Video: Differentiating Natural Rights from Legal and Constitutional Rights

The educational video below from LearnLiberty.org, explains the differences of rights.

From Learn Liberty,

Individuals have rights. But are they natural? And how do they compare and contrast with legal or constitutional rights? Are legal or constitutional rights similar to those inalienable rights mentioned in the Declaration of Independence? Professor Aeon Skoble distinguishes such constitutional rights, such as the right to vote, from the rights protected by governments and constitutions—natural rights not actually granted by governments themselves. He concludes that legal systems should create rights that are combatable with natural rights.

Landslide Win by Ron Paul on the GOP NBC Debate Poll

From prolific libertarian author Robert Ringer

According to a poll conducted by NBC News Political Unit Poll, the guy whom Bill O’Reilly referred to prior to Wednesday’s Republican debate as “a loon” and Dick Morris dismissed as the only candidate who had no chance of winning, 174,354 Americans not only believed Ron Paul won the debate at the Reagan Library, but did so in a landslide.

As of 4:00 pm Thursday, 54 percent (94,096 votes) voted for Ron Paul, with Mitt Romney a distant second at 15.8 percent (27,523 votes). Rick Perry, the supposed front runner, was at 13.2 percent (23,065 votes), Jon Huntsman at 6.5 percent (11,411 votes), and the rest of the field below 5 percent.

This is downright embarrassing to the Republican Party, whose establishment wishes Paul would just go away and rejoin the Libertarian Party. Left-wing moderators Brian Williams (NBC) and John Harris (Politico) did their best to diminish Paul in two ways. First, they asked him very few questions, and, second, the questions they did ask him were aimed at painting him as an extremist.

If the media cover-up regarding Paul’s popularity continues, establishment Republicans may just get their wish — at least partially. I don’t think Paul would run on the Libertarian Party ticket, but he might just form a third-party, which would probably end any hopes the Republicans have for taking back the White House.

Despite media bias against Presidential aspirant Ron Paul, the poll reveals that the trend following on classical liberalism, which Mr. Paul champions, seems to be snowballing.

Here is The Daily Show host Jon Stewart's hilarious take on the latest GOP debate

The Daily Show
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Does Rising Global Middle Class Presage Growing Demand for Classical Liberalism?

Globalization seems to have brought about a significant surge in the number of middle class.

Chart from the Economist

As a political force, the role of the middle class has been transitioning from one of passivism into activism.

The Economist notes, (bold highlights mine)

In rich countries the humbling of governments has been largely a result of economic slowdown, combined with problems in controlling public finances. Emerging markets, in contrast, have kept growth going, while public spending is (mostly) under control. The explanation for their political woes must lie elsewhere. The most plausible one is that India and China—and possibly other emerging markets, too—are experiencing the early stirrings of political demands by the growing ranks of their middle classes…

Polling evidence says middle-class values are distinctive. In a survey of 13 emerging markets by the Pew Global Attitudes Project in Washington, DC, the middle classes consistently give more weight to free speech and fair elections than do the poor, who are more concerned than the middle class about freedom from poverty. These differences hardly come as a shock. But they still matter because they mean that as the middle class grows, abstract ideas about governance come to play a bigger role in politics.

For now their focus has mostly been in the politics of corruption (bold emphasis mine)

There is no single explanation for the new middle-class activism. Given the rise in their numbers, it was probably bound to happen at some point. The spread of micro-blogging services has surely made some difference. Sina Weibo claims 140m users, mostly from China’s urban middle class. They posted 10m messages about the rail crash within days. The emerging giants have lost some of their economic sizzle lately, which might have had an effect—not (as in the West) by cutting jobs and government services, but by casting doubts on the cult of growth. Some observers (including, it seems, the Chinese Communist Party) have even worried that demonstrators might be emboldened to copy the Arab spring, though that seems far-fetched.

In contrast to the unrest in Middle Eastern countries, the middle-class activism of India and China is not aimed at bringing governments down. Rather, a narrower concern animates them: corruption…

This focus on corruption suggests that, at the moment, middle-class activism is a protest movement rather than a political force in the broader sense. It is an attempt to reform the government, not replace it. But that could change. In most middle-income countries, corruption is more than just a matter of criminality; it is also the product of an old way of doing politics, one that is unaccountable, untransparent and undemocratic. Ashutosh Varshney, at the Institute of Social and Economic Change in Bangalore, also argues that richer Indians resent corruption less because of the money wasted—which they can afford—than because they want clean government for its own sake: “the middle class is asserting its citizenship right to get government services without a bribe.”

As wealth from globalization expands and diffuses, it is likely that the desire for political freedom would follow. Such dynamic appears to be epitomized by the seminal focus on free speech, ‘fair’ elections and corruption free governance.

Yet again, the internet (via the blogsphere) has been proving to be a potent force in influencing such changes.

As the great Ludwig von Mises wrote (Planning for Freedom p.38),

The idea that political freedom can be preserved in the absence of economic freedom, and vice versa, is an illusion. Political freedom is the corollary of economic freedom. It is no accident that the age of capitalism became also the age of government by the people. If individuals are not free to buy and to sell on the market, they turn into virtual slaves dependent on the good graces of the omnipotent government, whatever the wording of the constitution may be.

In my view, the trend towards Classical liberalism seem to be seguing from the fringes towards the mainstream.

Quote of the Day: Ludwig von Mises on Fascism

Fascism, as defined by dictionary.com, is a government system led by a dictator having complete power, forcibly suppressing opposition and criticism, regimenting all industry, commerce, etc…, and emphasizing on aggressive nationalism and often racism

In today’s political environment, here and abroad, almost all aspects of civil and economic liberties have been under assault from the gradualist expansion of implicit fascism; think bailouts, QEs, manipulated interest rates, war on commodities, bans on short sales, smoking, anti-smoke belching and etc…

Nevertheless, this prescient block quote from the great Ludwig von Mises written in 1927 runs valid today [Liberalism, The Argument of Fascism, Chapter 1 Section 10]

What distinguishes liberal from Fascist political tactics is not a difference of opinion in regard to the necessity of using armed force to resist armed attackers, but a difference in the fundamental estimation of the role of violence in a struggle for power. The great danger threatening domestic policy from the side of Fascism lies in its complete faith in the decisive power of violence. In order to assure success, one must be imbued with the will to victory and always proceed violently. This is its highest principle. What happens, however, when one's opponent, similarly animated by the will to be victorious, acts just as violently? The result must be a battle, a civil war. The ultimate victor to emerge from such conflicts will be the faction strongest in number. In the long run, a minority -- even if it is composed of the most capable and energetic -- cannot succeed in resisting the majority. The decisive question, therefore, always remains: How does one obtain a majority for one's own party? This, however, is a purely intellectual matter. It is a victory that can be won only with the weapons of the intellect, never by force. The suppression of all opposition by sheer violence is a most unsuitable way to win adherents to one's cause. Resort to naked force -- that is, without justification in terms of intellectual arguments accepted by public opinion -- merely gains new friends for those whom one is thereby trying to combat. In a battle between force and an idea, the latter always prevails.

Fascism can triumph today because universal indignation at the infamies committed by the socialists and communists has obtained for it the sympathies of wide circles. But when the fresh impression of the crimes of the Bolsheviks has paled, the socialist program will once again exercise its power of attraction on the masses. For Fascism does nothing to combat it except to suppress socialist ideas and to persecute the people who spread them. If it wanted really to combat socialism, it would have to oppose it with ideas. There is, however, only one idea that can be effectively opposed to socialism, viz., that of liberalism.

It has often been said that nothing furthers a cause more than creating, martyrs for it. This is only approximately correct. What strengthens the cause of the persecuted faction is not the martyrdom of its adherents, but the fact that they are being attacked by force, and not by intellectual weapons. Repression by brute force is always a confession of the inability to make use of the better weapons of the intellect -- better because they alone give promise of final success. This is the fundamental error from which Fascism suffers and which will ultimately cause its downfall. The victory of Fascism in a number of countries is only an episode in the long series of struggles over the problem of property. The next episode will be the victory of Communism. The ultimate outcome of the struggle, however, will not be decided by arms, but by ideas. It is ideas that group men into fighting factions, that press the weapons into their hands, and that determine against whom and for whom the weapons shall be used. It is they alone, and not arms, that, in the last analysis, turn the scales.

So much for the domestic policy of Fascism. That its foreign policy, based as it is on the avowed principle of force in international relations, cannot fail to give rise to an endless series of wars that must destroy all of modern civilization requires no further discussion. To maintain and further raise our present level of economic development, peace among nations must be assured. But they cannot live together in peace if the basic tenet of the ideology by which they are governed is the belief that one's own nation can secure its place in the community of nations by force alone.

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.

Intellect versus force, that’s the essence of classical liberalism.

"Tu ne cede malis sed contra audentior ito", this favorite quote of Prof von Mises comes from Vigil which means "do not give into evil but proceed ever more boldly against it".

Hat tip: Cato’s Jason Kuznicki

Quote of the Day: The Morality of Classical Liberalism

...has been best encapsulated by this noteworthy excerpt from Professor Don Boudreaux, who writes a splendid book review of James Buchanan’s “Why I, Too, Am Not a Conservative: The Normative Vision of Classical Liberalism” (bold emphasis mine, italics original)

The modern "liberal" fancies himself to be enlightened and caring because he seeks to use government to improve the lives of others even when this involves forcing others to act differently than they freely choose to act. Although the true conservative's motives for constraining others' actions might (or might not!) differ from those of the modern "liberal," at root both conservatives and modern "liberals" disdain and distrust ordinary men and women. True liberals do not.

One result is that true liberals willingly allow peaceful adults do whatever they please. This willingness grows not from the liberal's lack of concern for his fellow man, but from his respect for his fellow man - from the true-liberal's mature recognition that his fellow man is, like himself, an adult with his own unique history, needs, and dreams. And when we treat others as adults, we accord them not only the freedom to pursue whatever peaceful paths they choose, but we also recognize them to be responsible.

Video: Understanding Liberty and Equality

Professor James Otteson, in the video below, explains the relationship between Liberty and Equality


From LearnLiberty (bold emphasis mine)

Two central values in American political life are liberty and equality. But are these two values in tension with one another?

As philosophy Prof. James Otteson explains, it depends on how you define them. There is more than one way to think about liberty, and more than one way to think about equality. For example, when talking about equality, there are two different central conceptions. The first is formal equality, equality that comes from the form of institutions. An example of formal equality is equality before the law: all laws apply equally to everyone. Formal equality is a central tenet of the classical liberal tradition, and compatible with individual liberty.

But a second conception of equality is material, or substantive, equality. Material equality holds that people ought to be equal in material respects, such as wealth or resources.

Material equality poses real challenges to classical liberalism, and according to Otteson, also faces challenges of its own. Otteson outlines three major challenges to material equality: first, it may be impossible, both to measure, and to achieve. Second, material equality interferes with human diversity. Humans have different talents, different interests, and different values, which in a free society get reflected in a range of goods & activities that individuals acquire and pursue. To try to enforce some kind of material equality would mean interfering with this diversity.

That leads to the third problem, which is that material equality interferes with human dignity. Part of what it means to have human dignity is to have the capacity and the freedom to make choices. These choices are reflected in the way we live our lives; to respect the free choices that people make is to respect their dignity. Enforcing material equality would necessarily interfere with the free choices that people make.

World Bank: Freedom and Liberty As Recipe To Prosperity!

The World Bank seems to have experienced an epiphany.

A recent research paper arrives at the conclusion that the formula to social prosperity are through Economic Freedom and Civil Liberties! [my earlier post here shows that economic freedom precedes civil liberties]

What makes this unusual is that the World Bank is a multilateral government agency. This means that the economics of classical liberalism and the politics of libertarianism has been gaining supporters even among government insiders.

Another way to see this is that some bureaucrats and politicians could be seeing the light of the delusions and failures of central planning.

Writes Jean-Pierre Chauffour (bold emphasis mine) [hat tip: Don Boudreaux]

Freedom and entitlement are largely two different paradigms to think about the fundamentals of economic development. Depending on the balance between free choices and more coerced decisions, individual opportunities to learn, own, work, save, invest, trade, protect, and so forth could vary greatly across countries and over time. The empirical findings in this paper suggest that fundamental freedoms are paramount to explain long term economic growth. For a given set of exogenous conditions, countries that favor free choice—economic freedom and civil and political liberties—over entitlement rights are likely to growth faster and achieve many of the distinctive proximate characteristics of success identified by the Growth Commission (2008): leadership and governance; engagement with the global economy; high rates of investment and savings; mobile resources, especially labor; and inclusiveness to share the benefits of globalization, provide access to the underserved, and deal with issues of gender inclusiveness. In contrast, pursuing entitlement rights through greater state coercion may be deceptive and even self-defeating in the long run.

Amen!

Video: Was Robin Hood A Libertarian?

Last night I watched Ridley Scott’s magnificent ‘prequel’ version of Robin Hood (portrayed by Russell Crowe) at the HBO.

Here is the video of Robin Hood’s stirring speech on Freedom: “Liberty by Law”.

I noticed that classical liberalism seems to emerge as the du jour theme on some movies, e.g. Prince of Persia: The Sands of Time (2010) has tinges of anti-taxation (movie quotes here).

Are these movies conveying blossoming sentiments of the public?

More movies of this genre would certainly put awareness to classical liberalism/libertarianism.

Will Ron Paul Run For President in 2012?

I hope he does. Signs point to this though...

From the Bloomberg,

U.S. Representative Ron Paul of Texas announced today in Iowa that he is forming an exploratory committee for a third presidential campaign.

Paul, a longshot 2008 Republican presidential candidate whose anti-tax, anti-government politics struck a chord with a swath of voters and fueled fundraising, will make a decision on whether to run by the middle of next month, said Jesse Benton, his political director.

“There’s a lot of enthusiasm,” Benton said. Paul plans to participate in a Republican primary debate May 5 in South Carolina.

Before his 2008 bid, Paul ran for president in 1988 on the Libertarian Party ticket.

Paul, who heads the House Financial Services subcommittee that oversees the Federal Reserve and wrote a 2009 book “End the Fed,” has long pushed for legislation to increase scrutiny of the central bank. He joined with his son, Rand, who was elected as a Republican senator from Kentucky in November, to introduce legislation this year to require an audit of the Fed by the Government Accountability Office.

Of course I don’t expect Congressman Paul to win. I don’t even think that this could even be the primary goal for Mr. Paul.

As Jacob Huebert aptly points out in this great talk (above), Ron Paul could simply be raising the level of awareness of classical liberalism or libertarianism to the public as he has successfully done so in the past by running for the top post.

The US is hardly a libertarian society (the youthful Mr. Huebert points to some 14% of the population as libertarians) which essentially makes Mr. Paul’s winning the Presidency seemingly against the odds.

However bringing the libertarianism platform to the political arena gradually opens the eyes of the public to the essence of liberty.

Aside, Mr. Huebert cites the internet as another complimentary driving force to Ron Paul as increasing the public’s interest on libertarianism.

One would note that since it is innate for people to look for role models, many libertarians may have seen Ron Paul as having assumed this function.

Besides classical liberalism or libertarianism requires some serious ruminations on economics and philosophy, something which most people appear averse at.

Great minds discuss ideas; Average minds discuss events; Small minds discuss people, said former US First Lady Eleanor Roosevelt.

Yet ideas are hardly the favored topic of mainstream media. Where ideas mattered, it could be seen in the context of social compassion but whose application implies compulsion to achieve this goal. (of course this would be embellished by math models)

Nevertheless the last word from hopefully Presidential candidate Ron Paul, (bold highlights mine)

To believe in liberty is not to believe in any particular social and economic outcome. It is to trust in the spontaneous order that emerges when the state does not intervene in human volition and human cooperation. It permits people to work out their problems for themselves, build lives for themselves, take risks and accept responsibility for the results, and make their own decisions.

Yemeni President To Resign: Another Near Victory For ‘Kids With Stones And Facebook’

Another MENA dictator bites the dust: Yemeni President agrees to step down

From the Wall Street Journal

Yemen's president and the country's top general are hashing out a settlement in which both men would resign within days, people familiar with the situation said, raising crucial questions of who will end up leading a key, though embattled, U.S. counterterrorism ally.

The outlines of a peaceful transition, to a civilian-led transitional government, emerged amid rising tension over the standoff between Yemeni President Ali Abdullah Saleh and pro-democracy protesters backed by Gen. Ali Mohsen al-Ahmar. The general this week broke ranks and declared his support for protesters demanding that the president resign immediately.

Opposing tanks from units loyal to Mr. Saleh and to Gen. Ahmar have faced off in the streets of San'a all week and tens of thousands of antigovernment demonstrators vowed to continue their protest Friday in the capital's Change Square.

It’s almost a validation of what I earlier wrote about—rebutting critiques of MENA revolts spearheaded by “Kids with stones and Facebook”

Today’s defection of Yemen’s key army commanders partially rebuts the idea that incumbents “do not easily yield that power to kids with stones and Facebook”. Maybe not easily, but this only shows that “facebook and kids with stones” have the power to turn the army on their sides.

Don’t forget armies are composite of people---who can be swayed by influences (like networks-families, friends or culture-religion).

As a saying goes... It’s not over till the fat lady sings.

Like it or not, “Kids with stones and Facebook” will play a far crucial role in shaping the geopolitical context than most experts would expect.

As I would like to reiterate, politics is an ongoing process.

People participating in these social (MENA) revolutions may not understand liberty (private property, rule of law and voluntary exchange) enough, in as much as they would like their dictators out. As the 18th President of the US, Ulysses S. Grant, once said,

The right of revolution is an inherent one. When people are oppressed by their government, it is a natural right they enjoy to relieve themselves of the oppression, if they are strong enough, either by withdrawal from it, or by overthrowing it and substituting a government more acceptable.

But slowly and surely social media is helping them get there.

P.J. O’Rourke On Atlas Shrugged (Movie): A Hundred Years Spent Proving Classical Liberalism Right

Libertarian author P.J. O’Rourke reviews Atlas Shrugged The Movie (source Wall Street Journal Blog; bold emphasis mine)

But I will not pan “Atlas Shrugged.” I don’t have the guts. If you associate with Randians—and I do—saying anything critical about Ayn Rand is almost as scary as saying anything critical to Ayn Rand. What’s more, given how protective Randians are of Rand, I’m not sure she’s dead.

The woman is a force. But, let us not forget, she’s a force for good. Millions of people have read “Atlas Shrugged” and been brought around to common sense, never mind that the author and her characters don’t exhibit much of it. Ayn Rand, perhaps better than anyone in the 20^thcentury, understood that the individual self-seeking we call an evil actually stands in noble contrast to the real evil of self-seeking collectives. (A rather Randian sentence.) It’s easy to make fun of Rand for being a simplistic philosopher, bombastic writer and—I’m just saying—crazy old bat. But the 20^th century was no joke. A hundred years, from Bolsheviks to Al Qaeda, were spent proving Ayn Rand right.

Then there is the audacity of bringing “Atlas Shrugged” to the screen at all. Rand devotees, starting with Rand herself, have been attempting it for 40 years. The result may be as puzzling as a nude sit-in anti-Gadhafi protest in Tripoli’s Green Square, but you have to give the participants credit for showing up.

In “Atlas Shrugged” Rand set out to prove that self-interest is vital to mankind. This, of course, is the whole point of free-market classical liberalism and has been since Adam Smith invented free-market classical liberalism by proving the same point. Therefore trying to make a movie of “Atlas Shrugged” is like trying to make a movie of “The Wealth of Nations.” But Adam Smith had the good sense to leave us with no plot, characters or melodramatic clashes of will so that we wouldn’t be tempted to try.

Patching it all up, P.J. O’Rourke simply says that a hundred years had been spent proving classical liberalism right.

Ron Paul’s Ten Principles of a Free Society

Here is US Congressman Ron Paul’s 10 Principles of a Free Society (from Lew Rockwell.com; bold emphasis mine)

This is the Appendix to Ron Paul's new book, Liberty Defined.

1. Rights belong to individuals, not groups; they derive from our nature and can neither be granted nor taken away by government.
2. All peaceful, voluntary economic and social associations are permitted; consent is the basis of the social and economic order.
3. Justly acquired property is privately owned by individuals and voluntary groups, and this ownership cannot be arbitrarily voided by governments.
4. Government may not redistribute private wealth or grant special privileges to any individual or group.
5. Individuals are responsible for their own actions; government cannot and should not protect us from ourselves.
6. Government may not claim the monopoly over a people's money and government's must never engaged in official counterfeiting, even in the name of macroeconomic stability.
7. Aggressive wars, even when called preventative, and even when they pertain only to trade relations, are forbidden.
8. Jury nullification, that is, the right of jurors to judge the law as well as the facts, is a right of the people and the courtroom norm.
9. All forms of involuntary servitude are prohibited, not only slavery but also conscription, forced association, and forced welfare distribution.
10. Government must obey the law that it expects other people to obey and thereby must never use force to mold behavior, manipulate social outcomes, manage the economy, or tell other countries how to behave.

Do Central Banks Uphold Or Undermine Free Market Principles?

When I read Professor Art Carden’s statement from this article,

Far too often, people use terms like "capitalism" and "socialism" sloppily, either because they don't understand them or because the words make for cheap but effective (albeit inaccurate) political rhetoric. The Great Conversation suffers because of it.

It struck me that many arguments supposedly for the so-called advancement of the political philosophy of libertarianism, free markets and or classical liberalism have precisely been anchored on this—rhetoric misrepresented as principles.

And this is exactly the essence of my last article, The Middle Of The Road Policy Of A Local Free Market Group. Where I was earlier disappointed about the issue of principles, I was even more dismayed by the responses.

Given the benefit of the doubt that perhaps my article or my “spin” could have lacked clarity, or that specialization may have lead to the misunderstanding of my message, my argument against the positive relationship between central banking and the free market was certainly not about utility nor was it about market failure.

By utility, I mean it would seem misguided to compare what is essentially is a monopoly—operating on the power of coercion, funded by taxpayer resources and whose decision making process by the authorities are (externality) risk borne by the taxpayers—with private and semi-private enterprises operating mostly on a competitive environment.

By market failure, the standard statist ‘Paul Krugman’ tactic—throw up a strawman, assail or shoot it down with econometric gibberish or economic models, and declare “market failure”, thus justifying government intervention—eludes the question about this relationship between free markets and the central bank.

The fact that the local central bank began only in the Philippines in 1949, goes to show that even in our colonial past the nation has survived without it, thereby, disproving the presumed sine qua non nature of central banking to the local economy.

As my colleague Paul How writes in his 'as-yet unpublished manuscript', the “Philippine Banking And The Business Cycle” about how the domestic monetary system operated, (bold emphasis mine)

During the 19^th century, the monetary system had a gold standard in place, where each monetary note was presumed to redeem a fixed amount of gold...

Clearly, people, in their private capacity, preferred the use of a medium of exchange whose value was based not on government decree but on the amount of rare metals contained in the item. Even after the Spanish handed the Philippines over to the United States in December 1898, Filipinos continued using the Mexican coin, much to the chagrin of US officials keen on imposing their culture on the new colony’s inhabitants.

Where half of our transactions are settled for by money which is issued by an institution owned and controlled by the government, this extrapolates to half of our trading activities under the indirect purview of the government. Thus it is very important to put in question the role of such institution under the Free Market precept.

Ultimately, what for stands as the most important issue is through this question:

Do central banks promote or undermine the Free Market Principles?

This brings us back to definition. A free market, according to Wikipedia, is a market in which there is no economic intervention and regulation by the state, except to enforce private contracts and the ownership of property.

If freedom to contract and private property rights are the key pillars of free market principles as stated by such definition, do central bank activities promote these?

As a side note, under classical liberalism I would not say that free market is the absence of intervention or regulation, but instead a free market is self regulated by (mostly non-state) institutions operating under the rule of law.

Nevertheless the entire concept of freedom to contract and private property or even the rule of law are put into a test under the central bank’s operations: (bold highlights under below quotes are my emphasis)

1. Inflation of the monetary system

Thus, credit expansion unavoidably results in the economic crisis. In either of the two alternatives, the artificial boom is doomed. In the long run, it must collapse. The short-run effect, the period of prosperity, may last sometimes several years. While it lasts, the authorities, the expanding banks and their public relations agencies arrogantly defy the warnings of the economists and pride themselves on the manifest success of their policies. But when the bitter end comes, they wash their hands of it.

The artificial prosperity cannot last because the lowering of the rate of interest, purely technical as it was and not corresponding to the real state of the market data, has misled entrepreneurial calculations. It has created the illusion that certain projects offer the chances of profitability when, in fact, the available supply of factors of production was not sufficient for their execution. Deluded by false reckoning, businessmen have expanded their activities beyond the limits drawn by the state of society’s wealth. They have underrated the degree of the scarcity of factors of production and overtaxed their capacity to produce. In short: they have squandered scarce capital goods by malinvestment.

Ludwig von Mises, The Causes of Economic Crisis,

Does price signalling distortion, reduction of purchasing power of money and capital consumption from these forces represent as free market principle? The same question should all be applied on the following aspects shown below.

2. The nature of central bank’s fractional reserve system

As Huerta de Soto points out, the problem of the tragedy of the commons always appears when property rights are defined improperly. In the case of fractional reserve banking, bankers can infringe on property rights because it is not clearly defined who owns the deposit.

When customers make their deposits, the promise is that the deposit is always available for withdrawal. However, the deposits, by the very definition of fractional reserve banking, are never completely available to all customers at one time. This is because banks will take a part of these deposits and loan them out to other customers. In other words, they issue fiduciary media. By issuing more property titles than property entrusted to them, the banks violate the traditional property rights of their customers. (One of the most important contributions of Huerta de Soto's exhaustive book is to demonstrate how banking developed historically and that fractional reserve banking evolved as a perversion of deposit banking.)

Philipp Bagus, The Commons and the Tragedy of Banking

3. Externality costs from the knowledge problem

The odds that 19 men and women (a.k.a. the Federal Open Market Committee) will be able to select the overnight interest rate that keeps the U.S. economy growing at its potential in perpetuity are next to nil.

There would be a huge outcry if the Fed set the price of oil or copper or soybeans. Yet we accept the central bank as a price setter, a monopolist, when it comes to the interbank lending rate.

Caroline Baum Capitalism Still Has Legs That Are Long and Sexy

3. Operates from an environment of arbitrary rules

The concept of the rule of law in jurisprudence and political philosophy has several dimensions. At its core is the classical liberal principle of nondiscretionary governance that stands in contrast to the arbitrary or discretionary rule of those people currently in authority. In shorthand, either we have the rule of law or we have the rule of authorities. Under the rule of law, government agencies do nothing but faithfully enforce statutes already on the books. Under the rule of authorities, those in positions of executive authority have the discretion to make up substantive new decrees as they go along, and to forego enforcing the statutes on the books.

Dr. Lawrence H. White Rule of Law or the Rule of Central Bankers?

Think currency interventions in behalf of exporters and OFWs at the expense of importers and consumers via elevated prices of goods and services.

4. Operate on persistent political pressures

To put it into the hands of an institution which is protected against competition, which can force us to accept the money, which is subject to incessant political pressure, such an authority will not ever again give us good money

Friedrich August von Hayek A Free-Market Monetary System

5. Choosing winners and losers

The real reason for the adoption of the Federal Reserve, and its promotion by the large banks, was the exact opposite of their loudly trumpeted motivations.

Rather than create an institution to curb their own profits on behalf of the public interest, the banks sought a Central Bank to enhance their profits by permitting them to inflate far beyond the bounds set by free-market competition.

Murray N. Rothbard, The Case Against the Fed

6. Crony Capitalism

The answer was the same in both cases: the big businessmen and financiers had to form an alliance with the opinion molding classes in society, in order to engineer the consent of the public by means of crafty and persuasive propaganda.

Murray N. Rothbard, The Case Against the Fed

7. Promote Government Expansion

While, as we shall see presently, government's exclusive right to issue and regulate money has certainly not helped to give us a better money than we would otherwise have had, and probably a very much worse one, it has of course become a chief instrument for prevailing governmental policies and profoundly assisted the general growth of governmental power. Much of contemporary politics is based on the assumption that government has the power to create and make people accept any amount of additional money it wishes. Governments will for this reason strongly defend their traditional rights. But for the same reason it is also most important that they should be taken from them.

A government ought not, any more than a private person, to be able (at least in peace-time) to take whatever it wants, but be limited strictly to the use of the means placed at its disposal by the representatives of the people, and to be unable to extend its resources beyond what the people have agreed to let it have. The modern expansion of government was largely assisted by the possibility of covering deficits by issuing money-usually on the pretence that it was thereby creating employment. It is perhaps significant, however, that Adam Smith [54, p. 687] does not mention the control of the issue of money among the 'only three duties [which] according to the system of natural liberty, the sovereign has to attend to'.

Friedrich August von Hayek Denationalization of money

In my view, the fundamental case for free market capitalism begins with sound money and sound banking institutions (whether it is a 100% gold reserve or a free banking standard).

MENA’s Revolt Has Neo (Classical) Liberalism Roots?

Many pundits say that the revolt in MENA isn’t about neo (classical) liberalism, but simply about regime (figurehead) change.

Maybe.

This is Egypt today even after the fall of ex-President Hosni Mubarak.

This comes even amidst speculation by some political pundits alleging that Egyptians will have a difficult time to wean away from the decades long of military rule.

The above picture from Al Jazeera.net shows that this simply isn’t so, as Egyptians demand for more than just President Mubarak's ouster but also the repeal of the emergency rule, release of political prisoners and removal of Mubarak's members--from Associated Press.

My salute to Al Jazeera.net’s outstanding live stream coverage of the MENA revolt.

In Libya, when I see placards that demand for the advancement of the role of civil society and institutional changes (I wasn’t quick to enough to capture them) and even call for changes to a constitutional government...

aside from the below....

....I am delighted to know that the seeds of classical liberalism have been sown --in Libya or possibly also in Egypt and perhaps in the other unfolding People Power revolutions in the Middle East and North Africa.

Thanks to the web too for disseminating knowledge and for inspiring people to act.

Seeing all these gives me reasons to be an optimist.

Video: 10 Core Principles of Classical Liberalism

Dr. Nigel Ashford of Senior Program Officer at the Institute for Humane Studies (IHS) at George Mason University, explains the 10 core principles of the classical liberal & libertarian view of society and the proper role of government (via learnliberty.org):

1) Liberty as the primary political value
2) Individualism
3) Skepticism about power
4) Rule of Law
5) Civil Society
6) Spontaneous Order
7) Free Markets
8) Toleration
9) Peace
10) Limited Government

Update: Read in the following link Ralph Raico's magnificent article on "Austrian economics and Classical Liberalism"

Here is the intro:

Classical liberalism — which we shall call here simply liberalism — is based on the conception of civil society as, by and large, self-regulating when its members are free to act within very wide bounds of their individual rights. Among these the right to private property, including freedom of contract and free disposition of one's own labor, is given a very high priority. Historically, liberalism has manifested a hostility to state action, which, it insists, should be reduced to a minimum (Raico 1992, 1994).

Austrian economics is the name given to the school, or strand, of economic theory that began with Carl Menger (Kirzner 1987; Hayek 1968), and it has often been linked — both by adherents and opponents — to the liberal doctrine. The purpose of this paper is to examine some of the connections that exist, or have been held to exist, between Austrian economics and liberalism.

Heritage Foundation’s Economic Freedom Scorecard For The Philippines

We’ve been told that elections would usher in important positive socio-economic changes.

But where things matters most, particularly economic freedom, there appear to be little signs of progress.

Here is the newly released Economic Freedom Index scorecard from the Heritage Foundation on the Philippines.

As one would observe, the Philippines falls BELOW the world average, and whose score has been nearly STATIC from the past administration until the present.

The Scoring Methodology: (all bold highlights mine)

Business Freedom

Potential entrepreneurs face severe challenges. The overall regulatory framework is burdensome, and the legal framework is ineffective, holding back more dynamic and broad-based expansion of the private sector.

[my comment:

These are symptoms of too many arbitrary laws and regulations which results to the onus of red tape, that increases the incidences of corruption and inefficiencies.

All these add to the business risk premium which raises the costs of doing business and the subsequent required investment hurdle rate.

Ever wonder why investment in the Philippines has lagged the region? And how unemployment rates remain high despite high level of educational attainment by the population?]

Trade Freedom

The Philippines’ weighted average tariff rate was 3.6 percent in 2007. Some high tariffs, import and export restrictions, quotas and tariff rate quotas, services market access barriers, import licensing requirements, restrictive and non-transparent standards, labeling and other regulations, domestic bias in government procurement, inconsistent and non-transparent customs valuation and administration, export subsidies, widespread corruption, and weak protection of intellectual property rights add to the cost of trade. Fifteen points were deducted from the Philippines’ trade freedom score to account for non-tariff barriers.

[my comment: protectionism results to inefficiency of resource allocation and crony capitalism]

Fiscal Freedom

The Philippines has relatively high tax rates. The top income tax rate is 32 percent. The top corporate tax rate is 30 percent. Other taxes include a value-added tax (VAT), a real property tax, and an inheritance tax. In the most recent year, overall tax revenue as a percentage of GDP was 14.1 percent.

[my comment: a double whammy for investments]

Government Spending

In the most recent year, total government expenditures, including consumption and transfer payments, held steady at 17.3 percent of GDP. Fiscal stimulus and restructuring of public enterprises have widened the fiscal deficit, which had almost reached balance in 2007.

[my comment: orthodox Keynesian policies for the benefit of the entrenched rent seeking political-economic class at the expense of society]

Monetary Freedom

Inflation has been moderate, averaging 4.7 percent between 2007 and 2009, and was holding steady in 2010. The government influences prices through state-owned enterprises and utilities and controls the prices of electricity distribution, water, telecommunications, and most transportation services. Price ceilings are usually imposed on basic commodities only in emergencies, and presidential authority to impose controls to check inflation or ease social tension is rarely exercised. Ten points were deducted from the Philippines’ monetary freedom score to account for measures that distort domestic prices.

[my comment: global inflation has been moderate and this has camouflaged or masked the imbalances from local state interventionism. Once global inflation rises meaningfully the ramifications of such imbalances will be magnified.]

Investment Freedom

Foreign investment is restricted in several sectors of the economy. In many industries where foreign investment is allowed, the level of foreign ownership is capped. All foreign investments are screened and must be registered with the government. Regulatory inconsistency and lack of transparency, corruption, and inadequate infrastructure hinder investment. Dispute resolution can be cumbersome and complex, and enforcement of contracts is weak. Residents and non-residents may hold foreign exchange accounts. Payments, capital transactions, and transfers are subject to some restrictions, controls, quantitative limits, and authorizations. Foreign investors may lease but not own land.

[my comment: embedded anti-competition policies all designed at propping up the economic interest of the elites combined with a legal system that is vulnerable to the influences of the same vested interest groups.

This should be a great example of what the great Frederic Bastiat’s calls as “legal plunder”

“Legal plunder can be committed in an infinite number of ways; hence, there are an infinite number of plans for organizing it: tariffs, protection, bonuses, subsidies, incentives, the progressive income tax, free education, the right to employment, the right to profit, the right to wages, the right to relief, the right to the tools of production, interest free credit, etc., etc. And it the aggregate of all these plans, in respect to what they have in common, legal plunder, that goes under the name of socialism.”]

Financial Freedom

The Philippines’ small financial sector is dominated by banking. In general, the financial system welcomes foreign competition, and capital standards and oversight have improved. Consolidation has progressed, and non-performing loans have gradually declined. The banking sector is dominated by five large commercial banks. Two large state-owned banks account for about 15 percent of total assets. Credit is generally available at market terms, but banks are required to lend specified portions of their funds to preferred sectors. The non-bank financial sector remains small. Capital markets are centered on the Philippine Stock Exchange. The impact of the global financial crisis on banking has been relatively small because of the sector’s very limited exposure to distressed international financial institutions.

[my comment: like all banking arrangements around the world a central bank led banking cartel. Only that this privileged industry has been fortunate enough to escape the latest crisis out of the bad experience from our own crisis episode.]

Property Rights

Although the Philippines has procedures and systems for registering claims on property, including intellectual property and chattel/mortgages, delays and uncertainty associated with a cumbersome court system continue to concern investors. Questions regarding the general sanctity of contracts and the property rights they support have also clouded the investment climate. The judicial system is weak. Judges are nominally independent, but some are corrupt or have been appointed strictly for political reasons. Organized crime is a serious problem. Despite some progress, enforcement of intellectual property rights remains problematic.

[my comment: similar to my outlook in Investment freedom]

Freedom from Corruption

Corruption is perceived as pervasive. The Philippines ranks 139th out of 180 countries in Transparency International’s Corruption Perceptions Index for 2009. A culture of corruption is long-standing. The government has worked to reinvigorate its anti-corruption drive, but these efforts have been inconsistent. Reforms have not improved public perception and are overshadowed by high-profile cases frequently reported in the Philippine media.

[my comment-that’s the outcome of a political economic structure which relies mostly on political distribution of economic opportunities]

Labor Freedom

The labor market remains structurally rigid, although existing labor regulations are not particularly burdensome. Many of the country’s skilled workers have migrated to other advanced economies.

[my comment-similar remark on business freedom]

Overall, on the hype of change from a new administration, developments appear to be turning out as we predicted: the more things change the more they stay the same.

It is important to remember that any major reforms must not emerge only in terms “personality based politics” or the illusion of good government but a change that espouses a society of entrepreneurs or economic freedom

As Ludwig von Mises once wrote,

Prosperity is not simply a matter of capital investment. It is an ideological issue. What the underdeveloped countries need first is the ideology of economic freedom and private enterprise.

Philippine Classical Liberalism and Libertarianism: Unpopular But Remarkable

I find the message of my favourite marketing guru, Seth Godin, especially relevant to my political economic perspective.

With reference to Lady Gaga, Mr. Godin writes, (bold emphasis mine)

Do you think it bothers her that I don't listen to her music and wouldn't recognize her if she stopped by and said hi?

It shouldn't.

Even if you're a pop star, you don't need everyone to be a fan or a customer. And especially if you're not a pop star, worrying about whether everyone laughs at your jokes, buys your product or even likes you is counterproductive.

Unless you're running for something that requires a unanimous vote, it's a mistake to focus on the frowning guy in the back of the room or the dolt who doesn't get your subtle references or the miser who isn't going to buy from you regardless...

You're on the hunt for sneezers, for fans, for people willing to cross the street to work with you. Everyone else can pound sand, that's okay. Being remarkable also means being ignored or actively disliked.

BTW, I'm virtually certain that Lady (do her friends call her that?) doesn't read my stuff, so we're even.

I feel that this applies also to contrarians or fringe thinkers, who have been frequently ostracized, reviled, despised and dismissed for their unorthodox and unconventional ideas, despite being trenchantly correct for most occasions. (yes even in the financial market's standards)

That’s because conformity represents as the social norm or the need to get accepted, regardless if this means embracing popular delusions. In short, the implicit herd mentality.

Yet it would take so much mettle and grit to stand up to challenge such falsehood. A challenge only a few will likely partake of.

Nonetheless, not all contrarians share similar insights. [Think communists.]

And in this occasion I would like to credit my domestic classical liberals and libertarians colleagues, who despite the odds, have taken this challenge to expose mainstream delusions and have made some critical inroads in expanding awareness, organizing a niche/tribe for people with similar persuasions and the spreading of knowledge in the local community. I once thought that I operated alone. Not anymore.

The great Ludwig von Mises assimilated a passage of Latin poet Publius Vergillius Maros, or popularly known as Virgil, as his motto: Tu ne cede malis sed contra audentior ito ("Do not yield to the bad, but always oppose it with courage."); a motto, which I think, is worth carrying over.

So despite our unpopular stance, your passionate efforts have made fighting for such a cause, remarkable and inspirational.

Merry Christmas.

Why Philippine Elite Schools Are Inclined Towards Statism

Recently a libertarian colleague frustratingly observed that elite Philippine schools appear biased towards socialism.

Before dwelling directly with this issue, we should first look at the bigger picture and ask whether Filipinos, in general, are inclined towards (classical) liberalism or socialism.

In observation of the major source of influences which shapes the public’s mindset—particularly, the context of TV and newspaper or mainstream media’s reports and opinions, combined with the influences of the Church (largely the Catholic Church), one may conclude that Filipinos seem largely predisposed with the notion of social democracy (socialism).

And this is why domestic politics has popularly but erroneously been seen as the elixir to prosperity: just put in the “right” people and everything will be fixed. Yet this prevailing mindset has led to the public’s undeserved fixation towards politics at the expense of enhancing productivity.

And conversely, this seems to be the reason why (classical) liberalism seems to be a strange and unpopular concept here.

And only with the help of the internet has the principle of individual freedom, upholding private property as means of production, freedom of contract and social cooperation (or peace) via free trade gradually spread to a handful of adherents.

And likewise given that the domestic education industry has been highly regulated in terms of the enforcing curriculum standards, education cycle (see How Bro. Armin Luisitro’s 12 Year Basic Education Cycle Will Benefit The Big League Schools), the obsession towards compulsory education (e.g. subsidies to private schools for underprivileged students- See Is There A Brewing Bubble In The Philippine Education System?) and in many other aspects, this only suggests that Philippine educational system could somewhat constitute as a form ‘indoctrination’ towards the acceptance of state absolutism.

Apparently this hasn’t escaped the elite schools.

But there seems more to this.

In my view the most important factor is what I would call this the insider-outsider dynamics.

Insiders, represent the symbiotic relationship between the economic elite and ruling political class while the outsiders are the average citizen.

In consideration of the operating framework of the domestic political economy, where the Philippines is considered economically less free, and where, to quote Joe Studwell in Asian Godfather: Money and Power in Hong Kong and Southeast Asia (bold highlights mine), ``business interest gain so close a control of the political system that they are unaffected by the changes of government that do occur (as in Thailand and the Philippines). In both instances politicians spend huge sums to maintain a grip on power that has some semblance of legitimacy. This can only be financed by through direct political ownership of big business or more usually, contributions from nominally independent big business that is beholden to politicians. Whichever, the mechanism creates a not entirely unhappy dependence of elites between politicians and tycoons”, the elite schools has served as THE breeding or training grounds into fostering and nurturing the union of this exclusive insider political-economic relationship.

In other words, the primary reason elite schools have been inclined towards statism is because they benefit from such relationship. They represent the status quo.

Think of the Presidents who came from the ranks elite schools, including the incumbent. Or think of the cabinet members or bureaucrats who emerged from such top rank schools throughout the past and present administrations.

In addition, think of all those “donations” made by “Godfathers (tycoons)” to the elite schools, after having financially benefited from “political concessions” (monopolies, subsidies, cartel, access to funding, and etc...).

It’s been a give and take for the elite schools and the privileged political and economic class.

This also means that for people aspiring to get assimilated with the privileged clique, the best chances to gain entry would be through the elite schools route, via networking or by establishing connections. And obviously the passport has costs—skyrocketing tuition fees!

This also implies that elite schools are likely to fight to maintain status quo by promoting statism, despite the oxymoronic rhetoric towards ‘good’ government.

However, not all of the graduates of the elite schools aspire to be part of the insider. And I am talking about myself and a handful of emerging local contrarian classical liberals.

That’s because the status quo political economy benefits some at the expense of the rest of the society by instituting inequality of political and economic power through arbitrary laws and regulations.

And classical liberalism hopes to disentangle this “inequality”—by giving everyone (or democratizing) the “equality” of opportunity to succeed.

At any rate, for my colleagues, Murray N. Rothbard offers the best way to disseminate the principles of classical liberalism...

This is why, by the way, strategically, if you're an Austrian, you shouldn't spend time trying to convert Paul Samuelson or Milton Friedman. These guys are not going to be converted: they're locked into their paradigm. You convert people who are just coming up, new people, people who are on the fence. Graduate students, these are the people you can convert. Don't waste your time trying to convert Samuelson or Friedman or whoever the other paradigm people are.