warrant any substantial shift in the stance of monetary policy.”
Stocks dropped as sales at Alcoa Inc. missed analyst estimates and Tokyo Electric Power Co. said its earthquake-hit nuclear power plant may release more radiation than Chernobyl. The Standard & Poor’s 500 Index fell 1 percent to 1,311.87 at 11:53 a.m. in New York. Oil fell in the biggest two-day drop in 14 months on the outlook for growth.
The median forecast of 71 economists surveyed by Bloomberg News projected the trade gap would shrink to $44 billion. Estimates ranged from deficits of $41 billion to $50.5 billion. The Commerce Department had previously estimated the January shortfall at $46.3 billion.
Morgan Stanley lowered its tracking estimate for gross domestic product in the first three months of the year to a 1.5 percent annual pace from a 1.9 percent forecast prior to the data. Barclays Capital in New York lowered it to a range of 1.5 percent to 2 percent, down a half point. GDP climbed at a 3.1 percent pace in the last three months of 2010.
After eliminating the influence of prices, which renders the figures used to calculate GDP, the trade deficit narrowed to $49.5 billion from $50.3 billion. The figures exceeded the fourth-quarter average of $45.3 billion.
Exports decreased 1.4 percent to $165.1 billion after climbing 2.6 percent in January to a record $167.5 billion. Decreased demand for autos and parts and for capital goods like semiconductors and engines contributed to the drop.
Imports fell 1.7 percent to $210.9 billion after climbing 5.4 percent in January, the biggest gain since 1993. Decreasing demand for autos and petroleum products led the decline.
An early Chinese New Year may have contributed to the volatility in trade this year. Chinese manufacturers typically run flat-out prior to the holiday then shut down for at least a week, according to Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York. The Year of the Rabbit was celebrated on Feb. 3, slightly earlier than the average timing.
The trade gap with China slumped to $18.8 billion from $23.3 billion the prior month.
A 6 percent drop in the value of the dollar in the year to April 8 against a weighted basket of currencies from the country’s biggest trading partners is making American-made goods cheaper for buyers abroad. Combined with growth in emerging economies, the decrease will probably lift exports later this year and benefit manufacturers like Caterpillar Inc. (CAT)
Caterpillar, the world’s largest maker of construction equipment, is seeing a “slow, steady increase” in demand in North America, Chief Executive Officer Doug Oberhelman said at an industry conference on March 23. “Business is booming outside the U.S.”
The world economy will expand 4.4 percent this year and 4.5 percent in 2012, the Washington-based International Monetary Fund said yesterday in its World Economic Outlook report. Developing nations will grow 6.5 percent this year and next while advanced economies will expand 2.4 percent in 2011 and 2.6 percent in 2012, the IMF said.
The earthquake and tsunami in Japan may hamper trade flows as parts shortages shutter factories.
“We’re going to have some headwinds in the first half of the year, given the Japan situation, though we do expect trade to pick back up,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut. “We’re going to have some disruptions in the supply chain, especially in the auto side, with all the news coming out of Japan.”
Amid stronger global growth and turmoil in the Middle East, commodity costs are on the rise. The average price of a barrel of imported crude oil climbed to $87.17 in February, today’s trade figures showed, the highest since October 2008. Americans responded to the increase by importing 242 million barrels in February, the fewest in 12 years.
Increases in food and fuel costs have hurt consumer spending, which accounts for about 70 percent of the economy. Household purchases probably climbed at a 2 percent annual pace in the first quarter, half the 4 percent gain in the previous three months, according to the median forecast of economists surveyed by Bloomberg earlier this month.
Romney Moves Toward U.S. Presidential Run and Focuses Fire on Obama Policy
As Republican Mitt Romney took the first official steps toward a presidential bid yesterday, he attacked President Barack Obama’s economic policies even while questions linger over his commitment to conservative causes.
“It is time that we put America back on a course of greatness, with a growing economy, good jobs and fiscal discipline in Washington,” Romney, 64, said in a video posted on his website in which he announced that he is forming a committee to explore a 2012 race for the White House.
Romney, a former governor of Massachusetts, is the second Republican to establish a presidential exploratory group, following former Minnesota Governor Tim Pawlenty. Romney’s announcement came on the eve of the fifth anniversary of his signature on a health-care law in Massachusetts that some Republican activists have been urging him to disavow.
Romney has been planning a second run for the presidency since losing the Republican nomination in 2008 to Arizona Senator John McCain. National polls of likely Republican primary voters have shown him leading or one of the top contenders among a large group of potential candidates. Many Republicans view him as the “default candidate” for the nomination, said Jeffrey Berry, a professor of political science at Tufts University in Medford, Massachusetts.
Establishment of the Massachusetts-based exploratory committee allows Romney to raise money for a presidential campaign and requires him to file financial reports with the Federal Election Commission.
As Romney’s efforts progress, he must deal with the challenge of proving his conservative credentials to a wide swath of the Republican political base, Berry said.
In the 2008 campaign, he was criticized over his reversals on social issues such as abortion and gay rights, which he no longer supports. When running unsuccessfully against then- Democratic incumbent Edward M. Kennedy for a U.S. Senate seat from Massachusetts in 1994, Romney had backed legal abortion and advocated for gay rights.
As governor of Massachusetts from 2003 to 2007, Romney supported a law similar to the national health-care overhaul despised by many fiscal and social conservatives.
“He has to convince people he has a backbone, and that backbone is conservative through and through,” Berry said.
Romney also struggled in his previous presidential campaign to alley skepticism about his Mormon faith, particularly from evangelical Christians who make up a significant portion of the Republican electorate. If he runs and is elected, he would be the first Mormon president.
Romney invested more than $40 million of his own fortune in his 2008 presidential bid.
In the video recorded yesterday at the University of New Hampshire announcing his exploratory committee, he touted his private-sector experience as a co-founder of Boston-based private equity firm Bain Capital LLC and as CEO of the 2002 Salt Lake City Winter Olympics.
“From my vantage point in business and in government, I have become convinced that America has been put on a dangerous course by Washington politicians, and it has become even worse during the last two years,” Romney said. “But I am also convinced that with able leadership, America’s best days are still ahead.”
“Sometimes I was successful and helped create jobs, other times I was not,” he said. “I learned how America competes with companies in other countries, why jobs leave, and how jobs are created here at home,” he said.
Like the federal health-care law that Obama pushed through Congress last year and that Republicans are trying to overturn, the 2006 health-care measure in Massachusetts that Romney shepherded into law includes a mandate requiring individuals to purchase insurance.
Democrats are attempting to highlight his support for the state law by hosting mock birthday displays today in early primary states. In addition, Obama and White House officials have praised the Massachusetts law.
“I agree with Mitt Romney, who recently said he’s proud of what he accomplished on health care in Massachusetts and supports giving states the power to determine their own health- care solutions,” Obama said Feb. 28 in remarks to the country’s governors.
In a Wall Street Journal/NBC News poll conducted March 31- April 4, 21 percent of Republican primary voters backed Romney, putting him ahead of nine other potential candidates.
Former House Speaker Newt Gingrich of Georgia on March 3 announced the start of a website to enable him to raise money and explore a presidential run. Other prospective 2012 Republican candidates include former Arkansas Governor Mike Huckabee, who won the Iowa caucuses in 2008; former Alaska Governor Sarah Palin, the party’s 2008 vice presidential nominee; Governor Mitch Daniels of Indiana, a former director of the Office of Management and Budget; and former Utah Governor Jon Huntsman, who is stepping down as ambassador to China this month.
Mississippi Governor Haley Barbour has expressed interest in the race and has begun traveling to states that hold early primaries and caucuses, as have former U.S. Senator Rick Santorum of Pennsylvania and Representative Michele Bachmann of Minnesota, a Tea Party favorite.
Businessman Donald Trump also is flirting with seeking the Republican nomination, saying he will announce in June whether he is a candidate.
Obama formally announced his re-election campaign on April 4, releasing a campaign video on his website and sending an e- mail to supporters that said the job of preparing for his campaign “must start today.” The headquarters for his re- election bid will be in Chicago, his adopted hometown.