Quote of the Day: More Socialism Means Less Real Democracy

From economic professor Sandy Ikeda at the FEE.org:

The greater the degree of central planning, the less the authority can put up with deviation and individual dissent. I also realize that there is more than one dimension along which you can trade off self-direction for direction by others, and some of these dimensions do not involve physical coercion. For example, groups can use social or religious pressure to thwart a person’s plans or shrink her autonomy, without resorting to physical aggression.

But there is no denying that along the dimension of physical coercion, which is the dimension along which governments have traditionally operated, the more coercive control there is by an outside agency, the less self-direction there can be. Coercion and self-direction are mutually exclusive. And as government planning supplants personal planning, the sphere of personal autonomy weakens and shrinks and the sphere of governmental authority strengthens and grows. More socialism means less real democracy.

Democratic socialism, then, is not a doctrine designed to protect the liberal values of independence, autonomy, and self-direction that many on the left still value to some degree. It is, on the contrary, a doctrine that forces those of us who cherish those liberal values onto a slippery slope toward tyranny.

Quote of the Day: Why the Welfare State Grows

The welfare state grows because there is no clear line (and there can be no clear line) between those who are supposedly “entitled” to benefits and those who are not. There will always be those who fall just fractionally outside the needs-based entitlement. So the entitlement line gradually gets moved to include more and more recipients. The real issue is how state welfare can be justified in a society based on the rule of law that ensures individual liberty. Welfare entitlements are a “taking” from Peter to give to Paul at the point of a supposedly legal gun. But how is state confiscation any different or more just than private robbery? That amorphous entity called the state decides that it will shirk its duty to protect our property and do exactly the opposite. No majority can make such an unjust act legal through the legislative process.

This is from Austrian economist Patrick Barron at the Mises Canada

Quote of the Day: How Democracy Made Central Banking Possible

Prior to democracy, loans were undertaken by monarchs, who were personally responsible for their loans. As Meir Kohn of the economics department at Dartmouth University writes:

The debt of a territorial government was essentially the personal debt of the prince: if he died, his successor had no obligation to honor it; if he defaulted, there was no recourse against him in his own courts.

Sometimes princes paid their loans, and sometimes they didn’t. For example, the Peruzzi were a leading Florentine banking house in the 14^th century. At one point, they lent Edward III of England 400,000 gold florins, which, for a variety of reasons, was never repaid. This led to the collapse of the Peruzzi Bank in 1343.

Deals were quickly made when a prince died, of course, but the bankers had a weak position. They had to negotiate the balances and promise to make more loans in the future.

On top of that, many rulers simply refused to pay loans they had taken. Probably the most prolific deadbeat was King Philip II of Spain. He refused to pay back his loans at least a dozen times.

Because of this, banks were seriously limited. They developed techniques of dealing with sovereign defaults, but central banking as we know it was more or less impossible. Bankers didn’t dare make the kinds of loans they do now.

Democracy, however, solved that problem for them. Under democracy, loans are not debited to an individual, but to the nation as a whole. All the citizens, and their children, become responsible for repaying the loan.

From the institution of democracy onward, loaning money to a government gave the banker a claim against the taxes of the people… a claim that never expires.

This was a clever trick: The person who signs for the loan ends up bearing almost no responsibility, and gets to spend all the money. At the same time, millions of people who never approved the debt—who probably had no way of even knowing about it—are left holding the bag… and passing on the obligation to their children.

(italics original)

This is from Free Man’s Perspective author Paul Rosenberg at the Casey Research

I would add that when persons X and Y votes to spend on person Z’s money, then such free lunch politics would extrapolate to more redistributive spending than what taxpayers (or the Z’s) can afford. Central banks, thus, basically assumes the indispensable role of bridge financers to the inadequacy of resources forcibly extracted from the public through taxes due to populist 'democratic' politics.

At the same time, the banking sector plays the fundamental function of intermediaries--as collection agents (as crucible for the public’s savings and or as tax collectors) and also as distribution agents (government debt sold to public)--of political institutions which central banks supervise and whose existence have even been guaranteed.

Quote of the Day: Authoritarianism: The common feature of socialists of both National and Leninist varieties

Marx’s error, Hitler believed, had been to foster class war instead of national unity – to set workers against industrialists instead of conscripting both groups into a corporatist order. His aim, he told his economic adviser, Otto Wagener, was to “convert the German Volk to socialism without simply killing off the old individualists” – by which he meant the bankers and factory owners who could, he thought, serve socialism better by generating revenue for the state. “What Marxism, Leninism and Stalinism failed to accomplish,” he told Wagener, “we shall be in a position to achieve.”...

In fact, authoritarianism was the common feature of socialists of both National and Leninist varieties, who rushed to stick each other in prison camps or before firing squads. Each faction loathed the other as heretical, but both scorned free-market individualists as beyond redemption. Their battle was all the fiercer, as Hayek pointed out in 1944, because it was a battle between brothers.

Authoritarianism – or, to give it a less loaded name, the belief that state compulsion is justified in pursuit of a higher goal, such as scientific progress or greater equality – was traditionally a characteristic of the social democrats as much as of the revolutionaries.

This is from UK journalist, author and politician Daniel Hannan at The Telegraph (hat tip Lew Rockwell)

Quote of the Day: State democracy is a limited monopolistic democracy

Today's democracy is a qualified democracy. Let us call it "state democracy". It is a democracy entirely linked to and emanating from the concept of a single state as the sole sovereign political unit. All the rights just mentioned have to do with the "citizen" of a state and a political system equated with that state and its machinery. A citizen is not a person with free choice of a social-political-legal system. A citizen is a designation of a state-limited and state-defined set of rights that each person finds he has, whether he likes it or not…

State democracy is based on the principle of state sovereignty. The state’s power prevails. The citizens as a group and linked by particular political arrangements are associated with this sovereignty. Whatever the basis of this sovereignty is, nothing can stand in its way when a law or rule is formulated, passed and enforced. There is no check and balance from outside the system. One can only exercise the limited rights of protest, voting, moving and running for office that the state allows. State democracy is a limited democracy. It is a monopolistic democracy.

The incentive for individuals living in state democracy is to gain control over the machinery of government and to use it to one’s personal advantage by forming coalitions that pass laws that one wants

This is from retired finance pofessor Michael Rozeff at the lewrockwell.com

Philippine Elections: The Politics of Symbolism

From the Inquirer:

A day after unofficial election results showed her ahead in the Senate race, Grace Poe evaded a television reporter who wanted to shadow her, received business cards handed to her staff by strangers and had Pad Thai noodles for lunch…

Nalokah (crazed),” was how Poe described herself in a solicited text message upon learning that she was No. 1 in the partial and unofficial tallies aired on television hours after voting precincts closed on Monday.

“I was very surprised, I was blown away,” she said…

Poe realized during the campaign that people wanted a closure to her father’s death. She said these people saw her “as the image of FPJ in defense of the oppressed, the champion of the poor” in his movies.

The result of the Philippine national elections demonstrates and validates theories and academic studies showing why elections are nothing but about feel good politics and of the myth of the rational voter.

The lists of winners consist of families from the political elites, celebrities or people with popular symbolical representations or a combination of.

As I wrote back then on the US elections

It would be conceivably naïve to rely on political rhetoric of competing candidates as basis for examining and projecting prospective policies.

Politicians usually appeal to the views the median voter to ensnare votes. In other words, politicians, who are running for office, are predisposed to say what the public wants or expects to hear.

On the obverse end, people hardly vote for policies but for symbolisms which these candidates represent. Thus aspiring politicians work hard to project themselves as symbols to reinforce people’s biases.

And this is why politicians usually end up with unfulfilled promises or have usually gone against their rhetorical assurances made during the campaign sorties.

Voters become useful only to politicians when election season arrives.

Yet the oppressor-oppressed political axis (Arnold Kling: Three Languages of Politics) which has been embedded deeply in human nature represents how domestic politics works, or how local politicians have exploited the Progressive perspective of justifying ‘social justice’ through coercive redistribution.

This serves as another reason why the Philippine boom will soon be revealed as a paper tiger. Social policies will be directed mostly towards redistribution than to real economic reforms. This means more government spending that will be financed by higher taxes, debt and inflation.

All these validates my view of the quasi-mob rule way of the selection process, which lays foundation to the local version of social democracy that has been skewed to, or even tacitly designed for the benefit of the political class and their allies.

As an old saw goes "the more things change the more they stay the same"

Quote of the Day: Invoking Democracy to Destroy Freedom

People are taught that, thanks to democracy, coercion is no longer dangerous because people get to vote on who coerces them. Because people are permitted a role in choosing who will be in charge of the penal code, they are free. Being permitted to vote for politicians who enact unjust, oppressive new laws magically converts the stripes on prison shirts into emblems of freedom. But it takes more than voting to make coercion benign.

The fiction of majority rule has become a license to impose nearly unlimited controls on the majority and everybody else. The doctrine of “majority rule equals freedom” is custom-made to turn mobs of voters into spoiled children with a divine right to plunder the candy store. The only way to equate submission to majority-sanctioned decrees with individual freedom is to assume that individuals have no right to live in any way that displeases the majority.

The more confused people’s thinking becomes, the easier it is for rulers to invoke democracy to destroy freedom. The issue is not simply Lincoln ‘s, Roosevelt’s, Clinton’s or Bush’s absurd statements on freedom but a cultural–intellectual smog in which politicians have unlimited leeway to redefine freedom. If politicians can redefine freedom at their whim, then they can raze limits on their own power.

This is from libertarian author and lecturer James Bovard at the Freeman.

It is important to distinguish constitutional/liberal democracy with that of social democracy and of mob rule (Ochlocracy)

Singapore’s Gradualist Descent to the Welfare State 2: The Rise of “Consultative Government”

Last year I wrote about how the impact of inflationism in Singapore may prompt her to gradually embrace into the welfare state model

Crises emanating from busting bubbles have been frequently used to justify social controls…

Once the ball gets rolling for the feedback loop of tax increase-government welfare spending then Singapore eventually ends up with the same plagues that has brought about the current string of crises, particularly loss of economic freedom, reduced competitiveness and productivity, lower standard of living, a culture of dependency and irresponsibility and of less charity and unsustainable debt conditions. The outcome from politically instituted parasitical relationship would not merely be a financial or economic crisis but social upheavals as well.

It appears that the results of the recent election have partly validated my outlook.

From the Bloomberg,

Singapore’s ruling People’s Action Party lost a by-election with the widest margin in almost three decades, signalling Prime Minister Lee Hsien Loong may struggle to claw back support as the cost of living climbs.

The Workers’ Party’s Lee Li Lian, a 34-year-old sales trainer, won 54.5 percent of votes in the four-way race in the northeastern Punggol East district over the weekend, a 10.8 percentage point lead over the ruling party’s candidate. That’s the most for a district held by the PAP since the 1984 general elections, according to data from the Elections Department.

Record-high housing and transport costs, public discontent over an influx of foreigners and infrastructure strains are weakening approval for the only party that has ruled Singapore since independence in 1965. Its policies, which have helped forge Southeast Asia’s only advanced economy, are now being questioned by voters, many of whom are looking for a government that is less authoritative and more consultative.

I say partly because this is just one development. It remains to be seen if such political trend will intensify.

Yet “consultative government” signifies nothing more than a façade based on the appeal to the majority (social democracy) to justify the use of force to attain redistribution goals

As the 4^th President of the US and founder of the US Constitution James Madison in a letter to John Monroe wrote; (bold mine)

There is no maxim, in my opinion, which is more liable to be misapplied, and which, therefore, more needs elucidation, than the current, that the interest of the majority is the political standard of right and wrong. Taking the word “interest” as synonymous with “ultimate happiness,” in which sense it is qualified with every necessary moral ingredient, the proposition is no doubt true. But taking it in the popular sense, as referring to immediate augmentation of property and wealth, nothing can be more false. In the latter sense it would be the interest of the majority in every community to despoil & enslave the minority of individuals; and in a federal community to make a similar sacrifice of the minority of the component States.

And more signs of Singapore’s slippery slope to the welfare state. From the same article….

The prime minister said after the Jan. 26 poll that by- elections tend to be tougher for the ruling party, and he will continue to focus on policies for the longer term that may take more time to yield results.

Last year, his administration cut ministerial pay, sped up construction of homes and made permanent a program to provide cash and medical funds for the elderly and low-income households. This month, it said it will give priority housing to families with children and provide greater childcare subsidies…

The island’s population has jumped by more than 1.1 million to 5.3 million since mid-2004, driving up property prices and stoking social tension as the government used immigration to make up for a low birth rate. Lee, who has led the country since 2004, has also raised foreign-worker levies and salary thresholds to slow the inflow of non-Singaporeans.

Inflationism or the global bubble cycles will continue to bamboozle or mislead the public to the populist welfare trap which will only exacerbate the current political settings in Singapore and elsewhere.

Yet the gist of the problem hasn’t been free market inequality and or immigration, which has falsely been attributed to, but rather central bank policies designed to promote the interests of the banking-political class cabal through financial repression—which includes negative real rates regime and balance sheet expansions.

And the next step for Singapore will likely be a gradualist transition towards a deeper welfare state that will be accompanied by more regulations, more restrictions of civil liberties, higher taxes, protectionism, cronyism and invasion of privacy which eventually leads to more social strains

From the behavioral perspective, I’ll borrow from Italian Statesman and Political Philosopher Niccolo Machiavelli’s observation on why the welfare state deludes the majority or the concensus.

For the great majority of mankind are satisfied with appearances, as though they were realities, and are often more influenced by the things that seem than by those that are.

Sad to see one of my ideal place lose its free market or economic freedom luster.

Ron Paul: US is a Constitutional Republic and Not a Democracy

Congressman Ron Paul reminds Americans that they are supposedly a constitutional Republic and not a democracy (bold emphasis mine)

Democracy is majority rule at the expense of the minority. Our system has certain democratic elements, but the founders never mentioned democracy in the Constitution, the Bill of Rights, or the Declaration of Independence. In fact, our most important protections are decidedly undemocratic. For example, the First Amendment protects free speech. It doesn't – or shouldn't – matter if that speech is abhorrent to 51% or even 99% of the people. Speech is not subject to majority approval. Under our republican form of government, the individual, the smallest of minorities, is protected from the mob.

Sadly, the constitution and its protections are respected less and less as we have quietly allowed our constitutional republic to devolve into a militarist, corporatist social democracy. Laws are broken, quietly changed and ignored when inconvenient to those in power, while others in positions to check and balance do nothing. The protections the founders put in place are more and more just an illusion.

This is why increasing importance is placed on the beliefs and views of the president. The very narrow limitations on government power are clearly laid out in Article 1 Section 8 of the Constitution. Nowhere is there any reference to being able to force Americans to buy health insurance or face a tax/penalty, for example. Yet this power has been claimed by the executive and astonishingly affirmed by Congress and the Supreme Court. Because we are a constitutional republic, the mere popularity of a policy should not matter. If it is in clear violation of the limits of government and the people still want it, a Constitutional amendment is the only appropriate way to proceed. However, rather than going through this arduous process, the Constitution was in effect, ignored and the insurance mandate was allowed anyway.

This demonstrates how there is now a great deal of unhindered flexibility in the Oval Office to impose personal views and preferences on the country, so long as 51% of the people can be convinced to vote a certain way. The other 49% on the other hand have much to be angry about and protest under this system.

We should not tolerate the fact that we have become a nation ruled by men, their whims and the mood of the day, and not laws. It cannot be emphasized enough that we are a republic, not a democracy and, as such, we should insist that the framework of the Constitution be respected and boundaries set by law are not crossed by our leaders. These legal limitations on government assure that other men do not impose their will over the individual, rather, the individual is able to govern himself. When government is restrained, liberty thrives.

Unfortunately, the “increasing importance” that will be “placed on the beliefs and views of the president” or the coming US presidential elections will be determined mostly by the following dynamics:

The jarring charts signifying the “epidemic” of entitlements are from Nicolas Eberstadt of the American Enterprise Institute at the Wall Street Journal

The devolution to “militarist, corporatist, social democracy” is why US fiscal conditions will continue to deteriorate.

Democracy or the rule of men rather than the rule of law self-reinforces on its own destruction.

Progressive Ideology: The 10 Paths to Nirvana

Progressives or the neo-liberalsm who account for populist politics in the US, unwaveringly embrace big government

Professor Robert Higgs enumerates the Progressives’ 10 paths to nirvana.

An economist notes in particular that progressive ideology now embraces the following default conclusions:

1. If a social or economic problem seems to exist, the state should impose regulation to remedy it.
2. If regulation has already been imposed, it should be made more expansive and severe.
3. If an economic recession occurs, the state should adopt “stimulus” programs by actively employing the state’s fiscal and monetary powers.
4. If the recession persists despite the state’s adoption of “stimulus” programs, the state should increase the size of these programs.
5. If long-term economic growth seems to be too slow to satisfy powerful people’s standard of performance, the state should intervene to accelerate the rate of growth by making “investments” in infrastructure, health, education, and technological advance.
6. If the state was already making such “investments,” it should make even more of them.
7. Taxes on “the rich” should be increased during a recession, to reduce the government’s budget deficit.
8. Taxes on “the rich” should also be increased during a business expansion, to ensure that they pay their “fair share” (that is, the great bulk) of total taxes and to reduce the government’s budget deficit.
9. If progressives perceive a “market failure” of any kind, the state should intervene in whatever way promises to create Nirvana.
10. If Nirvana has not resulted from past and current interventions, the state should increase its intervention until Nirvana is reached.

The foregoing progressive predispositions, and others too numerous to state here, provide the foundation on which the state justifies its current actions and its proposals for acting even more expansively. Progressives see no situation in which the best course of action requires that the government retrench or admit that it can do nothing constructive to help matters. They see the state as well-intentioned, sufficiently capable, and properly motivated to fix any social and economic problem whatsoever if only the public allows it to do so and bears the costs.

The Philippine social democracy version can be reduced into three: namely, change the leader, tax and regulate, and finally, throw money at the problem. Anything beyond these have been deemed as blasphemy.

I wrote about them here.

Quote of the Day: Why Business is (partly) Purer than Academia

One of the most recent post by my favorite iconoclast Nassim Nicolas Taleb on his Facebook wall.

I have made my case on why local elite private schools are predisposed to the political philosophy of social democracy

And here is the great Friedrich von Hayek on why Intellectuals are prejudiced to socialism

And here is the nexus between the US Federal Reserve and the Economic Profession

Philippine Infrastructure Development Fund: The More Things Stay The Same

In a recent conference sponsored by Finance Asia, the Philippine government showcased to international investors a proposed $280 million government funded Infrastructure Development Fund.

Unfortunately it seems that the investor response had been tepid.

This from Asian Investor, (bold emphasis mine)

As reported by AsianInvestor recently, the President of the Philippines has promised that these new public-private partnership deals would not be tainted by corruption on the part of the national government. Since he is new to the job, people may give him the benefit of the doubt until it’s proved that nothing has changed.

However, there are worries that international investment funds are going to be embezzled and siphoned off by people seeking backhanders and kickbacks, irrespective of the good intentions expressed by the head of state.

International infrastructure investors would therefore like to see a modest track record of success and a proven ability to administer this programme before they make significant commitments, even if that is based on the evidence of just a couple of honestly and effectively managed projects that can be held up as good examples.

This seems to be a natural reaction from international investors considering the poor track record and that public-private partnership deals signify no less than political concessions subject to the caprice of politicians.

As we previously said,

PPP’s signifies as politically privileged economic rent/concessions to favoured private entities that will undertake the operations in lieu of the government. They will come in the form of monopolies, cartels or subsidies that will benefit only the politically connected.

Since the private partner partnerships aren’t bound by the profit and loss discipline from the consumers, the interest of the private partners will most likely be prioritized or aligned to please the whims of the new political masters.

And because of it, much of the resources that go into these projects will not only be costly or priced above the market to defray on the ‘political’ costs, but likewise, they will be inefficiently allocated.

The more things supposedly would change, the more things seemingly would stay the same.

The Philippine growth model still depends on crony capitalism arising from its ardent adherence to the elitist based social democracy.