The approach of each year’s April 15 tax deadline reminds us that even if one stretches credulity to believe “taxes are the price we pay for a civilized society,” that doesn’t prove the civilization we get is worth the taxes we are forced to pay. But this issue is far from new. More than two centuries ago, the Antifederalists warned us that the price we would have to pay for government would rise. So as we struggle with our IRS forms, and particularly as we write that check to the Treasury (or file for an extension to delay it), what they said merits recalling.Antifederalists were particularly concerned that the Constitution gave the national government almost unlimited taxing discretion.One of the leading Antifederalists was Robert Yates, writing as Brutus. He described federal taxing power as onethat has such latitude, which reaches every person in the community in every conceivable circumstance, and lays hold of every species of property they possess, and which has no bounds set to it, but the discretion of those who exercise it.In addition,it will lead to the passing a vast number of laws, which may affect the personal rights of the citizens of the states, expose their property to fines and confiscation. ... It opens the door to the appointment of a swarm of revenue and excise officers to prey upon the honest and industrious part of the community [and] eat up their substance.Brutus wrote that federal taxation “will introduce such an infinite number of laws and ordinances, fines and penalties, courts and judges, collectors, and excise men, that when a man can number them, he may enumerate the stars of Heaven.” That sounds a lot like what millions of Americans now struggle with each April.Brutus also predicted how invasive tax collection could become:This power, exercised without limitation, will introduce itself into every corner of the city, and country — it will wait upon the ladies at their toilet, and will not leave them in any of their domestic concerns; it will accompany them to the ball, the play, and assembly; it will go with them when they visit, and will, on all occasions, sit beside them in their carriages, nor will it desert them even at church; it will enter the house of every gentleman, watch over his cellar, wait upon his cook in the kitchen, follow the servants into parlor, preside over the table, and note down all he eats or drinks; it will accompany him to his bedchamber, and watch him while he sleeps; it will take cognizance of the professional man in his office, or study; it will watch the merchant in the counting-house, or in his store; it will follow the mechanic to his shop, and in his work, and will haunt him in his family, and in his bed; it will be a constant companion of the industrious farmer in all his labor, it will be with him in the house, and in the field, observe the toil of his hands, and the sweat of his brow; it will penetrate into the most obscure cottage; and finally, it will light upon the head of every person in the United States. To all these different classes of people, and in all these circumstances, in which it will attend them, the language in which it will address them will be GIVE! GIVE!Brutus described the consequences of expansive federal taxing powers. But he was writing only of direct (e.g., excise) taxes and the small federal government they could finance, long before the 16th Amendment made possible a federal income tax in 1913. In its aftermath, Brutus would conclude that he was far, far too optimistic. He would see why Albert Jay Nock described the income tax as a new American revolution, allowing a Brobdingnagian federal government and burdens beyond even his worst nightmare.
The art of economics consists in looking not merely at the immediate hut at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups—Henry Hazlitt
Friday, April 15, 2016
Tax Day: Why "Brutus" Thought Taxes Were Brutal
Sunday, October 19, 2014
Infographics: 5 Truths You Cannot Disagree With
Tuesday, September 09, 2014
New ADB Chief: Middle Income Trap is a Sham
The so-called middle-income trap, in which certain countries appear stuck at a middle level of development, is a sham, the new chief economist of the Asian Development Bank says.Although it has no formal definition, the "trap" is characterized by the inability of middle-income countries to advance to high-income status. In contrast, low-income economies are said to be able to easily move up to middle-income status and high-income countries are likely to sustain prosperity"I have looked at the data -- this is ongoing research still -- but the data suggest to me that this is largely a myth: the notion of the middle-income trap," Shang-Jin Wei said in an interview with the Nikkei late last week…Wei's assertion came after he looked at the economic growth history of "all countries in the world." He grouped them into five brackets: high-income, middle-income, low-income, poor, and extremely poor. He then looked at how they developed starting from 1960 and then 10, 20 and 50 years after.In any bracket, Wei said, some countries advanced, some dropped, while some stayed the same, suggesting that there is nothing special with the middle-income level.
This is an example of how macro statistics can be used to mislead people. Countries essentially don’t fall into “traps”, it is the individual who make or unmake their respective wealth.What truly restrains people from advancing is when productive resources are diverted into non-productive use. That’s basic, and is a matter of the law of opportunity costs or the law of scarcity.And what induces non-productive use of resources are insatiable government spending, the welfare state, bloated bureaucracy and trade restrictions, anti-competition laws, bubble policies (or policies which induces consumption), inflationism (QEs) and all sorts of market distorting interventionism. Yes, all of them are interconnected…In short, the more intervention, the lesser the capital accumulation or reduced economic growth. When politicians become greedy enough to divert much wealth into policy driven consumption activities then productivity diminishes. And that's where the so-called statistical 'trap' comes in.
Tuesday, June 24, 2014
Peter Schiff on the Pernicious Effects of the Fed’s Proposed Exit Fee on US bonds
The American financial establishment has an incredible ability to celebrate the inconsequential while ignoring the vital. Last week, while the Wall Street Journal pondered how the Fed may set interest rates three to four years in the future (an exercise that David Stockman rightly compared to debating how many angels could dance on the head of a pin), the media almost completely ignored one of the most chilling pieces of financial news that I have ever seen. According to a small story in the Financial Times, some Fed officials would like to require retail owners of bond mutual funds to pay an "exit fee" to liquidate their positions. Come again? That such a policy would even be considered tells us much about the current fragility of our bond market and the collective insanity of layers of unnecessary regulation.Recently Federal Reserve Governor Jeremy Stein commented on what has become obvious to many investors: the bond market has become too large and too illiquid, exposing the market to crisis and seizure if a large portion of investors decide to sell at the same time. Such an event occurred back in 2008 when the money market funds briefly fell below par and "broke the buck." To prevent such a possibility in the larger bond market, the Fed wants to slow any potential panic selling by constructing a barrier to exit. Since it would be outrageous and unconstitutional to pass a law banning sales (although in this day and age anything may be possible) an exit fee could provide the brakes the Fed is looking for. Fortunately, the rules governing securities transactions are not imposed by the Fed, but are the prerogative of the SEC. (But if you are like me, that fact offers little in the way of relief.) How did it come to this?For the past six years it has been the policy of the Federal Reserve to push down interest rates to record low levels. In has done so effectively on the "short end of the curve" by setting the Fed Funds rate at zero since 2008. The resulting lack of yield in short term debt has encouraged more investors to buy riskier long-term debt. This has created a bull market in long bonds. The Fed's QE purchases have extended the run beyond what even most bond bulls had anticipated, making "risk-free" long-term debt far too attractive for far too long. As a result, mutual fund holdings of long term government and corporate debt have swelled to more $7 trillion as of the end of 2013, a whopping 109% increase from 2008 levels.Compounding the problem is that many of these funds are leveraged, meaning they have borrowed on the short-end to buy on the long end. This has artificially goosed yields in an otherwise low-rate environment. But that means when liquidations occur, leveraged funds will have to sell even more long-term bonds to raise cash than the dollar amount of the liquidations being requested.But now that Fed policies have herded investors out on the long end of the curve, they want to take steps to make sure they don't come scurrying back to safety. They hope to construct the bond equivalent of a roach motel, where investors check in but they don't check out. How high the exit fee would need to be is open to speculation. But clearly, it would have to be high enough to be effective, and would have to increase with the desire of the owners to sell. If everyone panicked at once, it's possible that the fee would have to be utterly prohibitive.
Tuesday, April 15, 2014
Interventionism: Using Legal Coercion to Get Ahead in Life
In an environment in which “public policy” determines individual lives and fortunes and in which social and economic life has become politicized, it is not surprising that many Americans have turned their attention to politics to improve their market position and relative income share. Legalized coercion has become the method by which they get ahead in life.And make no mistake about it: Every income transfer, every tariff or import quota, every business subsidy, every regulation or prohibition on who may compete or how a product may be produced and marketed, and every restraint on the use and transfer of property is an act of coercion. Political force is interjected into what would otherwise be a system of peaceful and voluntary transactions.Over time, interventionism blurs the distinction between what is moral and what is not. In ordinary life, most people take for granted that certain forms of conduct are permissible while others are not. These are the Golden Rules we live by. Government’s task in human society is to enforce and protect these rules, which are summarized in two basic principles: Neither force nor fraud shall be practiced in dealings with others; and the rights and property of others must be respected. In the moral order that is the free market economy, these principles are the wellspring of honesty and trust. Without them, America is threatened with ultimate ruin – with a war of all-against-all in the pursuit of plunder.When individuals began to ask government to do things for them, rather than merely to secure their individual rights and honestly acquired property, they began asking government to violate other’s rights and property for their benefit.These demands on government have been rationalized by intellectuals and social engineers who have persuaded people that what they wanted but didn’t have was due to the greed, exploitation, and immorality of others. Basic morality and justice has been transcended in the political arena in order to take from the “haves” and give to the “have not’s.” Theft through political means has become the basis of a “higher” morality: “social justice,” which is supposed to remedy the alleged injustices of the free market economy.But once the market becomes politicized in this manner, morality begins to disintegrate. Increasingly, the only way to survive in society is to resort to the same types of political methods for gain as others are using, or to devise ways to evade the controls and regulations. More and more people, therefore, have been drawn into the arena of political intrigue and manipulation or violation of the law for economic gain. Human relationships and the political process have become increasingly corrupted.In the 1920s, Ludwig von Mises explained a crucial aspect of this corruption of morality and law:“By constantly violating criminal laws and moral decrees [people] lose the ability to distinguish between right and wrong, good and bad. The merchant, who began by violating foreign exchange controls, import and export restrictions, price ceilings, etc., easily proceeds to defraud his partners. The decay of business morals . . . is the inevitable concomitant of the regulations imposed on trade.”Mises was, of course, repeating the lesson that the French classical economist Frederic Bastiat had attempted to teach in the 1850s in his famous essay, “The Law.” When the state becomes the violator of liberty and property rather than its guarantor, it debases respect for all law. People in society develop an increasing disrespect and disregard for what the law demands. They view the law as the agent for immorality in the form of legalized plunder for the benefit of some at the expense of others. And this same disrespect and disregard sooner or later starts to creep into the ordinary dealings between individuals. Society verges on the brink of lawlessness.
So proposals to implement more interventionist solutions is like a dog chasing their own tail.
Thursday, November 07, 2013
Quotes from Peter Drucker’s The Sickness of Government
Government surely has never been more prominent than today. The most despotic government of 1900 would not have dared probe into the private affairs of its citizens as income tax collectors now do routinely in the freest society. Even the tsar’s secret police did not go in for the security investigations we now take for granted.” p.3…For seventy years or so – from the 1890’s to the 1960’s – mankind, especially in the developed countries, was hypnotized by government. We were in love with it and saw no limits to its abilities, or to its good intentions. p.4…This belief has been, in effect, only one facet of a much more general illusion from which the educated and the intellectuals in particular have suffered: that by turning tasks over to government, conflict and decision would be made to go away. Once the “wicked private interests” had been eliminated, a decision as to the right course of action would be rational and automatic. There would be neither selfishness nor political passion. Belief in government was thus largely a romantic escape from politics and from responsibility.” p.5…The greatest factor in the disenchantment with government is that government has not performed. The record over these last thirty or forty years has been dismal. Government has proven itself capable of doing only two things with great effectiveness. It can wage war. And it can inflate the currency.” p.7 (I would add spending and borrowing too—benson)…The best we get from government in the welfare state is competent mediocrity. More often we do not even get that; we get incompetence such as we would not tolerate in an insurance company. In every country, there are big areas of government administration where there is no performance whatever – only costs. p.7…Modern government has become ungovernable. There is no government today that can still claim control of its bureaucracy and of its various agencies. Government agencies are all becoming autonomous, ends in themselves, and directed by their own desire for power, their own narrow vision rather than by national policy. p.8…We are very good at creating administrative agencies. But no sooner are they called into being than they become ends in themselves, acquire their own constituency as well as a “vested right” to grants from the treasury, continuing support by the taxpayer, and immunity to political direction. No sooner, in other words, are they born than they defy public will and public policy. p.9…Nothing in history, for instance, can compare in futility with those prize activities of the American government, its welfare policies and its farm policies. Both policies are largely responsible for the disease that they are supposed to cure. p.13
Tuesday, September 24, 2013
How Inflationism Spurred Singapore’s Labor Protectionism
Singapore will widen foreign-worker curbs to professional jobs as the government clamps down on companies that hire overseas talent at the expense of citizens, stepping up efforts to counter a backlash against immigration.The Southeast Asian nation said yesterday it will set up a job bank where companies are required to advertise positions to Singaporeans before applying for so-called employment passes for foreign professionals. The unprecedented policy will target jobs that currently pay at least S$3,000 ($2,400) a month.“There are concerns among Singaporeans, which I think is fair, and so it’s timely for us to introduce this,” Acting Manpower Minister Tan Chuan-Jin said in a Bloomberg Television interview yesterday. “There are Singaporeans out there, well-skilled and capable, who are looking for jobs and I think this step would actually facilitate that process.”The country is persisting with a four-year campaign to reduce its reliance on foreign workers, after years of open immigration policy led to voter discontent over increased competition for housing, jobs and education. The move has led to a labor shortage and pushed up wages, prompting some companies to seek cheaper locations…Singapore will also raise the minimum pay for employment-pass holders by 10 percent to S$3,300 a month in January, the Ministry of Manpower said in a statement yesterday. The job bank will be set up by mid-2014, it said. Companies with 25 or fewer employees will be exempt from the new rules, as well as jobs that pay a fixed monthly salary of S$12,000 or more, the ministry said.
Inflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism
Friday, August 16, 2013
Misleading Housing Statistics on US Household Budget
What’s wrong with this? First, attributing 30% to the cost of housing. If a family puts three boys on one bedroom, and three girls in a second bedroom, the cost per child will plummet.In fact, the housing expense for children is close to zero. Here’s why. All costs are marginal, economic theory teaches. What is the cost of those extra rooms? Almost zero.When childless couples buy a home, do they buy a one-bedroom home? No. They buy at least a two-bedroom home. Most of them buy a three-bedroom home. But if the average American family buys extra bedrooms for show, the marginal cost of having a child live in that bedroom is zero. This is basic economics.Do they immediately move out when the children depart? No. So, the marginal cost of the children’s occupancy was zero. Americans pay for bedrooms they don’t need. It’s aesthetic. It’s cultural. It’s the American dream.I live in a three-bedroom home. Two of them are empty. I could easily convert two more rooms into bedrooms. I could adopt 10 children, and the housing costs would not rise much: the loss of one office, which could be moved into the basement, where there is another empty room. What did I pay for the house, plus the basement? About $225,000. I bought it in 2009. So, spare us the cries of high housing costs for children. These costs are marginal. The more kids you stick into a bedroom, the more marginal the costs are.
Certainly, only by statistics, can the federal government make even a fitful attempt to plan, regulate, control, or reform various industries — or impose central planning and socialization on the entire economic system
India Bans Gold Coin Imports, Imposes Capital Controls
Amid continuing pressure on the rupee, the RBI on Wednesday announced stern measures, including curbs on Indian firms investing abroad and a reduction of outward remittances, to restrict the outflow of foreign currency.The central bank reduced the limit for overseas direct investment (ODI) by domestic companies, other than oil PSUs, under the automatic route from 400 per cent of net worth to 100 per cent. Oil India and ONGC Videsh are exempt from this limitation…The RBI reduced the limit for remittances made by resident individuals under the liberalized remittances scheme (LRS) from $2 lakh to USD 75,000 a year. Resident individuals are, however, allowed to set up joint ventures or wholly owned subsidiaries outside under the ODI route within the revised LRS limit.
Seeking to reduce the import of gold, the Reserve Bank Wednesday prohibited inward shipment of gold coins, medallions and dores without license. "From now onwards, import of gold in the form of coins and medallions is prohibited and henceforth all import of gold in any form or purity shall be subject to a licence issued by DGFT prescribing 20-80 scheme," economic affairs secretary Arvind Mayaram told reporters here.The latest measures are part of the series of steps taken to curb gold import, the single biggest contributor to the widening current account deficit (CAD). After a dip in June, gold imports again surged in July with 47 tonnes of inward shipments compared to 31 tonnes in the previous month. Import of gold in April-July rose 87 per cent to 383 tonnes.
State interference in economic life, which calls itself "economic policy," has done nothing but destroy economic life. Prohibitions and regulations have by their general obstructive tendency fostered the growth of the spirit of wastefulness. Already during the war period this policy had gained so much ground that practically all economic action of the entrepreneur was branded as violation of the law. That production is still being carried on, even semi-rationally, is to be ascribed only to the fact that destructionist laws and measures have not yet been able to operate completely and effectively. Were they more effective, hunger and mass extinction would be the lot of all civilized nations today.
Tuesday, April 30, 2013
The Parallel Universe: Asian Edition
Japanese and South Korean industrial output was less than estimates in March and Taiwan’s first-quarter growth was half the forecast pace as weakness in global demand limits recoveries in Asian economies.In Japan, production climbed 0.2 percent from the previous month, the trade ministry said in Tokyo today. That was less than the median 0.4 percent forecast in a Bloomberg News survey of 27 economists. South Korea’s output fell 2.6 percent, a separate report showed. Taiwan’s gross domestic product rose 1.54 percent.Today’s data add to signs of a cooling global economy after U.S. gross domestic product rose less than forecast in the first quarter and China reported an unexpected slowdown. While Japan is already rolling out unprecedented monetary easing, the latest numbers may fuel calls for South Korea’s central bank to cut interest rates.
Tuesday, April 02, 2013
Quote of the Day: Market Failures Does Not Justify Government Interventions
Market failure is a tricky topic even for professional economists. And when non-economists raise the examples of market failure that we discussed here, matters become even trickier. Not only do all of these terms have technical meanings that often do not match what the non-economist thinks the terms mean, but most non-economists also are unaware of the various criticisms that have been raised in the literature on these topics. Most important, non-economist critics of the market are frequently unaware of the comparative institutional analysis that public choice theory has made a necessary part of thinking about the role of government in the economy. Pointing out imperfections in the market does not ipso facto justify government intervention, and the only certain way that market "failures" are "failures" is by comparison to an unreachable theoretical idea. Market imperfections are not magic wands that make market solutions and government imperfections disappear. Real understanding of comparative political economy begins rather than ends with the recognition that markets are not always perfect.
Wednesday, January 16, 2013
Example of How the Minimum Wage Hurt Businesses
In November, Albuquerque voters said yes to raising the city's minimum wage from $7.50 to $8.50 an hour, and just 13 days into the increase, historic city restaurant is already feeling the pinch.Owners of the historic El Charritos restaurant on Central say the hike is taking a bit out of business…Romero says the hike came at the worst possible time for the business with an already sluggish economy, as people cut back on eating out and venders upped their prices for food and fuel.To stay afloat El Charritos is cutting back too. They have slashed hours now closing at 2 p.m. on Mondays and Tuesdays to cut back on operating costs. El Charritos has also chosen not to fill six positions and say things could get worse.
In truth, there is only one way to regard a minimum-wage law: it is compulsory unemployment, period. The law says, it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment.
Sunday, December 30, 2012
Quotes of the Day: Ronald Coase on Economic Theory
But a theory is not like an airline or bus timetable. We are not interested simply in the accuracy of its predictions. A theory also serves as a base for thinking. It helps us to understand what is going on by enabling us to organize our thoughts. Faced with a choice between a theory which predicts well but gives us little insight into how the system works and one which gives us this insight but predicts badly, I would choose the latter, and I am inclined to think that most economists would do the same.
Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for enlightenment about how the economy operates. But because it is no longer firmly grounded in systematic empirical investigation of the working of the economy, it is hardly up to the task. During most of human history, households and tribes largely lived on their own subsistence economy; their connections to one another and the outside world were tenuous and intermittent. This changed completely with the rise of the commercial society. Today, a modern market economy with its ever-finer division of labor depends on a constantly expanding network of trade. It requires an intricate web of social institutions to coordinate the working of markets and firms across various boundaries. At a time when the modern economy is becoming increasingly institutions-intensive, the reduction of economics to price theory is troubling enough. It is suicidal for the field to slide into a hard science of choice, ignoring the influences of society, history, culture, and politics on the working of the economy.
Thursday, December 13, 2012
Quote of the Day: The Virtue of Market Inefficiency
an inefficiency exists when, for a given person at a given time and place, the cost of an action outweighs the benefit. We’ve seen that to rationally calculate costs and benefits you need money prices of inputs and outputs, of steel and bridges. So when government erodes private property rights, interferes with trade, distorts prices, and manipulates money, it doesn’t just make it harder to be efficient; it also pulls the rug from under the very ability to spot inefficiencies at all.Using the rules of arithmetic, for example, it’s easy to see that the statement 1 + 2 = 4 is wrong, but what about _ + _ = _ ? What’s the solution to this “problem”? Is there even a problem here? Money prices fill in the blanks; they “create errors”—i.e., reveal mistakes that no one could see without them—that alert entrepreneurs might then perceive and correct. If mistakes and inefficiencies remain invisible, the search for better ways of doing things could never get off the ground.An economy without inefficiencies is either one where knowledge is so perfect that no one ever makes a mistake, or it’s one in which government policy has effectively foreclosed the very possibility of inefficiency. In a world of surprise and discovery, of experiment and innovation, the former is impossible; the latter sort of economy, as Mises showed almost 100 years ago, is impossible as well as intolerable.So a living economy needs to “create” inefficiencies, and lots of them, to set the stage for greater efficiency and ongoing innovation.
Friday, November 16, 2012
Are Taxes and Regulations as Primary Business Obstacles a Myth?
Many business leaders will tell you that taxes and regulation are the biggest barriers to starting up and enlarging small businesses. It’s true that some regulations and laws have inhibited the growth of small businesses; the Sarbanes–Oxley Act, for instance, had the unexpected consequence of discouraging some companies from making initial public offerings, a step typically followed by a burst of hiring. But taxes and government oversight are not the primary barriers to stimulating the growth of small businesses. In the latest recession, their owners pointed to a lack of market demand as the primary problem, as well as an inability to obtain financing
The conquest of opinion by Keynesian economics is due mainly to the fact that its argument conformed to the age-old belief of the businessman that his prosperity depended on consumer demand. This plausible but erroneous conclusion was derived from his individual experience in business, namely, that general prosperity could be maintained by keeping general demand high. Economic theory had been rejecting this conclusion for generations, but it was suddenly made respectable by Keynes. And since the 1930s it has been embraced as obvious good sense by a whole generation of economists brought up on the teaching of his school. Thus for a quarter of a century we have systematically employed all available methods of increasing money expenditure, which in the short run creates additional employment but at the same time leads to a misdirection of labor that must ultimately result in extensive unemployment
Sunday, November 11, 2012
Argentina Politics: Biggest Protest Rally in Decades
it is totally false to say that printing more money generates inflation, price increases are generated by other phenomena like supply and external sector’s behaviour
Tens of thousands of Argentinians blocked the streets of Buenos Aires in the country’s largest anti-government protests in more than a decade.Demonstrators marched against rising inflation, crime and corruption under President Cristina Fernandez de Kirchner, whose popularity has plummeted since she was re-elected last year as the economy wobbles.
State interference in economic life, which calls itself "economic policy," has done nothing but destroy economic life. Prohibitions and regulations have by their general obstructive tendency fostered the growth of the spirit of wastefulness. Already during the war period this policy had gained so much ground that practically all economic action of the entrepreneur was branded as violation of the law. That production is still being carried on, even semi-rationally, is to be ascribed only to the fact that destructionist laws and measures have not yet been able to operate completely and effectively. Were they more effective, hunger and mass extinction would be the lot of all civilized nations today.Our whole life is so given over to destructionism that one can name hardly a field into which it has not penetrated. "Social" art preaches it, schools teach it, the churches disseminate it.
Saturday, September 22, 2012
Senkaku Islands Dispute: Chinese Government Behind Anti-Japan Protest
The last week's anti-Japan demonstrations in China have been a spectacular display of just how easily the ruling Communist Party can harness the power of protest.In the aftermath of nationwide protests, in which mobs trashed Japanese-owned businesses and set fire to Japanese model cars, critics are questioning the degree to which the Chinese government fanned the flames as part of its dispute with Japan over an island chain both nations claim."It is obvious that this was planned," said Ai Weiwei, the dissident artist, who videotaped some of the protests. The 1989 pro-democracy demonstrations in Tiananmen Square were "the last time that the people themselves organized a real protest and then the government sent in tanks to crush them," he said.Although there has been no evidence that police officers participated in the violence, in many cities they directed the public on where to protest and cleared streets to allow tens of thousands to mass. Many protesters interviewed Tuesday said they had been given the day off by employers to demonstrate. Sept. 18 is a traditional day of protest, marking the anniversary of the Japanese invasion of Manchuria in 1931.
In reality these are most likely smokescreens to the worsening internal problems experienced by both countries and to the mounting interventionism being applied by the increasingly desperate political authorities.
Wednesday, September 12, 2012
Video: Should the Government Track Your Political Activity?
Wednesday, August 29, 2012
Corrupt Indian Politicians Loot $14.5 billion in Food
From Bloomberg,
as much as $14.5 billion in food was looted by corrupt politicians and their criminal syndicates over the past decade in Kishen’s home state of Uttar Pradesh alone, according to data compiled by Bloomberg. The theft blunted the country’s only weapon against widespread starvation -- a five-decade-old public distribution system that has failed to deliver record harvests to the plates of India’s hungriest.
“This is the most mean-spirited, ruthlessly executed corruption because it hits the poorest and most vulnerable in society,” said Naresh Saxena, who, as a commissioner to the nation’s Supreme Court, monitors hunger-based programs across the country. “What I find even more shocking is the lack of willingness in trying to stop it.”
In every instance of corruption, the public’s attention have mechanically been directed at the immorality of the culpable political leaders. Yet media fails to investigate or even attempt to understand the incentives that encourages such nefarious acts. Thus the easy implied solution has always been to seek the appointment of persons of supposed “virtue”. But in reality, politics has never been about virtue but of the preservation of power.
Looking at the symptom than the disease won’t really lead to comprehensive solution.
More from the same article
This scam, like many others involving politicians in India, remains unpunished. A state police force beholden to corrupt lawmakers, an underfunded federal anti-graft agency and a sluggish court system have resulted in five overlapping investigations over seven years -- and zero convictions.
India has run the world’s largest public food distribution system for the poor since the failure of two successive monsoons led to the creation of the Food Corporation of India in 1965. The government last year spent a record $13 billion buying and storing commodities such as wheat and rice, and expects that figure to grow this year.
Yet 21 percent of all adults and almost half of India’s children under 5 years old are still malnourished. About 900 million Indians already eat less than government-recommended minimums. As local food prices climbed more than 70 percent over the past five years, dependence on subsidies has grown.
In reality, political distribution of resources tends to create two classes of people: particularly the powerful politicians—bureaucrats and the helpless public. With God like powers from legal mandates to determine the beneficiaries (winners and losers), many will try to influence or win the favor of the political class through various means, including bribery or through coopting or gaming the system.
On the other hand, the political class will always act in accordance to their self interest, particularly personal values and preferences, ideology, personal networks (family friends and etc..), career, social status and even financial interests. After all, political class are humans too.
As the great Professor Ludwig von Mises wrote in his magnum opus Human Action,
Unfortunately the office-holders and their staffs are not angelic. They learn very soon that their decisions mean for the businessmen either considerable losses or—sometimes—considerable gains. Certainly there are also bureaucrats who do not take bribes; but there are others who are anxious to take advantage of any “safe” opportunity of “sharing” with those whom their decisions favor.
In many fields of the administration of interventionist measures, favoritism simply cannot be avoided. Take, for example, the case of export or import licenses. Such a license has for the licensee a definite cash value. To whom ought the government grant a license and to whom should it be denied? There is no neutral or objective yardstick available to make the decision free from bias and favoritism. Whether or not money changes hands in the affair does not matter. The scandal is the same when the license is given to people who have rendered or are expected to render other kinds of valuable services (e.g., in casting their votes) to the people upon whom the decision depends.
Corruption is a regular effect of interventionism. It may be left to the historians and to the lawyers to deal with the problems involved.
Since interventionism are coursed through laws, laws create corruption and corruption engenders laws.
This striking quote from the same Bloomberg article is very much revealing of the true nature of the state and of the importance or of the superiority of the market: (bold highlights mine)
“If you can buy a Pepsi in every village in India, why can’t the government get us our rations?” asked Vaish, who lives in Satnapur. “The reason we don’t is because the government doesn’t want us to -- they all get a cut.”
Thursday, August 09, 2012
Wealthy French Mull Exodus in Response to Class Warfare Policies
“Soak the rich” socialist policies of French President François Hollande has been prompting many wealthy French citizens to consider the exit option
Reports the New York Times
The call to Vincent Grandil’s Paris law firm began like many others that have rolled in recently. On the line was the well-paid chief executive of one of France’s most profitable companies, and he was feeling nervous.
President François Hollande is vowing to impose a 75 percent tax on the portion of anyone’s income above a million euros ($1.24 million) a year. “Should I be preparing to leave the country?” the executive asked Mr. Grandil.
The lawyer’s counsel: Wait and see. For now, at least.
“We’re getting a lot of calls from high earners who are asking whether they should get out of France,” said Mr. Grandil, a partner at Altexis, which specializes in tax matters for corporations and the wealthy. “Even young, dynamic people pulling in 200,000 euros are wondering whether to remain in a country where making money is not considered a good thing.”
A chill is wafting over France’s business class as Mr. Hollande, the country’s first Socialist president since François Mitterrand in the 1980s, presses a manifesto of patriotism to “pay extra tax to get the country back on its feet again.” The 75 percent tax proposal, which Parliament plans to take up in September, is ostensibly aimed at bolstering French finances as Europe’s long-running debt crisis intensifies.
But because there are relatively few people in France whose income would incur such a tax — an estimated 7,000 to 30,000 in a country of 65 million — the gains might contribute but a small fraction of the 33 billion euros in new revenue the government wants to raise next year to help balance the budget.
The French finance ministry did not respond to requests for an estimate of the revenue the tax might raise. Though the amount would be low, some analysts note that a tax hit on the rich would provide political cover for painful cuts Mr. Hollande may need to make next year in social and welfare programs that are likely to be far less popular with the rank and file.
And class warfare politics has negatively affected business sentiment as well. Again from the same article,
Many companies are studying contingency plans to move high-paid executives outside of France, according to consultants, lawyers, accountants and real estate agents — who are highly protective of their clients and decline to identify them by name. They say some executives and wealthy people have already packed up for destinations like Britain, Belgium, Switzerland and the United States, taking their taxable income with them.
They also know of companies — start-ups and multinationals alike — that are delaying plans to invest in France or to move employees or new hires here.
Politicians and their apologists fail to realize that they are dealing with people who will respond adversely to their foolish repressive measures.
That's why there such a thing called the law of unintended consequences, or as per Wikipedia.org, used as an adage or idiomatic warning that an intervention in a complex system tends to create unanticipated and often undesirable outcomes
So far the concurrent panic in the peripheral crisis stricken Euro nations have been prompting for a stampede into French 10 year bonds. This despite the deteriorating fiscal conditions of the French government.
The French equity bellwether, the CAC, has also been in a rally mode since ECB President Draghi’s promise to do whatever it takes to save the Euro
Given the fluidity of events, current market actions may swiftly and drastically change.
And once the exodus of the wealthy French transforms into reality, then we should expect a selloff in both the bond and the equity markets.
Class warfare politics through taxing or soaking the rich serves only as camouflage to the real consequences—taxing everyone else including the poor, except for the political class—or myth of the Santa Claus Fund.
As the great Ludwig von Mises explained, (bold emphasis mine)
High surtax rates for the rich are very popular with interventionist dilettantes and demagogues, but they secure only modest additions to the revenue. From day to day it becomes more obvious that large-scale additions to the amount of public expenditure cannot be financed by "soaking the rich," but that the burden must be carried by the masses. The traditional tax policy of the age of interventionism, its glorified devices of progressive taxation and lavish spending have been carried to a point at which their absurdity can no longer be concealed. The notorious principle that, whereas private expenditures depend on the size of income available, public revenues must be regulated according to expenditures, refutes itself. Henceforth, governments will have to realize that one dollar cannot be spent twice, and that the various items of government expenditure are in conflict with one another. Every penny of additional government spending will have to be collected from precisely those people who hitherto have been intent upon shifting the main burden to other groups. Those anxious to get subsidies will themselves have to foot the bill. The deficits of publicly owned and operated enterprises will be charged to the bulk of the population. [p. 858]
The situation in the employer-employee nexus will be analogous. The popular doctrine contends that wage earners are reaping "social gains" at the expense of the unearned income of the exploiting classes. The strikers, it is said, do not strike against the consumers but against "management." There is no reason to raise the prices of products when labor costs are increased; the difference must be borne by employers. But when more and more of the share of the entrepreneurs and capitalists is absorbed by taxes, higher wage rates, and other "social gains" of employees, and by price ceilings, nothing remains for such a buffer function. Then it becomes evident that every wage raise, with its whole momentum, must affect the prices of the products and that the social gains of each group fully correspond to the social losses of the other groups. Every strike becomes, even in the short run and not only in the long run, a strike against the rest of the people.
An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself.
French class warfare politics essentially serves as the death warrant for the Euro.