Why Do People have Faith in Politicians?

Professor Don Boudreaux is puzzled and saddened by people’s unwavering faith in reprobate politicians,

Successful politicians – and particularly those who are successful on national stages – are, with exceptions too few to matter, master con artists.

Whatever is the reason why so many grown people respect holders of political office is, as it has always been, beyond my comprehension. I just don’t get it. Practitioners of no other profession are accorded more honor, respect, and (most importantly) power while at the same time being held to such low standards of ethical behavior. Actions that, when committed by the family dog, properly elicit scolding or muzzling or even eviction from the premises are, when committed by an elected official, greeted with oohs, aahhs, applause, and re-election to powerful office.

I share the same frustrations too.

Thanks to the principles of liberty, I have been enlightened that people who mattered most are those who put to risks their personal savings and capital and commit tremendous efforts to serve the consumers. Such people represent genuine public service.

Yet these wealth generating class of people are often unfairly painted as immoral or unethical by politicians, by their lackeys and their media mouthpieces.

Moreover, there has been little realization that while there will always be crooked people, corrupt and perverted behaviour are often an offshoot to arbitrary laws, excessive interventionism and burdensome taxes. Many unscrupulous actions are consequences of stifling regulations. And these have been the primary reasons for the proliferation of informal economies or black markets.

And in contrast, politicians who live by the forcible appropriation of people’s efforts, have ironically, been portrayed as having the moral high ground over the productive economic class.

Many don’t understand that the precept of “it is not what you know but who you know” has been grounded on the politicization of the marketplace. Where entrepreneurs, business people and corporate managers have been frequently harassed or intimidated by onerous regulatory and tax requirements, political “connections” become a byword for the protection of one’s properties and the facilitation one’s economic interests.

And analogous to Stockholm Syndrome, where hostages develop personal attachments with their captors, the populace yield or surrender to the “realities” of interventionism. Thus, the popularity of those who possess social and political control over others—or the politicians and the political class because of the unwarranted dependency relationship built from oppressive politics.

Of course the indoctrination factor through mass media, and the state captured private (crony) institutions have been party to the promotion of interventionism, the latter serves as a reason for the existence of revolving door relationships with crony institutions.

In the Philippines many aspire to be lawyers, that’s because lawyers are perceived to be a heartbeat away from politics. And politics has been seen by many, if not most, as a paragon of public service and career success which is entirely a popular delusion.

People hardly understand the system of ethics from which democratic politics operates on.

Basically, in arguing for the protection of society’s welfare, politicians take away people’s freedom, which is used as basis for the second step, the arrogation of people’s property. Then, the state through incumbent political leaders redistributes plundered resources to their wards and gives some of the plundered resources back to the taxpayers (e.g. welfare, public infrastructures) and claim the moral high ground of being ‘compassionate’. Yet most of such actions have been meant at securing votes to keep them in office.

I am reminded by the pungent Bennett Cerf quote in Nathaniel Branden’s book Judgment Day: My Years With Ayn Rand

You have to throw welfare programs at people — like throwing meat to a pack of wolves — even if the programs don't accomplish their alleged purpose and even if they're morally wrong.

And of course, the rest of the taxed resources are kept for themselves in the form of salaries, perks, perquisites and other benefits (such as junkets), not to mention income from under the table transactions.

People hardly realize too that the political office have been magnet to people with sinister motivations. The great Friedrich von Hayek said the worst people usually get to the top of the political world.

Writes Doug French at the Mises Blog, (bold emphasis mine)

F.A. Hayek famously argued in The Road to Serfdom, that in politics, the worst get on top, and outlined three reasons this is so. First, Hayek makes the point that people of higher intelligence have different tastes and views. So, as Hayek writes, “we have to descend to the regions of lower moral and intellectual standards where the more primitive instincts prevail,” to have uniformity of opinion.

Second, those on top must “gain the support of the docile and gullible,” who are ready to accept whatever values and ideology is drummed into them. Totalitarians depend upon those who are guided by their passions and emotions rather than by critical thinking.

Finally, leaders don’t promote a positive agenda, but a negative one of hating an enemy and envy of the wealthy. To appeal to the masses, leaders preach an “us” against “them” program.

“Advancement within a totalitarian group or party depends largely on a willingness to do immoral things,” Hayek explains. “The principle that the end justifies the means, which in individualist ethics is regarded as the denial of all morals, in collectivist ethics becomes necessarily the supreme rule.”

The bottom line is that ignorance, indoctrination, propaganda, the belief in the politics of heaven (abundance) on earth (scarcity), the seduction of easy life from political redistribution, dependency on political relations as means to preserve one’s property, the popularity of social control or political power, traditionalism, peer pressures, and the Stockholm syndrome applied to political relations, among many others more, may have contributed to people’s undeserving faith in politicians.

Quote of the Day: War Equals Presidential Greatness

Our data analysis suggests that wars in which a large percentage of the U.S. population is killed will, all other things equal, cause historians to judge as great a president on whose watch those wars occurred. Certainly, this was the perception of presidents Theodore Roosevelt and John F. Kennedy. It was probably also the perception of other presidents.

This conclusion is troubling. Most presidents, after all, probably want to be thought of as great. When they spend resources on war, they are spending almost entirely other peoples money and lives. They get little credit for avoiding war. Martin Van Buren, for example, effectively avoided a war on the northern border of the United States. How many people know that today?
Indeed, how many people have even heard of Martin Van Buren?

Woodrow Wilson, by contrast, inserted the United States into World War I. That was a war that the United States could easily have avoided. Moreover, had the U.S. government avoided World War I, the treaty that ended the war would not likely have been so lopsided. The Versailles Treaty`s punitive terms on Germany, as Keynes predicted in 1919, helped set the stage for WorldWar II.

So it is reasonable to think that had the United States not entered World War I, there might not have been a World War II. Yet, despite his major blunder and more likely, because of his major blunder, which caused over 100,000 Americans to die in World War I, Wilson is often thought of as a great president.

The danger is that modern presidents understand these incentives. Those who want peace should take historians` ratings of presidents seriously. Beyond that, we should stop celebrating, and try to persuade historians to stop celebrating, presidents who made unnecessary wars. One way to do so is to remember the unseen: the war that didn`t happen, the war that was avoided, and the peace and prosperity that resulted. If we applied this standard, then presidents Martin van Buren, John Tyler, Warren G. Harding, and Calvin Coolidge, to name four, would get a substantially higher rating than they are usually given.

That’s from a paper by Professors David Henderson and Zachary Gochenour.

Seeing greatness in war or destruction is an example of the public’s misconceived glorification of the state, which has mostly been a product of indoctrination and political propaganda.

War, according to writer Randolph Bourne, is the health of the state.

Wars are the ramifications of societies that worship the state, where the gullible public are misled to exalt the illusions of the supposed virtues of nationalism by ignoring the destructive real effects of such political actions.

Wars will always be a recourse or an option of any society that depends on political redistribution of resources.

Celebrating Unsung Heroes of Capitalism: Wilson Greatbatch

From analyst Andy Kessler at the Wall Street Journal (emphasis added)

Wilson Greatbatch, 92, died this week a wealthy man. Investing $2,000 of his own money way back in 1958 and tending a garden to feed his family, Greatbatch invented the pacemaker. He licensed it to Medtronic, a company now valued at $36 billion that sells and continues to improve pacemakers and defibrillators. Greatbatch did his part to improve society, create wealth and increase, quite literally, our standard of living. But apparently that's not enough. President Obama suggested under a Cincinnati bridge this month that "if you've done well . . . then you should do a little something to give something back."

Give something back? Greatbatch did well specifically because he provided something that society needed. His and Medtronic's profits are what you and I are willing to pay above costs for these life-enhancing devices. This is true of Apple iPhones and Genentech Herceptin and Google Maps and Facebook Likes.

Ever since the mid-19th-century era of so-called Robber Barons, this country has had a philosophical divide over the role of business in a democracy. It's time to set the record straight.

History has proven that the road to increased standards of living and wealth was built on productivity—doing more with less. It was the Industrial Revolution that got us out of the growing fields and into factories, which allowed us to pay for roads and teachers and civil servants. And now the move out of factories into air-conditioned offices is creating anxiety. It shouldn't. Labor replacement is productivity. James Spangler's vacuum cleaner. The Walker brothers' dishwasher. Clarence Birdseye's flash freezing. DuPont's Kevlar. And John Simpson's guidewire catheter for angioplasty and heart stents—the list goes on. Each invention generated wealth because it improved our lives, not because someone "gave back."

Thanks Mr. Greatbatch, RIP.

I hope that people will learn to treasure those whom have truly contributed to our wellbeing through the markets.

Commemorating the 130th Birthday of Ludwig von Mises

Today is the 130th birthday of one of my inspiration and role model: the great Ludwig Heinrich Edler von Mises…

Celebrating Unsung Heroes of Capitalism: Keith W. Tantlinger

From the New York Times (bold emphasis mine)

Nearly six decades ago, Keith W. Tantlinger built a box — or, more accurately, the corners of a box. It was a seemingly small invention, but a vital one: it set in motion a chain of events that changed the way people buy and sell things, transformed the means by which nations do business and ultimately gave rise to the present-day global economy.

Mr. Tantlinger’s box, large, heavy and metal, is known as the shipping container. Though he did not invent it (such containers had been in use at least since the 19th century to haul heavy cargo like coal), he is widely credited with having created, in the 1950s, the first commercially viable modern one.

The crucial refinements he made — including a corner mechanism that locks containers together — allowed them to be hefted by crane, stacked high in ships and transferred from shipboard to trucks and trains far more easily, and cheaply, than ever before.

Thus, without ever intending to, Mr. Tantlinger, an engineer who died at 92 on Aug. 27 and who had long worked out of the limelight, helped bring about the vast web of international trade that is a fact of 21st-century life. More than any other innovation, the modern shipping container — by turns venerated and castigated — is now acknowledged to have been the spark that touched off globalization.

In short, Mr. Tantlinger's propagation and commercialization of the shipping container, which he did not invent but refined on, signifies as one of the main instruments used in international trade. Or our access to a wider variety of products has partly been facilitated by his efforts.

Thanks Mr. Tanlinger.

P-Noy’s Entourage is a Showcase of the Philippine Political Economy

“As a society, culturally we get what we celebrate”, that’s how prolific Forbes nanotech analyst-writer Josh Wolfe describes the importance of role models in shaping society.

Who we celebrate essentially reflects on our actions. For instance, if we worship politicians and celebrities, we tend to follow their actions. Our time orientation would narrow to match with theirs.

And having a short term time preference means we value today more than the future, thus we would be predisposed to indulge in gambling, hedonistic (high risk but self gratifying) activities and political actions that would dovetail with such values.

However, if we see entrepreneurs or scientists as our role models then we are likely to value the future more than today. We would learn of the essence of savings, capital accumulation and trade.

What has this got to do with P-Noy’s trip to China? A lot.

President Aquino’s entourage simply is a showcase of how the Philippine political economy works.

From today’s Inquirer

Underlining the trade and investment slant of his state visit to China, President Benigno Aquino III arrived here with a 270-strong business delegation, including the Philippines’ top industry leaders.

It is the biggest business contingent of Mr. Aquino’s foreign trips.

And for what stated reason? Newswires say this is meant to secure $60 billion worth of investments.

According to Bloomberg,

The Philippines may secure as much as $60 billion in Chinese investments under a five-year plan to be signed during Aquino’s stay, Christine Ortega, assistant secretary for foreign affairs, told reporters in Manila on Aug. 24. This trip alone may bring $7 billion in commitments, Trade Undersecretary Cristino Panlilio told reporters in Beijing yesterday…

Aquino is counting on investments to boost economic growth that slowed for a fourth straight quarter. Gross domestic product increased 3.4 percent in the three months through June from a year earlier, from a revised 4.6 percent in the first quarter, the National Statistical Coordination Board said today.

Lagging Investments

Net foreign direct investment in the Philippines fell 13 percent to $1.7 billion in 2010 from a year earlier, the central bank said in March. Between 1970 to 2009, the country lured $32.3 billion in FDI, compared with $104.1 billion for Thailand, according to United Nations data.

Higher returns on investments will come from resources “that have been untapped for such a long time,” Aquino said in an Aug. 18 interview, citing plans to explore for energy in the South China Sea. Two of 15 blocks put out for tender in June are in waters China claims.

The Philippines plans to boost hydrocarbon reserves by 40 percent in the next two decades. Mineral fuels accounted for 17 percent of total monthly imports on average last year, from 11 percent in 2000, data compiled by Bloomberg show.

“We want to resolve the conflicting claims so that we can have our own gas,” Aquino said Aug. 29. “Once we have our own, we will not be affected by events in other parts of the world.”

First of all it isn’t true that the Philippines have little access to $60 billion worth of funds for investment.

In fact, the Philippines has a disproportion of savings to investment as shown below.

National savings alone is almost enough to bankroll these required investments (charts above and below from ADB)

Yet this doesn’t even count other domestic assets which can be used as collateral or as alternative sources for funding.

The Philippine Equity markets had a market cap of $202 billion as of the last trading day of 2010.

Foreigners hold around 20% of the market cap; even assuming 50% foreign ownership that’s still $100 billion worth of potential collateral.

And we also have the corporate bond markets (4.1% of GDP) and vast property assets which because of the lack of secured property rights, around 67% of rural residents in the Philippines live in housing that is considered as ‘dead capital’ which is worth about $133 billion Peruvian economist Hernando de Soto estimated in 2001 in his book, the Mystery of Capital

In other words, many of the big shot investors who went with P-Noy do not see sufficient returns on their investments, hence have been reluctant to deploy their savings on local investments.

They instead went with the President to supposedly seek out “partners” to 'spread the risks'.

On the other hand, these business honchos will likely use this opportunity to invest overseas!

Why then the lack of domestic investments?

Aside from the lack or insufficient protection of property rights, a very important hurdle to investments is simply the inhospitable environment for investors.

As the table above shows, the Philippine economy has been strangled or choked by politics.

So bringing in a high powered presidential entourage won’t help unless there would be dramatic structural reforms on our political institutions that would encourage profitable investments.

Most of the deals that would be obtained from this trip will likely be political privileges or concessions (most possibly backed by implicit guarantees from the Philippine government).

This brings us to the significance of role models.

Essentially, P-Noy sees big business as the main way to entice investments or reinvigorate the economy, hence this star-studded retinue (could this be a junket??)

Why leave out the public, when I would presuppose that much of the investable savings are held by them? Is it because that, as his political supporters, this would serve as the ripe opportunity to be rewarded (with state induced deals)?

Or is this authorative show of force simply been about showmanship? (Public choice theory is right again showing how politicians are attracted to symbolisms to promote their self interests)

Bottom line: P-Noy’s China trip reveals of the essence of the Philippine political economy; economic opportunities allocated or provided for by the state.

In short, state or crony capitalism.

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.