War on the Internet: China’s Censorship on New York Times’s Expose on Chinese Leader’s Wealth Fails

The New York Times published an expose on the Chinese leadership which had been met by swift response and censorship by Chinese authorities.

Nonetheless, the article continues to generate readership within China via the informal or shadow internet economy.

From the New York Times (bold mine)

A spokesman for China’s Foreign Ministry on Friday criticized a decision by The New York Times to publish a lengthy investigation into assets accumulated by the family of Prime Minister Wen Jiabao, saying that the article “smears China and has ulterior motives.”

Speaking at a regularly scheduled daily briefing in Beijing, the spokesman, Hong Lei, also said that the Chinese government’s decision to immediately block access to the English- and Chinese-language Web sites of The Times on Friday morning was taken “in accordance with laws and rules.”

China’s censors also moved with unusual swiftness on Friday to delete any social media postings alluding even tangentially to the article, which cited publicly available corporate documents in reporting that Mr. Wen’s family has controlled assets worth at least $2.7 billion.

Sina Weibo, a very popular microblogging service similar to Twitter and traded on the Nasdaq in New York, on Friday morning immediately deleted the unofficial account that had been used to promote the culture and arts coverage on the Chinese-language site of The Times and that had nearly 60,000 followers. The site’s official account had been blocked since the site began operations in late June.

Even the term “$2.7 billion” was blocked on Friday on Weibo. But users were still discussing the article by using deliberate mistakes like “2.7b.”

Despite the censorship, there were signs that the article was attracting attention. According to the company’s statistics, the number of page views and unique users of the Chinese-language site fell by only a third on Friday compared with the previous Friday, even though 85 percent of users are typically located in mainland China.

The investigative article was the site’s most popular, drawing nearly a third of page views, while the home page drew another third.

The continued strength of traffic to the site was a sign that many users were using virtual private networks, or V.P.N.’s, to effectively bypass servers in China and circumvent the country’s censors.

The controversial article can be seen here

Earlier, Bloomberg had been banned for a similar expose focused on another political leader

This serves as more proof that China’s largely statist regime or her practice of state capitalism, where nearly half of the enterprises remain state owned, have been tainted with favoritism, nepotism, corruption, cronyism and all sorts of economic windfall derived from the privileges of wielding political power.

And this is why policies in China have remained predisposed to Keynesianism despite its record of mounting failures and of the explosive growth of private enterprises. The latter of which has grown into a political force enough to challenge the status quo 

This also debunks the myth of selfless or virtuous leaders. Politicization of economic opportunities universally leads to immoral actions or conflicts of interests.

And importantly, the failure to censor the article in the entirety also exhibits the shadow internet economy thrives in China, which serves as further proof that internet remains a free market despite frenetic efforts of governments to control or regulate flow of information in order to protect the status quo.

Forces of decentralization (Information age or the Third Wave) have been gnawing at the foundations of the 20th century designed political establishment.

The Philippine SEC’s Phantasm of “Trading Gangs”

Below is an example of Hayek's Fatal Conceit applied to the Philippines

From the Business Mirror,

The Securities and Exchange Commission (SEC) is studying new surveillance initiatives that may see the establishment of a special division to monitor online chatter targeting so-called trading gangs, SEC Commissioner Juanita Cueto said on Thursday.

Trading gangs, according to Cueto are loosely defined as short-term trader syndicates who have both the resources and numbers to drive market prices and volumes.

She added that the trading rings that “play” the market are nothing new in the country or even abroad, but she noted that their influence had been growing in recent years, aided by the anonymity offered by the Internet and the influx of new and relatively inexperienced investors who may fall prey to these groups.

“They have pseudo names on the Internet. The scary part is they buy and sell in unison. Some of their analyses are inaccurate and can hurt issuers,” Cueto told the BusinessMirror. “It is a concern of legitimate brokers and issuers.”

She said the surveillance measures could involve closer scrutiny of Internet-based stock-market forums.

Some people cheer at this development WITHOUT an inkling of understanding HOW the SEC will be able to define and enforce surveillance of the so called "short term trader syndicates" that “have both the resources and numbers to drive market prices and volumes” from so-called trading gangs.

At what criterion will groups of people (syndicates) who shares “beliefs” in certain stocks, even in the short term, whom they are or could be exposed to, culpable of “driving” market prices and volumes? What if the stocks they promote indeed goes up? 

If a prediction fails, does this mechanically imply fraud?

In bear markets, does allegations of “pump and dump” proliferate or even exist at all?

Importantly what delineates “belief” and “analysis” from the intent to “defraud” through manipulation?

So the implication is that such regulations will be arbitrarily defined or established according to the whims of the political masters.

People who espouse political intrusions have a strange mystic adulation for the supposed omniscience of authorities and of the platonic ethics of regulators.

Yet if this logic holds true, then markets DO NOT need to exist at all.

Áll such ruckus essentially boils down to the definition of prices and values.

Who determines what appropriate prices and values are? The SEC? From what basis?

For starters, market prices are ALWAYS subjectively determined

To quote the great Ludwig von Mises,

It is ultimately always the subjective value judgments of individuals that determine the formation of prices. Catallactics in conceiving the pricing process necessarily reverts to the fundamental category of action, the preference given to a over b. In view of popular errors it is expedient to emphasize that catallactics deals with the real prices as they are paid in definite transactions and not with imaginary prices. The concept of final prices is merely a mental tool for the grasp of a particular problem, the emergence of entrepreneurial profit and loss.

Prices, which are subjective expressions of people’s value scales and time preferences, are principally used for economic calculations from where trades (of all kinds including stock markets) emerge, again Professor Mises

In the market society there are money prices. Economic calculation is calculation in terms of money prices. The various quantities of goods and services enter into this calculation with the amount of money for which they are bought and sold on the market or for which they could prospectively be bought and sold. It is a fictitious assumption that an isolated self-sufficient individual or the general manager of a socialist system, i.e., a system in which there is no market for means of production, could calculate. There is no way which could lead one from the money computation of a market economy to any kind of computation in a nonmarket system.

So if prices are subjectively determined, how then does the "gods" of the SEC know each and every individuals order of priorities?

And at what levels are prices to be considered “fair”?

Again Professor Mises,

The concept of a "just" or "fair" price is devoid of any scientific meaning; it is a disguise for wishes, a striving for a state of affairs different from reality. Market prices are entirely determined by the value judgments of men as they really act.

So supposed fraud will be substituted for propaganda and the curtailment of civil liberties.

This comment by a market practitioner from the same article “It could be really hard to prove wrongdoing this way,” is half correct, but has been obscured by the misleading reference of “noting how identities can be masked online”.

“Anonymity” does not automatically make stock promotions unethical. What makes unethical is the deliberate act to defraud or bamboozle people, e.g. a breach of contract or deprivation of property rights, which based on the above seems very difficult to prove.

This would be analogical to say that advertising is a fraud.

To which government providing “truth” in advertising is likewise delusional, Professor Ludwig von Mises writes,

But whoever is ready to grant to the government this power would be inconsistent if he objected to the demand to submit the statements of churches and sects to the same examination. Freedom is indivisible. As soon as one starts to restrict it, one enters upon a decline on which it is difficult to stop. If one assigns to the government the task of making truth prevail in the advertising of perfumes and toothpaste, one cannot contest it the right to look after truth in the more important matters of religion, philosophy, and social ideology.

And government interventions DO NOT make transactions ethical too, on the contrary, they make them worst.

Bruce L Benson in “The Enterprise of Law: Justice Without the State” writes, (bold emphasis mine) 

When government becomes involved in the enterprise of law, both the rules of conduct and the institutions for enforcement are likely to change. The primary functions of governments are to act as a mechanism to take wealth from some and transfer it to others, and to discriminate among groups on the basis of their relative power in order to determine who gains and who loses.

Yes most people don’t seem to realize that in an inflationary boom, the guiding incentives provided by manipulation of interest rates promote rampant gambling and irresponsible actions which are always blamed on market actors.

From the great Henry Hazlitt

Inflation, to sum up, is the increase in the volume of money and bank credit in relation to the volume of goods. It is harmful because it depreciates the value of the monetary unit, raises everybody's cost of living, imposes what is in effect a tax on the poorest (without exemptions) at as high a rate as the tax on the richest, wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals.

Non-Austrian Charles Kindleberger author of Mania’s Panics and Crashes also notes how swindles emerge during bubble cycles. (Previously I quoted him here)

Commercial and financial crisis are intimately bound up with transactions that overstep the confines of law and morality shadowy though these confines be. The propensities to swindle and be swindled run parallel to the propensity to speculate during a boom. Crash and panic, with their motto of sauve qui peut induce still more to cheat in order to save themselves. And the signal for panic is often the revelation of some swindle, theft embezzlement or fraud

And as proof, I cited instances of Ponzi schemes in the US has had meaningful correlations with the FED’s credit easing policies.

When political gods determine winners and losers, contrary to popular brainwashed expectations, the outcome is not one of optimism. According to author, philosopher and individualist Ayn Rand on her classic novel Atlas Shrugged,

Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed. Money is so noble a medium that is does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

Such interventionism also leads to a suppression of freedom of expression.

Nonetheless, sorry to say but regulations will not solve or protect people form their silliness or foolishness, their reckless behavior and the entitlement mentality which most likely has been a result of existing policies…instead these would only do worse.

And in contrast, as I previously noted, successful investing requires Self discipline.

Quote of the Day: The Perils of Unlimited Democracy

Of course there is something very wrong with unlimited democracies. There is simply no justification for the majority of the population in a country imposing its will on everyone. The idea is completely misguided. Why on earth should a great number of people have the authority to force a small number to obey them? There is no argument anywhere in the history of political philosophy and theory that would make out the case for this? If it were a valid point, it would imply that a large number of thugs somehow have the right to subdue other people to serve them. The famous example of the lynch mob that hangs an accused person make the point without difficulty. Expanding the will of vicious people doesn’t make it virtuous. And even if what the larger group wants is actually virtuous, forcing it on others is still not justified since they would have to make the free choice to be virtuous. Human virtue must be a matter of free choice. Only in self-defense may force be applied to others!

The election process in so called democratic countries is anything but justified or moral. Even when it hides behind the term “we” as it tries to do in too many instances--just listen to politicians anywhere around the globe and notice how often they pretend to be speaking for and acting in behalf of everyone--the will of the majority simply has no moral authority, none! Anyone who can dodge it successfully is perfectly justified to do so!

This is from Philosophy Professor Tibor R. Machan at weblogbahamas.com

Lessons from Bernanke’s Thank You Notes

From the Politico (hat tip Bob Wenzel)

If you have the Federal Reserve’s back, there’s a good chance Ben Bernanke will notice.

He may even send you a thank you note.

In July, the Fed chairman sent letters of gratitude to five Democratic members of Congress after they delivered speeches on the House floor urging fellow lawmakers to reject the “Audit the Fed” bill authored by retiring Texas Republican Ron Paul, the central bank’s chief antagonist.

Their efforts failed to defeat the bill, but they were not in vain, at least in Bernanke’s eyes.

“While the outcome of the vote was not in doubt, your willingness to stand up for the independence of the Federal Reserve is greatly appreciated,” Bernanke wrote in the letters, which were obtained by POLITICO through a Freedom of Information Act request.

He continued, “Independence in monetary policy operations is now the norm for central banks around the world — and it would be a grave mistake were Congress to reverse the protection it provided to the Federal Reserve more than 30 years ago.”

The letters were sent to Reps. Barney Frank, Elijah Cummings, Melvin Watt, Carolyn Maloney and Steny Hoyer.

“It's not unusual for the chairman to write thank you notes to members of Congress,” said Fed spokesman David Skidmore.

Dated July 26, the notes were written the day after the House voted 327-98 to pass Paul’s bill, which would authorize the Government Accountability Office to audit how the central bank implements monetary policy.

While the Fed defends Mr. Bernanke’s thank you notes as having been “not usual”, meaning that such action may have been a tradition, bureaucratic traditionalism does not translate into moralistic actions.

The above simply exhibits how political agents operate behind the scenes to attain self-interested goals. In this case,  Bernanke tries to influence the outcome of votes of the US congress (which he failed). This also implies that such relationship works the other way around for other political du jour issues.

One can construe “conflict of interests” and “agency problems” rather than supposed “independence” from such interactions, as well as, reciprocity and horse trading as part of concession seeking approach employed by political agents from different branches of government.

This also further demystifies the highly glamorized “virtuosity” of governments (myth of good government) as the above account puts into perspective similar human frailties of those in command of the use guns and badge institutions over the populace…except of course the difference is that they can wield political power over society to feed on their caprices.

Quote of the Day: The Folly of Trusting Competence and Character of Public Officials

It is dangerously naive to trust chiefly in the competence and character of government officials while paying little attention to the temptations and complexities that confront such officials – temptations and complexities that grow exponentially with growth in government’s powers.

This from Professor Donald J. Boudreaux at the Café Hayek

Philippines Small Business: Unfortunate Victims of Political Distribution

When, then, does plunder stop? It stops when it becomes more painful and more dangerous than labor. It is evident, then, that the proper purpose of law is to use the power of its collective force to stop this fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder.- Frédéric Bastiat

In a few hours the Philippine President, Benigno Aquino Jr. will be making his second state of the nation’s address (SONA).

Yet like most speeches, much of what we will likely hear will be founded on emotive platonic rhetoric, mostly founded on logical fallacies and empty promises whose solution would require expanded political redistribution and more control over the economy and the sacrifice of civil liberties.

And most likely, the important real factors will be glossed over.

Nevertheless, the following charts shows where the Philippines have gotten policies so wrenchingly astray.

The heart of any market economy is the small businesses.

In the US, small businesses have functioned as an indispensable force.

According to the US Small Business Association[1]

-Represent 99.7 percent of all employer firms.

-Employ just over half of all private sector employees.

-Pay 44 percent of total U.S. private payroll.

-Have generated 64 percent of net new jobs over the past 15 years.

-Create more than half of the nonfarm private gross domestic product (GDP).

-Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).

-Are 52 percent home-based and 2 percent franchises.

-Made up 97.3 percent of all identified exporters and produced 30.2 percent of the known export value in FY 2007.

-Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.

China’s majestic renaissance also shares the same dynamics

Ms. Lydia So of Matthews Asia writes[2], (bold emphasis mine)

With the diminishing dominance of state-owned enterprises (SOEs), China’s private sector is increasingly becoming an important driving force for economic growth. Over the past few decades, these private businesses have been a large contributor to providing consumer-oriented goods and services, generating employment, and leading to innovation as well as increased productivity in China. These changes didn’t occur overnight. A favorable business environment is essential in fostering entrepreneurship in any country. While entrepreneurs in China got a relatively "late" start compared to their global counterparts, its achievements and contributions in driving the private economy have been impressive. To date, small and medium enterprises (SMEs) have become the dominant growth driver and a critical source of China’s expanding and evolving economy. In 2007, SMEs accounted for 55% of GDP, 60% of China’s industrial output, 65% of patent registrations and 70% of employment in urban areas.

Now, in contrast, the Philippines have shown a tremendous decline in registered small and medium sized business over the past decade.

Such dismal outcome have been in place despite the so-called manifold government assistance via (chart above and quote from ADB[3])

extension of financial support, enhancement of managerial and technological capabilities, tapping domestic and international markets, streamlining systems and institutions, and providing infrastructure and incentives

We understand that small businesses have not entirely vanished but have mostly gone underground or have operated beyond formal government.

This we know or call the informal economy.

The chart above from the ADB[4] shows that 43.4% of the Philippine economy has been operating underground or informally.

The other way to say this is that 2/5 of the Philippine economy exists outside of the ambit of government.

The multifarious reasons for the existence of an informal economy as I earlier pointed out are[5]

-high taxes,

-high welfare payments (social security)

-restrictions, mandates in the official labor market

-minimum wages

-a smothering web of government regulations (license requirements, labor market regulations and trade barriers)

-compliance and other regulatory related costs

In other words, an overdose of government regulations and tax and welfare burdens has pushed small businesses out to operate in the informal economy which has surmounted any trivial incentives by the government to promote them. What the left hand giveth, the right hand taketh away!

The simple reason is that operating in the formal economy has been so politically and economically exacting whose cost benefit rewards informal operations. Talk about the Philippine government sowing the seeds of self destruction!

The ADB chart shows almost the same concerns.

Corruption, as expressed by the surveys, is seen as the fundamental problem.

Yet the public has been virtually deluded to think that the roots of corruption have been about all about personal virtuousness.

Little realize that corruption, inefficient government bureaucracy, inadequate supply of infrastructure, policy instability, tax regulations, crime and theft and tax rates or at least 84% of the aforementioned obstacles for doing business have all been intertwined. You can even count in coups, labor regulations, inflation and foreign currency regulations as part of this.

Many people (vendors) pay bribe money just to be able to operate the informal economy which makes corruption an informal way of governance too. Except that bribe money goes directly into the pockets of the enforcers than the coffers of the government.

Yet people hardly realize that all these obstacles are consequences of predatory laws, as governments have been all about the power to plunder others and not about moral uprightness[6].

I reprise my previous quotation of the legendary investor Doug Casey on corruption[7] (bold emphasis mine)

As Tacitus said in the second century A.D., "The more corrupt the state, the more numerous the laws." It's absolutely predictable that as all these governments around the world – and I mean all of them – respond to the ongoing crisis with an ever-accelerating onslaught of new laws, there will be more and more corruption – and frustration with that corruption.

Tacitus was right. But he could just as accurately have said, "The more numerous the laws, the more corrupt the state," because lots of laws engender lots of corruption. In other words, corruption isn't the problem. The state and its laws are the problem, to which corruption is an unsavory and unaesthetic – but necessary – solution. Laws create corruption, and corruption engenders laws.

Anyone can operate on utopian illusions and fantasies, yet economic reality eventually prevails and slaps us in the face.

Don’t we ever realize why self appointed messiahs in uniforms always pop out somewhere with their reformist rhetoric[8] but whose goal is to only seize power?

Personality based politics which operates on the principle of plunder represents a vicious cycle that deals with the superficial or the symptom and won’t solve whatever ills we have.

The only way to improve the Filipinos’ standard of living is to adapt and promote economic freedom through the repeal of these byzantine arbitrary anti-competitive laws and regulations, by vastly reducing bureaucracy and government spending, by having an economic system based on sound money, by pruning political stranglehold over the economic distribution of resources, by promoting property rights and the upholding the sanctity of contract through the rule of law.

---

[1] SBA.gov How important are small businesses to the U.S. economy?

[2] So Lydia, China's New Generation of Entrepreneurs, Matthews International Capital Management July 1, 2011

[3] Paderanga, Jr. Cayetano W. Private Sector Assessment Philippines 2011 ADB.org

[4] Martinez-Vazquez Jorge, Taxation in Asia 2011 ADB.org

[5] See Does The Government Deserve Credit Over Philippine Economic Growth?, May 31, 2011

[6] See Video: The Myth of Good Government, July 23, 2011

[7] See Doug Casey On Corruption: Laws Create Corruption And Corruption Engenders Laws, February 10, 2011

[8] Inquirer.net Marine colonel calls for Aquino’s ouster, July 16, 2011

Video: The Myth of Good Government

The animated video below explains the myth of good government, from the simulated perspective of a "King" [hat tip Jeff Tucker]

The Myth of Good Government

One my favorite video clips is when Milton Friedman was interviewed by Phil Donahue in the 70s on the topics of greed and virtue.

In addressing Mr. Donahue’s suggestion that governments ought to “reward virtue” Mr. Friedman rebutted (bold emphasis added)

"And what does reward virtue? You think the communist commissar rewards virtue? ...Do you think American presidents reward virtue? Do they choose their appointees on the basis of the virtue of the people appointed or on the basis of their political clout? Is it really true that political self- interest is nobler somehow than economic self-interest? ...Just tell me where in the world you find these angels who are going to organize society for us?"

The illusion of “rewarding virtue” can be seen in the appointments of US President Obama,

From the Politico, (bold emphasis mine)

More than two years after Obama took office vowing to banish “special interests” from his administration, nearly 200 of his biggest donors have landed plum government jobs and advisory posts, won federal contracts worth millions of dollars for their business interests or attended numerous elite White House meetings and social events, an investigation by iWatch News has found.

These “bundlers” raised at least $50,000 — and sometimes more than $500,000 — in campaign donations for Obama’s campaign. Many of those in the “Class of 2008” are now being asked to bundle contributions for Obama’s reelection, an effort that could cost $1 billion...

More (from the same article; emphasis added)...

The iWatch News investigation found:

Overall, 184 of 556, or about one-third of Obama bundlers or their spouses joined the administration in some role. But the percentages are much higher for the big-dollar bundlers. Nearly 80 percent of those who collected more than $500,000 for Obama took “key administration posts,” as defined by the White House. More than half the 24 ambassador nominees who were bundlers raised $500,000.

The big bundlers had broad access to the White House for meetings with top administration officials and glitzy social events. In all, campaign bundlers and their family members account for more than 3,000 White House meetings and visits. Half of them raised $200,000 or more.

Some Obama bundlers have ties to companies that stand to gain financially from the president’s policy agenda, particularly in clean energy and telecommunications, and some already have done so. Level 3 Communications, for instance, snared $13.8 million in stimulus money.

And it’s not just President Obama, but also past President Bush (from the same article; emphasis added)

Public Citizen found in 2008 that President George W. Bush had appointed about 200 bundlers to administration posts over his eight years in office. That is roughly the same number Obama has appointed in a little more than two years, the iWatch News analysis showed.

Well, that’s in the US which supposedly is a country whose political institutions are far sounder than the most of the world.

Yet in the Philippines, it’s been no different.

From Sunstar.com.ph (emphasis added)

FRIENDS and allies of President Benigno Aquino III occupying government positions are not considered “untouchables” and will not be spared from corrections, the President’s spokesman said.

Presidential spokesperson Edwin Lacierda admitted that President Aquino prefers to appoint people whom he has level of comfort but it does not mean that they are not beyond criticism.

So there you have it.

Milton Friedman was correct to debunk the romanticized idea that governments’ reward the virtuous.

Instead, the main beneficiaries of the division of the spoils via political appointments (or political concessions) have been from political allies and political clients, vested ‘rent seeking’ interest groups, families and friends. And this dynamic applies to any form of government.

Realize that political leaders or bureaucrats are human beings or self-interested agents too, whom are subject to the same fragilities (biases, knowledge limitations, different interpretations based on diverse value preferences, cultural orientation, education and etc.) as everyone else.

The difference is in the incentives that governs them with those of economic agents.

Instead of profits and losses, these entities use institutional coercion or violence to redistribute resources based on political exigencies (e.g. populism) with the ultimate aim of annexation and preservation of power and of social image. Thus, the reliance on so-called ‘comfort zones’ as every society operates on diversified interests which continually competes for scarce resources.

Despite the popular notion, Government or the State will NEVER be about virtue or morality.

So for those who stubbornly insist of having “good governments”, be it known that dreams or illusions can last forever.

Mainstream’s Three “Wise” Monkey Solution To Social Problems

Say what you want
Say what you will
'Cos I find you think what makes it easier
And lies spread on lies
We don't care
Belief is our relief
We don't care

-Roland Orzabal, Tears For Fears, Ideas As Opiates

For the mainstream, our social problems can be simplified into three “wise monkey” solutions:

First, speak no evil-throw money at every problem.

Everyone desires a free lunch. Almost everybody believes that they deserve a special place in this world. Since society’s interests are divergent, such sense of entitlement should come at the expense of someone else. It’s usually dignified and justified with the word “right”. One man’s effort is another man’s privilege.

For them, scarcity of resources can only solved by forcible redistribution. It doesn’t really matter if there are limitations to the scale of taxation. It also doesn’t matter if redistribution reduces the incentives to produce and trade. It doesn’t matter if “picking winners” takes away resources meant for productive activities which have been meant to enhance livelihood. The only thing significant is to be at the receiving end. And it’s hardly ever been asked “when is enough, enough”?

Heck, it would even be politically incorrect to argue for prudence. ‘Moral’ justifications demand for immediate gratification. It’s almost always about NOW. Forget the future.

That’s why the intellectual classes long came up with varied theories in support of these political demands.

Importantly that’s why the political classes are enamoured with these concepts. Redistribution enhances only their power, esteem and control over the others. And that’s why “inflation” has long been a part of human nature, since the introduction of government.

For as long as the system is tolerant of such nebulous tradeoff, trouble can be kept at bay, ergo speak no evil.

The other way to see it is that while everyone wants to rule the world, in reality this isn’t feasible. It’s a mass delusion. The universal law of scarcity always prevails. By force of nature, artificially induced imbalances are resolved eventually.

Second, see no evil-elect or put in place a virtuous leader.

The popular redress to most social problems has been premised mostly on hope, cosmetically embellished by “specific” ennobling goals.

In times of frustrations, the next alternative has been to look for a saviour.

Yet hope is mostly anchored on symbolism. And these are what elections are mostly all about. Even if one’s vote doesn’t truly count, everybody believes they do. Elections are reduced to the polemic of self-import.

Hardly has the directions of policies been the context of any meaningful discussion. People’s arguments will always be simplified to what seems “moral” in the popular sense. Yet, a vote on a person to office is a carte blanche vote on the ensuing policies. But it’s hardly about stakes involved and the prospective costs, but mostly about emotions and the feeling of being in the winning camp.

And since the world has been condensed into strictly a “moral” sphere, political leaders are most frequently deemed to have been transformed into demigods.

Once in power, people mistakenly believe that these entities have transcended the laws of scarcity. People have assumed that they possess the superlative knowledge that is needed to effect the exigent balance on a complex and continuously evolving society. These leaders are presumed to know of our needs, our values, our priorities and our preferences, which lay as basis of our actions in response to ever changing conditions.

Not of only of knowledge, but people also expect leaders and officials to dispense justice and equity according to our sense of definition. Many see these leaders as reflecting on their values. And that’s why many fall for the dichotomous trappings of the well meaning “motivations”. Yet, motivations barely distinguish the role of “means” and “ends”.

Essentially genuflecting on hope to see one’s moral desires as represented by politics can be construed as refusing to see evil for what it is.

And it’s only when the rubber meets the road, from which people come to realize that their expectations have misaligned with reality-and usually through deepening frustrations or in the aftermath of some horrifying outcome.

Hardly has it been comprehended that politics and bureaucratic activities are merely HUMAN activities.

That leaders and officials are subject to the very same foibles as anyone else. That these people see things and act according to the incentives brought about by their interpretation of events, their existing limited and ‘biased’ knowledge and are swayed by influences brought about by cognitive biases, networks, familiarity, assessment of prevailing conditions, information relayed by the underlings, varying degree of stakes of involved and et. al.

Importantly like everyone else, their actions skewed based on personal values. So when a political or bureaucratic leader forces upon their sense of moral vision to a constituency and which has not well received, the result in some cases has been political upheavals.

Yet in spite of the repeated errors, people never learn from George Santayana’s admonition that those who ignore the past are condemned to repeat it.

The third intuitive recourse to any social problems is to hear no evil by enacting new rules/laws.

Like any “throw the money” and “virtuous leader” syndromes, rules are little seen for its costs but nevertheless oftenly envisaged as preferred nostrums to existing problems as identified from the biased viewpoint of the observer/s.

Causal factors are hardly considered in the appraisal of the existing problems. What seems more important is to automatically blame market forces and unduly impose proscriptions. Never mind if the past ills have been caused by the same underlying dynamic-previous interventionism.

The act of simply “doing something” is meant to be perceptibly seen by the voting public for political purposes (extension of career by vote or by appointment). Thus the “hear no evil” therapy, which is merely adding rules for extant fallibilities, are simply props for more of the same malaise.

Many rules, regulations, edicts or laws are imposed upon the “populist demand of the moment”, without the realization that rules, which tend to realign people’s behaviour, can cause huge unintended consequences and likewise entails costs of enforcement. Hence when new rules create distortions in the political economic order, the instinctive response is to have more of rules or regulations.

Importantly, popular clamor for new rules/laws hardly differentiates “rule of laws” against “rule of men”.

Rule of Law are in effect, the guiding principles or the laws that had been a legacy from our forefathers, as the great Friedrich August von Hayek wrote, ``Political wisdom, dearly bought by the bitter experience of generations, is often lost through the gradual change in the meaning of the words which express its maxims[1]”. (underscore mine)

This means because these laws have been constant, are anticipated by all and easily observed or practiced, they become part of our heritage. Again we quote the Mr. Hayek, ``Stripped of all technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand.[2]”

In stateless Somalia, customary laws serve as default laws after her government had been eviscerated,

Benjamin Powell writes[3], ``Somali law is based on custom interpreted and enforced by decentralized clan networks. The Somali customary law, Xeer, has existed since pre-colonial times and continued to operate under colonial rule. The Somali nation-state tried to replace the Xeer with government legislation and enforcement. However, in rural areas and border regions where the Somali government lacked firm control, people continued to apply the common law. When the Somali state collapsed, much of the population returned to their traditional legal system... But Somalia does demonstrate that a reasonable level of law and order can be provided by nonstate customary legal systems and that such systems are capable of providing some basis for economic development. This is particularly true when the alternative is not a limited government but instead a particularly brutal and repressive government such as Somalia had and is likely to have again if a government is reestablished.” [bold highlights mine]

That’s simply proof that “rule of laws” exists even outside of the realm of governments, which also goes to show that society can exist stateless. None of this is meant to say that we should be stateless, but the point is rule of law is what organizes society.

Importantly, “rules of law” have been passed through the ages as a means to protect the citizens from the abuses of the authority, again Mr. Hayek[4],

``The main point is that, in the use of its coercive powers, the discretion of the authorities should be so strictly bound by laws laid down beforehand that the individual can foresee with fair certainty how these powers will be used in particular instances; and that the laws themselves are truly general and create no privileges for class or person because they are made in view of their long-run effects and therefore in necessary ignorance of who will be the particular individuals who will be benefited or harmed by them. That the law should be an instrument to be used by the individuals for their ends and not an instrument used upon the people by the legislators is the ultimate meaning of the Rule of Law.” (emphasis added)

In short, the fundamental characteristics of respected and effective laws are those that to limited, steady or constant, designed for the benefit of everyone and importantly a law that is clearly enforceable.

Of course this doesn’t overrule the occasional use of arbitrary laws, but nevertheless arbitrary rules should compliment and NOT displace the essence of the “rule of law”.

Mr. Hayek quotes David Hume[5], ``No government, at that time, appeared in the world, nor is perhaps found in the records of any history, which subsisted without a mixture of some arbitrary authority, committed to some magistrate; and it might reasonably, beforehand, appear doubtful whether human society could ever arrive at that state of perfection, as to support itself with no other control, than the general and rigid maxims of law and equity.”

In essence, in contrast to mainstream thinking, the rule of law and not simply arbitrary regulations, serves as the central element to well functioning societies.

Former President Ronald Reagan nicely captures part of our “Three Wise Monkey” solution as seen by the mainstream, “The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it”, from which I would add, “if subsidies are not enough, elect one who makes sure it would”.

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[1] Hayek, Friedrich August von, Decline of the Rule of Law, Part 1, The Freeman April 20, 1953

[2] Hayek, Friedrich August von, Decline of the Rule of Law, Part 1, The Freeman April 20, 1953

[3] Powell, Benjamin; Somalia: Failed State, Economic Success? The Freeman

[4] Hayek, Friedrich August von, The Road To Serfdom

[5] Hume, David; The history of England, from the invasion of Julius Caesar to the revolution, we earlier quoted this see Graphic: Origin of The Rule of Law