Thursday, November 15, 2012

Video: Ron Paul's Farewell Speech to Congress

Congressman Ron Paul’s magnificent exit or farewell speech at the US Congress


Transcript here (bold and underline mine) [hat tip EPJ’s Bob Wenzel]
This may well be the last time I speak on the House Floor.  At the end of the year I’ll leave Congress after 23 years in office over a 36 year period.  My goals in 1976 were the same as they are today:  promote peace and prosperity by a strict adherence to the principles of individual liberty.

It was my opinion, that the course the U.S. embarked on in the latter part of the 20th Century would bring us a major financial crisis and engulf us in a foreign policy that would overextend us and undermine our national security.

To achieve the goals I sought, government would have had to shrink in size and scope, reduce spending, change the monetary system, and reject the unsustainable costs of policing the world and expanding the American Empire.
The problems seemed to be overwhelming and impossible to solve, yet from my view point, just following the constraints placed on the federal government by the Constitution would have been a good place to start.

How Much Did I Accomplish?

In many ways, according to conventional wisdom, my off-and-on career in Congress, from 1976 to 2012, accomplished very little.  No named legislation, no named federal buildings or highways—thank goodness.  In spite of my efforts, the government has grown exponentially, taxes remain excessive, and the prolific increase of incomprehensible regulations continues.  Wars are constant and pursued without Congressional declaration, deficits rise to the sky, poverty is rampant and dependency on the federal government is now worse than any time in our history.

All this with minimal concerns for the deficits and unfunded liabilities that common sense tells us cannot go on much longer.  A grand, but never mentioned, bipartisan agreement allows for the well-kept secret that keeps the spending going.  One side doesn’t give up one penny on military spending, the other side doesn’t give up one penny on welfare spending, while both sides support the bailouts and subsidies for the banking and  corporate elite.  And the spending continues as the economy weakens and the downward spiral continues.   As the government continues fiddling around, our liberties and our wealth burn in the flames of a foreign policy that makes us less safe.

The major stumbling block to real change in Washington is the total resistance to admitting that the country is broke. This has made compromising, just to agree to increase spending, inevitable since neither side has any intention of cutting spending.

The country and the Congress will remain divisive since there’s no “loot left to divvy up.”
 
Without this recognition the spenders in Washington will continue the march toward a fiscal cliff much bigger than the one anticipated this coming January.

I have thought a lot about why those of us who believe in liberty, as a solution, have done so poorly in convincing others of its benefits.  If liberty is what we claim it is- the principle that protects all personal, social and economic decisions necessary for maximum prosperity and the best chance for peace- it should be an easy sell.  Yet, history has shown that the masses have been quite receptive to the promises of authoritarians which are rarely if ever fulfilled.
 
Authoritarianism vs. Liberty
If authoritarianism leads to poverty and war and less freedom for all individuals and is controlled by rich special interests, the people should be begging for liberty.  There certainly was a strong enough sentiment for more freedom at the time of our founding that motivated those who were willing to fight in the revolution against the powerful British government. 

During my time in Congress the appetite for liberty has been quite weak; the understanding of its significance negligible.  Yet the good news is that compared to 1976 when I first came to Congress, the desire for more freedom and less government in 2012 is much greater and growing, especially in grassroots America. Tens of thousands of teenagers and college age students are, with great enthusiasm, welcoming the message of liberty.

I have a few thoughts as to why the people of a country like ours, once the freest and most prosperous, allowed the conditions to deteriorate to the degree that they have. 

Freedom, private property, and enforceable voluntary contracts, generate wealth.  In our early history we were very much aware of this.  But in the early part of the 20th century our politicians promoted the notion that the tax and monetary systems had to change if we were to involve ourselves in excessive domestic and military spending. That is why Congress gave us the Federal Reserve and the income tax.  The majority of Americans and many government officials agreed that sacrificing some liberty was necessary to carry out what some claimed to be “progressive” ideas. Pure democracy became acceptable.

They failed to recognized that what they were doing was exactly opposite of what the colonists were seeking when they broke away from the British.

Some complain that my arguments makes no sense, since great wealth and the standard of living improved  for many Americans over the last 100 years, even with these new policies. 

But the damage to the market economy, and the currency, has been insidious and steady.  It took a long time to consume our wealth, destroy the currency and undermine productivity and get our financial obligations to a point of no return. Confidence sometimes lasts longer than deserved. Most of our wealth today depends on debt.

The wealth that we enjoyed and seemed to be endless, allowed concern for the principle of a free society to be neglected.  As long as most people believed the material abundance would last forever, worrying about protecting a competitive productive economy and individual liberty seemed unnecessary.

The Age of Redistribution

This neglect ushered in an age of redistribution of wealth by government kowtowing to any and all special interests, except for those who just wanted to left alone.  That is why today money in politics far surpasses money currently going into research and development and productive entrepreneurial efforts.

The material benefits became more important than the understanding and promoting the principles of liberty and a free market.  It is good that material abundance is a result of liberty but if materialism is all that we care about, problems are guaranteed. 

The crisis arrived because the illusion that wealth and prosperity would last forever has ended. Since it was based on debt and a pretense that debt can be papered over by an out-of-control fiat monetary system, it was doomed to fail.  We have ended up with a system that doesn’t produce enough even to finance the debt and no fundamental understanding of why a free society is crucial to reversing these trends.

If this is not recognized, the recovery will linger for a long time.  Bigger government, more spending, more debt, more poverty for the middle class, and a more intense scramble by the elite special interests will continue.

We Need an Intellectual Awakening

Without an intellectual awakening, the turning point will be driven by economic law.  A dollar crisis will bring the current out-of-control system to its knees.

If it’s not accepted that big government, fiat money, ignoring liberty, central economic planning, welfarism, and warfarism caused our crisis we can expect a continuous and dangerous march toward corporatism and even fascism with even more loss of our liberties.  Prosperity for a large middle class though will become an abstract dream.

This continuous move is no different than what we have seen in how our financial crisis of 2008 was handled.  Congress first directed, with bipartisan support, bailouts for the wealthy.  Then it was the Federal Reserve with its endless quantitative easing. If at first it doesn’t succeed try again; QE1, QE2, and QE3 and with no results we try QE indefinitely—that is until it too fails. There’s a cost to all of this and let me assure you delaying the payment is no longer an option.  The rules of the market will extract its pound of flesh and it won’t be pretty.

The current crisis elicits a lot of pessimism.  And the pessimism adds to less confidence in the future.  The two feed on themselves, making our situation worse.

If the underlying cause of the crisis is not understood we cannot solve our problems. The issues of warfare, welfare, deficits, inflationism, corporatism, bailouts and authoritarianism cannot be ignored.  By only expanding these policies we cannot expect good results. 

Everyone claims support for freedom.  But too often it’s for one’s own freedom and not for others.  Too many believe that there must be limits on freedom. They argue that freedom must be directed and managed to achieve fairness and equality thus making it acceptable to curtail, through force, certain liberties.

Some decide what and whose freedoms are to be limited.  These are the politicians whose goal in life is power. Their success depends on gaining support from special interests.

No More ‘isms’ 

The great news is the answer is not to be found in more “isms.”  The answers are to be found in more liberty which cost so much less.  Under these circumstances spending goes down, wealth production goes up, and the quality of life improves.

Just this recognition—especially if we move in this direction—increases optimism which in itself is beneficial.  The follow through with sound policies are required which must be understood and supported by the people.

But there is good evidence that the generation coming of age at the present time is supportive of moving in the direction of more liberty and self-reliance. The more this change in direction and the solutions become known, the quicker will be the return of optimism.

Our job, for those of us who believe that a different system than the  one that we have  had for the  last 100 years, has driven us to this unsustainable crisis, is to be more convincing that there is a wonderful, uncomplicated, and moral system that provides the answers.  We had a taste of it in our early history. We need not give up on the notion of advancing this cause.  

It worked, but we allowed our leaders to concentrate on the material abundance that freedom generates, while ignoring freedom itself.  Now we have neither, but the door is open, out of necessity, for an answer. The answer available is based on the Constitution, individual liberty and prohibiting the use of government force to provide privileges and benefits to all special interests.

After over 100 years we face a society quite different from the one that was intended by the Founders.  In many ways their efforts to protect future generations with the Constitution from this danger has failed.  Skeptics, at the time the Constitution was written in 1787, warned us of today’s possible outcome.  The insidious nature of the erosion of our liberties and the reassurance our great abundance gave us, allowed the process to evolve into the dangerous period in which we now live.

Dependency on Government Largesse 

Today we face a dependency on government largesse for almost every need.  Our liberties are restricted and government operates outside the rule of law, protecting and rewarding those who buy or coerce government into satisfying their demands. Here are a few examples:

-Undeclared wars are commonplace. 
-Welfare for the rich and poor is considered an entitlement.
-The economy is overregulated, overtaxed and grossly distorted by a deeply flawed monetary system.
-Debt is growing exponentially.
-The Patriot Act and FISA legislation passed without much debate have resulted in a steady erosion of our 4th Amendment rights.
-Tragically our government engages in preemptive war, otherwise known as aggression, with no complaints from the American people.
-The drone warfare we are pursuing worldwide is destined to end badly for us as the hatred builds for innocent lives lost and the international laws flaunted. Once we are financially weakened and militarily challenged, there will be a lot resentment thrown our way.
-It’s now the law of the land that the military can arrest American citizens, hold them indefinitely, without charges or a trial.
-Rampant hostility toward free trade is supported by a large number in Washington.
-Supporters of sanctions, currency manipulation and WTO trade retaliation, call the true free traders “isolationists.”
-Sanctions are used to punish countries that don’t follow our orders.
-Bailouts and guarantees for all kinds of misbehavior are routine.
-Central economic planning through monetary policy, regulations and legislative mandates has been an acceptable policy.

Questions

Excessive government has created such a mess it prompts many questions:

Why are sick people who use medical marijuana put in prison?

Why does the federal government restrict the drinking of raw milk?

Why can’t Americans manufacturer rope and other products from hemp?

Why are Americans not allowed to use gold and silver as legal tender as mandated by the Constitution?

Why is Germany concerned enough to consider repatriating their gold held by the FED for her in New York?  Is it that the trust in the U.S. and dollar supremacy beginning to wane?

Why do our political leaders believe it’s unnecessary to thoroughly audit our own gold?

Why can’t Americans decide which type of light bulbs they can buy?

Why is the TSA permitted to abuse the rights of any American traveling by air?

Why should there be mandatory sentences—even up to life for crimes without victims—as our drug laws require?

Why have we allowed the federal government to regulate commodes in our homes?

Why is it political suicide for anyone to criticize AIPAC ?

Why haven’t we given up on the drug war since it’s an obvious failure and violates the people’s rights? Has nobody noticed that the authorities can’t even keep drugs out of the prisons? How can making our entire society a prison solve the problem?

Why do we sacrifice so much getting needlessly involved in border disputes and civil strife around the world and ignore the root cause of the most deadly border in the world-the one between Mexico and the US?

Why does Congress willingly give up its prerogatives to the Executive Branch?

Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same?

Why did the big banks, the large corporations, and foreign banks and foreign central banks get bailed out in 2008 and the middle class lost their jobs and their homes?

Why do so many in the government and the federal officials believe that creating money out of thin air creates wealth?

Why do so many accept the deeply flawed principle that government bureaucrats and politicians can protect us from ourselves without totally destroying the principle of liberty?

Why can’t people understand that war always destroys wealth and liberty?

Why is there so little concern for the Executive Order that gives the President authority to establish a “kill list,” including American citizens, of those targeted for assassination?

Why is patriotism thought to be blind loyalty to the government and the politicians who run it, rather than loyalty to the principles of liberty and support for the people? Real patriotism is a willingness to challenge the government when it’s wrong.

Why is it is claimed that if people won’t  or can’t take care of their own needs, that people in government can do it for them?

Why did we ever give the government a safe haven for initiating violence against the people?

Why do some members defend free markets, but not civil liberties?

Why do some members defend civil liberties but not free markets? Aren’t they the same?

Why don’t more defend both economic liberty and personal liberty?
Why are there not more individuals who seek to intellectually influence others to bring about positive changes than those who seek power to force others to obey their commands?

Why does the use of religion to support a social gospel and preemptive wars, both of which requires authoritarians to use violence, or the threat of violence, go unchallenged? 

Aggression and forced redistribution of wealth has nothing to do with the teachings of the world great religions.

Why do we allow the government and the Federal Reserve to disseminate false information dealing with both economic and  foreign policy?

Why is democracy held in such high esteem when it’s the enemy of the minority and makes all rights relative to the dictates of the majority?

Why should anyone be surprised that Congress has no credibility, since there’s such a disconnect between what politicians say and what they do?

Is there any explanation for all the deception, the unhappiness, the fear of the future, the loss of confidence in our leaders, the distrust, the anger and frustration?   Yes there is, and there’s a way to reverse these attitudes.  The negative perceptions are logical and a consequence of bad policies bringing about our problems.  Identification of the problems and recognizing the cause allow the proper changes to come easy.
Trust Yourself, Not the Government

Too many people have for too long placed too much confidence and trust in government and not enough in themselves.  Fortunately, many are now becoming aware of the seriousness of the gross mistakes of the past several decades. The blame is shared by both political parties.  Many Americans now are demanding to hear the plain truth of things and want the demagoguing to stop.  Without this first step, solutions are impossible.

Seeking the truth and finding the answers in liberty and self-reliance promotes the optimism necessary for restoring prosperity.  The task is not that difficult if politics doesn’t get in the way.

We have allowed ourselves to get into such a mess for various reasons.

Politicians deceive themselves as to how wealth is produced.  Excessive confidence is placed in the judgment of politicians and bureaucrats.  This replaces the confidence in a free society.  Too many in high places of authority became convinced that only they,   armed with arbitrary government power, can bring about fairness, while facilitating wealth production.  This always proves to be a utopian dream and destroys wealth and liberty.  It impoverishes the people and rewards the special interests who end up controlling both political parties.

It’s no surprise then that much of what goes on in Washington is driven by aggressive partisanship and power seeking, with philosophic differences being minor.

Economic Ignorance

Economic ignorance is commonplace.  Keynesianism continues to thrive, although today it is facing healthy and enthusiastic rebuttals.  Believers in military Keynesianism and domestic Keynesianism continue to desperately promote their failed policies, as the economy languishes in a deep slumber.

Supporters of all government edicts use humanitarian arguments to justify them.

Humanitarian arguments are always used to justify government mandates related to the economy, monetary policy, foreign policy, and personal liberty. This is on purpose to make it more difficult to challenge.  But, initiating violence for humanitarian reasons is still violence.  Good intentions are no excuse and are just as harmful as when people use force with bad intentionsThe results are always negative.

The immoral use of force is the source of man’s political problems.  Sadly, many religious groups, secular organizations, and psychopathic authoritarians endorse government initiated force to change the world.  Even when the desired goals are well-intentioned—or especially when well-intentioned—the results are dismal.  The good results sought never materialize.  The new problems created require even more government force as a solution.  The net result is institutionalizing government initiated violence and morally justifying it on humanitarian grounds.

This is the same fundamental reason our government  uses force  for invading other countries at will, central economic planning at home, and the regulation of personal liberty and habits of our citizens.

It is rather strange, that unless one has a criminal mind and no respect for other people and their property, no one claims it’s permissible to go into one’s neighbor’s house and tell them how to behave, what they can eat, smoke and drink or how to spend their money.

Yet, rarely is it asked why it is morally acceptable that a stranger with a badge and a gun can do the same thing in the name of law and order.  Any resistance is met with brute force, fines, taxes, arrests, and even imprisonment. This is done more frequently every day without a proper search warrant.

No Government Monopoly over Initiating Violence

Restraining aggressive behavior is one thing, but legalizing a government monopoly for initiating aggression can only lead to exhausting liberty associated with chaos, anger and the breakdown of civil society.  Permitting such authority and expecting saintly behavior from the bureaucrats and the politicians is a pipe dream.  We now have a standing army of armed bureaucrats in the TSA, CIA, FBI, Fish and Wildlife, FEMA, IRS, Corp of Engineers, etc. numbering over 100,000.  Citizens are guilty until proven innocent in the unconstitutional administrative courts.

Government in a free society should have no authority to meddle in social activities or the economic transactions of individuals. Nor should government meddle in the affairs of other nations. All things peaceful, even when controversial, should be permitted.

We must reject the notion of prior restraint in economic activity just we do in the area of free speech and religious liberty. But even in these areas government is starting to use a backdoor approach of political correctness to regulate speech-a dangerous trend. Since 9/11 monitoring speech on the internet is now a problem since warrants are no longer required.

The Proliferation of Federal Crimes

The Constitution established four federal crimes.  Today the experts can’t even agree on how many federal crimes are now on the books—they number into the thousands.  No one person can comprehend the enormity of the legal system—especially the tax code.  Due to the ill-advised drug war and the endless federal expansion of the criminal code we have over 6 million people under correctional suspension, more than the Soviets ever had, and more than any other nation today, including China.  I don’t understand the complacency of the Congress and the willingness to continue their obsession with passing more Federal laws.  Mandatory sentencing laws associated with drug laws have compounded our prison problems.

The federal register is now 75,000 pages long and the tax code has 72,000 pages, and expands every year.  When will the people start shouting, “enough is enough,” and demand Congress cease and desist.

Achieving Liberty

Liberty can only be achieved when government is denied the aggressive use of force.  If one seeks liberty, a precise type of government is needed.  To achieve it, more than lip service is required.

Two choices are available.

A government designed to protect liberty—a natural right—as its sole objective.  The people are expected to care for themselves and reject the use of any force for interfering with another person’s liberty.  Government is given a strictly limited authority to enforce contracts, property ownership, settle disputes, and defend against foreign aggression.

A government that pretends to protect liberty but is granted power to arbitrarily use force over the people and foreign nations.  Though the grant of power many times is meant to be small and limited, it inevitably metastasizes into an omnipotent political cancer.  This is the problem for which the world has suffered throughout the ages.  Though meant to be limited it nevertheless is a 100% sacrifice of a principle that would-be-tyrants find irresistible.  It is used vigorously—though incrementally and insidiously.  Granting power to government officials always proves the adage that:  “power corrupts.”

Once government gets a limited concession for the use of force to mold people habits and plan the economy, it causes a steady move toward tyrannical government.  Only a revolutionary spirit can reverse the process and deny to the government this arbitrary use of aggression.  There’s no in-between.  Sacrificing a little liberty for imaginary safety always ends badly.

Today’s mess is a result of Americans accepting option #2, even though the Founders attempted to give us Option #1.

The results are not good.  As our liberties have been eroded our wealth has been consumed.  The wealth we see today is based on debt and a foolish willingness on the part of foreigners to take our dollars for goods and services. They then loan them back to us to perpetuate our debt system.  It’s amazing that it has worked for this long but the impasse in Washington, in solving our problems indicate that many are starting to understand the seriousness of the world -wide debt crisis and the dangers we face. The longer this process continues the harsher the outcome will be.

The Financial Crisis Is a Moral Crisis

Many are now acknowledging that a financial crisis looms but few understand it’s, in reality, a moral crisis. It’s the moral crisis that has allowed our liberties to be undermined and permits the exponential growth of illegal government power.  Without a clear understanding of the nature of the crisis it will be difficult to prevent a steady march toward tyranny and the poverty that will accompany it.

Ultimately, the people have to decide which form of government they want; option #1 or option #2.  There is no other choice.  Claiming there is a choice of a “little” tyranny is like describing pregnancy as a “touch of pregnancy.”  It is a myth to believe that a mixture of free markets and government central economic planning is a worthy compromise.  What we see today is a result of that type of thinking.  And the results speak for themselves.

A Culture of Violence

American now suffers from a culture of violence.  It’s easy to reject the initiation of violence against one’s neighbor but it’s ironic that the people arbitrarily and freely anoint government officials with monopoly power to initiate violence against the American people—practically at will.

Because it’s the government that initiates force, most people accept it as being legitimate.  Those who exert the force have no sense of guilt. It is believed by too many that governments are morally justified in initiating force supposedly to “do good.”  They incorrectly believe that this authority has come from the “consent of the people.”  The minority, or victims of government violence never consented to suffer the abuse of government mandates, even when dictated by the majority.  Victims of TSA excesses never consented to this abuse.

This attitude has given us a policy of initiating war to “do good,” as well. It is claimed that war, to prevent war for noble purposes, is justified.  This is similar to what we were once told that:  “destroying a village to save a village” was justified.  It was said by a US Secretary of State that the loss of 500,000 Iraqis, mostly children, in the 1990s, as a result of American bombs and sanctions, was “worth it” to achieve the “good” we brought to the Iraqi people.  And look at the mess that Iraq is in today.

Government use of force to mold social and economic behavior at home and abroad has justified individuals using force on their own terms.  The fact that violence by government is seen as morally justified, is the reason why violence will increase when the big financial crisis hits and becomes a political crisis as well.

First, we recognize that individuals shouldn’t initiate violence, then we give the authority to government.   Eventually, the immoral use of government violence, when things goes badly, will be used to justify an individual’s “right” to do the same thing. Neither the government nor individuals have the moral right to initiate violence against another yet we are moving toward the day when both will claim this authority.  If this cycle is not reversed society will break down.

When needs are pressing, conditions deteriorate and rights become relative to the demands and the whims of the majority.  It’s then not a great leap for individuals to take it upon themselves to use violence to get what they claim is theirs.  As the economy deteriorates and the wealth discrepancies increase—as are already occurring— violence increases as those in need take it in their own hands to get what they believe is theirs.  They will not wait for a government rescue program.

When government officials wield power over others to bail out the special interests, even with disastrous results to the average citizen, they feel no guilt for the harm they do. Those who take us into undeclared wars with many casualties resulting, never lose sleep over the death and destruction their bad decisions caused. They are convinced that what they do is morally justified, and the fact that many suffer   just can’t be helped.

When the street criminals do the same thing, they too have no remorse, believing they are only taking what is rightfully theirs.  All moral standards become relativeWhether it’s bailouts, privileges, government subsidies or benefits for some from inflating a currency, it’s all part of a process justified by a philosophy of forced redistribution of wealth.  Violence, or a threat of such, is the instrument required and unfortunately is of little concern of most members of Congress.

Some argue it’s only a matter of “fairness” that those in need are cared for. There are two problems with this. First, the principle is used to provide a greater amount of benefits to the rich than the poor. Second, no one seems to be concerned about whether or not it’s fair to those who end up paying for the benefits. The costs are usually placed on the backs of the middle class and are hidden from the public eye. Too many people believe government handouts are free, like printing money out of thin air, and there is no cost. That deception is coming to an end. The bills are coming due and that’s what the economic slowdown is all about.

Sadly, we have become accustomed to living with the illegitimate use of force by government.  It is the tool for telling the people how to live, what to eat and drink, what to read and how to spend their money.

To develop a truly free society, the issue of initiating force must be understood and rejected.  Granting to government even a small amount of force is a dangerous concession.

Limiting Government Excesses vs. a Virtuous Moral People

Our Constitution, which was intended to limit government power and abuse, has failed.  The Founders warned that a free society depends on a virtuous and moral people.  The current crisis reflects that their concerns were justified.

Most politicians and pundits are aware of the problems we face but spend all their time in trying to reform government.  The sad part is that the suggested reforms almost always lead to less freedom and the importance of a virtuous and moral people is either ignored, or not understood. The new reforms serve only to further undermine liberty.  The compounding effect has given us this steady erosion of liberty and the massive expansion of debt.  The real question is: if it is liberty we seek, should most of the emphasis be placed on government reform or trying to understand what “a virtuous and moral people” means and how to promote it. The Constitution has not prevented the people from demanding handouts for both rich and poor in their efforts to reform the government, while ignoring the principles of a free society. All branches of our government today are controlled by individuals who use their power to undermine liberty and enhance the welfare/warfare state-and frequently their own wealth and power.

If the people are unhappy with the government performance it must be recognized that government is merely a reflection of an immoral society that rejected a moral government of constitutional limitations of power and love of freedom.

If this is the problem all the tinkering with thousands of pages of new laws and regulations will do nothing to solve the problem.

It is self-evident that our freedoms have been severely limited and the apparent prosperity we still have, is nothing more than leftover wealth from a previous time.  This fictitious wealth based on debt and benefits from a false trust in our currency and credit, will play havoc with our society when the bills come due.  This means that the full consequence of our lost liberties is yet to be felt.

But that illusion is now ending.  Reversing a downward spiral depends on accepting a new approach.

Expect the rapidly expanding homeschooling movement to play a significant role in the revolutionary reforms needed to build a free society with Constitutional protections. We cannot expect a Federal government controlled school system to provide the intellectual ammunition to combat the dangerous growth of government that threatens our liberties.

The internet will provide the alternative to the government/media complex that controls the news and most political propaganda. This is why it’s essential that the internet remains free of government regulation.

Many of our religious institutions and secular organizations support greater dependency on the state by supporting war, welfare and corporatism and ignore the need for a virtuous people.

I never believed that the world or our country could be made more free by politicians, if the people had no desire for freedom.

Under the current circumstances the most we can hope to achieve in the political process is to use it as a podium to reach the people to alert them of the nature of the crisis and the importance of their need to assume responsibility for themselves, if it is liberty that they truly seek.  Without this, a constitutionally protected free society is impossible.

If this is true, our individual goal in life ought to be for us to seek virtue and excellence and recognize that self-esteem and happiness only comes from using one’s natural ability, in the most productive manner possible, according to one’s own talents.

Productivity and creativity are the true source of personal satisfaction. Freedom, and not dependency, provides the environment needed to achieve these goals. Government cannot do this for us; it only gets in the way. When the government gets involved, the goal becomes a bailout or a subsidy and these cannot provide a sense of  personal achievement.

Achieving legislative power and political influence should not be our goal. Most of the change, if it is to come, will not come from the politicians, but rather from individuals, family, friends, intellectual leaders and our religious institutions.  The solution can only come from rejecting the use of coercion, compulsion, government commands, and aggressive force, to mold social and economic behavior.  Without accepting these restraints, inevitably the consensus will be to allow the government to mandate economic equality and obedience to the politicians who gain power and promote an environment that smothers the freedoms of everyone. It is then that the responsible individuals who seek excellence and self-esteem by being self-reliance and productive, become the true victims.

Conclusion

What are the greatest dangers that the American people face today and impede the goal of a free society? There are five.

1. The continuous attack on our civil liberties which threatens the rule of law and our ability to resist the onrush of tyranny.             

2. Violent anti-Americanism that has engulfed the world. Because the phenomenon of “blow-back” is not understood or denied, our foreign policy is destined to keep us involved in many wars that we have no business being in. National bankruptcy and a greater threat to our national security will result.                                                       

3. The ease in which we go to war, without a declaration by Congress, but accepting international authority from the UN or NATO even for preemptive wars, otherwise known as aggression. 

4. A financial political crisis as a consequence of excessive debt, unfunded liabilities, spending, bailouts, and gross discrepancy in wealth distribution going from the middle class to the rich. The danger of central economic planning, by the Federal Reserve must be understood.    

5. World government taking over  local and US sovereignty by getting involved in the issues of war, welfare, trade, banking,  a world currency, taxes, property ownership, and private ownership of guns.

Happily, there is an answer for these very dangerous trends.

What a wonderful world it would be if everyone accepted the simple moral premise of rejecting all acts of aggression.  The retort to such a suggestion is always:  it’s too simplistic, too idealistic, impractical, naïve, utopian, dangerous, and unrealistic to strive for such an ideal.

The answer to that is that for thousands of years the acceptance of government force, to rule over the people, at the sacrifice of liberty, was considered moral and the only available option for achieving peace and prosperity.

What could be more utopian than that myth—considering the results especially looking at the state sponsored killing, by nearly every government during the 20th Century, estimated to be in the hundreds of millions.  It’s time to reconsider this grant of authority to the state.

No good has ever come from granting monopoly power to the state to use aggression against the people to arbitrarily mold human behavior.  Such power, when left unchecked, becomes the seed of an ugly tyranny.  This method of governance has been adequately tested, and the results are in: reality dictates we try liberty.

The idealism of non-aggression and rejecting all offensive use of force should be tried.  The idealism of government sanctioned violence has been abused throughout history and is the primary source of poverty and war.  The theory of a society being based on individual freedom has been around for a long time.  It’s time to take a bold step and actually permit it by advancing this cause, rather than taking a step backwards as some would like us to do.

Today the principle of habeas corpus, established when King John signed the Magna Carta in 1215, is under attack. There’s every reason to believe that a renewed effort with the use of the internet that we can instead advance the cause of liberty by spreading an uncensored message that will serve to rein in government authority and challenge the obsession with war and welfare.

What I’m talking about is a system of government guided by the moral principles of peace and tolerance.

The Founders were convinced that a free society could not exist without a moral people.  Just writing rules won’t work if the people choose to ignore them.  Today the rule of law written in the Constitution has little meaning for most Americans, especially those who work in Washington DC.

Benjamin Franklin claimed “only a virtuous people are capable of freedom.”  John Adams concurred:  “Our Constitution was made for a moral and religious people.  It is wholly inadequate to the government of any other.”

A moral people must reject all violence in an effort to mold people’s beliefs or habits.

A society that boos or ridicules the Golden Rule is not a moral society.  All great religions endorse the Golden Rule.  The same moral standards that individuals are required to follow should apply to all government officials.  They cannot be exempt.

The ultimate solution is not in the hands of the government.

The solution falls on each and every individual, with guidance from family, friends and community.

The #1 responsibility for each of us is to change ourselves with hope that others will follow.  This is of greater importance than working on changing the government; that is secondary to promoting a virtuous society.  If we can achieve this, then the government will change.

It doesn’t mean that political action or holding office has no value. At times it does nudge policy in the right direction. But what is true is that when seeking office is done for personal aggrandizement, money or power, it becomes useless if not harmful. When political action is taken for the right reasons it’s easy to understand why compromise should be avoided. It also becomes clear why progress is best achieved by working with coalitions, which bring people together, without anyone sacrificing his principles.

Political action, to be truly beneficial, must be directed toward changing the hearts and minds of the people, recognizing that it’s the virtue and morality of the people that allow liberty to flourish.

The Constitution or more laws per se, have no value if the people’s attitudes aren’t changed.

To achieve liberty and peace, two powerful human emotions have to be overcome.  Number one is “envy” which leads to hate and class warfare.  Number two is “intolerance” which leads to bigoted and judgmental policies.  These emotions must be replaced with a much better understanding of love, compassion, tolerance and free market economics. Freedom, when understood, brings people together. When tried, freedom is popular.

The problem we have faced over the years has been that economic interventionists are swayed by envy, whereas social interventionists are swayed by intolerance of habits and lifestyles. The misunderstanding that tolerance is an endorsement of certain activities, motivates many to legislate moral standards which should only be set by individuals making their own choices. Both sides use force to deal with these misplaced emotions. Both are authoritarians. Neither endorses voluntarism.  Both views ought to be rejected.

I have come to one firm conviction after these many years of trying to figure out “the plain truth of things.”  The best chance for achieving peace and prosperity, for the maximum number of people world-wide, is to pursue the cause of LIBERTY.

If you find this to be a worthwhile message, spread it throughout the land.
To add: The message above applies to universally which means to the Filipinos too.
No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws

Wednesday, November 14, 2012

Syria’s Gold Market Thrives Amidst Civil War

Syria’s gold markets remains buoyant despite the ongoing civil war. 

Importantly events in Syria has been providing some insights on resident Syrians perceived value of gold.

For these economically marginalized by the war, gold has been sold in order to raise cash

In a Damascus jewelry shop, the customer’s jaw drops when he hears what he is being offered for his gold ring. Barely $100. “Can’t you do any better?” he asks timidly before accepting the deal.

After nearly 20 long months of conflict, many Syrians are now digging deep into their pockets, with many having to sell their jewelry -- including family heirlooms -- just to survive.

The conflict between government troops and the rebels may have brought the economy to a stalemate, but the gold market is experiencing an unprecedented frenzy.

For those who have lost their livelihood with the closing down or destruction of their workplace, selling off jewelry is an unwelcome but necessary option so they can feed their families.
Because gold has not yet been recognized as money on the street levels, and because gold is yet considered an asset, economically marginalized people prefer cash over gold.

The point here is that gold hardly signifies hedge against “economic hardships” or what others would (mis) classify as “deflation”.

But it has been a different story for those who have savings

From the same article:
For the rich, the precious metal represents a bulwark against the collapse of the Syrian pound.

According to Sonia Khanji, a member of the Damascus Chamber of Commerce, 30 percent of small and medium enterprises in the country have now closed, throwing roughly a quarter of the workforce out of a job.

Long accustomed to stable prices and currency, Syrians have seen rampant inflation reduce their purchasing power by one third since the revolt against the regime of President Bashar al-Assad broke out in March 2011.

Damascus blames the country’s economic woes on sanctions imposed by Europe and the United States, whose administrations accuse the regime of conducting a bloody crackdown on its own people.

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Blaming external factors has been a mechanical response by almost every politicians.  In reality, wars are mainly funded by inflationism. 

The Syrian government recently announced a significant spending hike to cover salary increases (+13%) and subsidies on food, fuel, power and agriculture (+25%), apparently to buy popular support even when the economy has been hit hard by the rebellion.

Yet without sufficient tax revenues to cover the added expenses including the existing ones, then the Syrian government may have already become dependent on her central bank for financing, thus the recent spike in price inflation (chart from tradingeconomics.com)

And many Syrians see gold as safe haven of their savings against monetary inflation

Again from the same Al Arabiya News article
Today, those who still have a steady income put their faith in gold.

“People prefer to buy gold or sterling ounces rather than trinkets,” Mdari says, adding that people are hunkering down for a protracted period of unrest.

“People have lost faith in the national currency. Whenever new economic sanctions are announced, I notice that the rich flock to buy gold. They believe that acquiring the yellow metal offers security,” says Michel, a jeweler.

Damascus industry professionals agree that the precious metal provides a form of savings that appreciates in times of political and economic uncertainty.

“To save money, people prefer gold. They fear a rising dollar and the fall of the Syrian pound, and gold is easier to transport if we need to leave quickly,” said Hisham, a goldsmith on Abed Street in downtown Damascus.
In the real world, gold represents a hedge against currency inflation.

Graphic: A History of Sovereign Defaults

Just a reminder that there is no such thing as “risk free”, particularly on the popular impression that government debts are safe havens.

Below a historical roster of Sovereign debt defaults from Wikipedia.org

Africa:
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Americas:
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Even the US has had several instances of defaults.

John Chamberlain at the Mises Institutes explains some of in list: Continental Currency Default of 1779, Default on Continental Domestic Loans, Greenback Default of 1862, Continental Currency Default of 1779, Momentary Default of 1979

Asia:
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Postbellum Japan has not been spared too.

So as with the Philippines whom restructured debt in 1983/1986 (World Bank)

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Europe’s largest economies Germany, the United Kingdom, France has had their share of defaults or partial defaults (restructuring)

As per historian Edward Chancellor (also cited by the wikipedia.org) reasons for default consist of: A reversal of global capital flows, Unwise lending, Fraudulent lending, Excessive foreign debts, A poor credit history, Unproductive lending, Rollover risk, Weak revenues, Rising interest rates, Terminal debt.

All these are rather symptoms of political spending which has been unproductive and consumption based (e.g. welfare, wars, bailouts, bureaucracy, etc.) and which frequently leads to excesses.

The idea that government debt represents as safe haven is no less than political travesty meant to justify the current unsustainable debt based political economic institutions. 

Eventually, the naked will be exposed when the tide subsides.

Negative Real Rates Breed Ponzi Schemes

I have been saying here that negative real rates will not only drive people to gamble but to fall prey to Ponzi scams

I wrote last March:
Since fixed incomes will also suffer from interest rate manipulations, many will fall victim or get seduced to dabble with Ponzi schemes marketed by scoundrels who would use the current policy induced environment as an opportunity to exploit a gullible public.

In the US, Ponzi schemes skyrocketed as the US Federal Reserve has taken on a zero bound interest rate environment in response to the recent crisis in 2008.
I wrote last week
instead of locking money through interest rate dividends from savings account in the financial institutions, zero bound regime or negative real rates which are part of financial repression have been forcing people to chase on yields and gamble in order to generate returns. So the public have become more of a “risk taker” and take on “greedy” activities in response to such policies. Some would even fall or become victims to Ponzi schemes which I expect to mushroom. 
Today’s headlines seem to validate my predictions:

From the Inquirer.net
A company managed by a former janitor and driver, and founded just early this year, has duped at least 15,000 people in Mindanao and the Visayas of P12 billion in a pyramid scam, an official of the National Bureau of Investigation said Tuesday.

The NBI identified the company as Aman Futures Group Phils. Inc.

“Some of the victims committed suicide and others have become violent and sick when they learned their hard-earned money was gone,” said Virgilio Mendez, NBI deputy director for regional operations services, who was investigating the scam.

Among Aman Futures’ victims were local politicians, police and military personnel, government workers, market vendors, farmers, drivers, retired employees and overseas Filipino workers, according to Mendez.

He said the number of “complainants from across the country is piling up.”
Aside from negative real rates, because of the overdependence on the government to do the legwork of supervision on the viability of such devious projects, the victim’s economic calculation has been substituted for the desire “to gain something from nothing

More from the same article
He said Aman Futures was able to lure investors by offering a 30-percent to 40-percent return on investment within eight days, and a 50-percent to 80-percent profit for 18 to 20 days.

“The amount of interest varies depending on the investment or money placements,” Mendez said.
And worst Ponzi schemes have been endorsed by politicians
He said the victims trusted Aman Futures largely because of endorsements from local officials.

“They trusted Aman Futures because even local government officials had openly endorsed it and admitted to have invested also,” Mendez explained.
This shows how people have been duped in the same way as they see politics (via elections and legislation): they simply look at the superficialities (here in terms returns) without ever questioning the system (or in this case how such returns will be funded and what types of projects will lead to such astronomical returns).

Critical thinking, and most importantly, self responsibility has eschewed for endorsements and assurances from politicians, who ironically became victims themselves.  This is the welfare mentality.

Of course, under a negative real rates regime, there will be more instances of Ponzi, pyramiding and other fraudulent schemes which will snooker many. 

Again the morality of the policies inflationism from the great Henry Hazlitt (bold mine)
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.
The above example is a validation of how negative real rates and the lack of self-responsibility due to overdependence on government debauches the morality of the public and private sector.

Tuesday, November 13, 2012

Obama’s Fiscal Cliff: The Effects of Taxing Wealth


For many of the wealthy, 2012 is becoming a good year to sell.

They're worried about the "fiscal cliff," which is when tax cuts expire and spending cuts are set to go into effect at the end of the year.

Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.

Wealth advisors say that with capital-gains taxes potentially going to 25 percent from 15 percent, and other possible increases in the dividend tax, estate tax and other taxes, many clients are selling now to save millions in taxes.

“Under almost any scenario, it makes sense to take the gains this year,” said Gregory Curtis, chairman and managing director of Greycourt & Co. “Clients aren’t selling willy nilly. But if they can and they have a huge gain, they’re selling now.”
Capital gains taxes represents a tax on wealth. In essence if you tax something you get less of it.  Thus an increase in capital gains taxes dissuades investors and entrepreneurs to undertake productive activities which becomes a hindrance to capital accumulation and to wealth generation.

So capital gains hike will have lasting adverse  effects

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Raising dividend taxes also will hurt stock market investors.

The level of dividend tax rates affect dividend issuance. According to the Wall Street Journal
Historical experience indicates that corporate dividend payouts are highly sensitive to the dividend tax. Dividends fell out of favor in the 1990s when the dividend tax rate was roughly twice the rate of capital gains.

When the rate fell to 15% on January 1, 2003, dividends reported on tax returns nearly doubled to $196 billion from $103 billion the year before the tax cut. By 2006 dividend income had grown to nearly $337 billion, more than three times the pre-tax cut level.
Next a swath of investors will get hurt, not limited to the scorned “wealthy”. From the same article
IRS data show that retirees and near-retirees who depend on dividend income would be hit especially hard. Almost three of four dividend payments go to those over the age of 55, and more than half go to those older than 65, according to IRS data.

But all American shareholders would lose. Higher dividend and capital gains taxes make stocks less valuable. A share of stock is worth the discounted present value of the future earnings stream after taxes. Stock prices would fall over time to adjust to the new after-tax rate of return. And if investors become convinced later this year that dividend and capital gains taxes are going way up on January 1, some investors are likely to sell shares ahead of paying these higher rates.

The question is how this helps anyone. According to the Investment Company Institute, about 51% of adults own stock directly or through mutual funds, which is more than 100 million shareholders.
So again, unless there will be a bipartisan deal reached, US stock markets will remain highly vulnerable to sharp downside volatility.

And President Obama will increasingly rely on team Bernanke and the FED to offset the effects of wealth destructive policies.

Ironically while Mr. Bernanke has been doing his darned best to keep asset markets afloat, Mr. Obama has been undoing them. Such paradox accounts for as the proverbial "the left hand does not know what the right hand is doing". That's the way of politics.

The Informal Economy Drives Latin America’s Middle Class

Experts are puzzled at Latin America’s rapid growth of the middle class.
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The Economist writes
But the political implications of Latin America’s growing middle class are not yet clear. Some commentators have argued that the “new middle class” is entrepreneurial, is partly drawn from the informal sector, and will be hostile to statism and high taxes. (In fact, the bank finds that the middle class tend to be salaried employees of private companies.) Some of them send their children to private schools that have sprung up in many once-poor communities.
The mainstream vehemently denies it, but the share of informal economy in Latin America has been substantial.

For many poor people in urban areas, the primary means of economic survival is the production or sale of goods or services through semi-legal or illegal ventures, known as the informal economy. Conservatively, informal employment accounts for half to three quarters of all nonagricultural employment in developing countries: 48 percent in North Africa, 51 percent in Latin America, 65 percent in Asia, and 72 percent in sub-Saharan Africa.
You cannot have sustained rising standards of living or a middle class or a broadening of societal wealth without an increase in capital accumulation.

As the late great Professor Ludwig von Mises wrote,
Saving—capital accumulation—is the agency that has transformed step by step the awkward search for food on the part of savage cave dwellers into the modern ways of industry. The pacemakers of this evolution were the ideas that created the institutional framework within which capital accumula­tion was rendered safe by the principle of private ownership of the means of production. Every step forward on the way toward prosperity is the effect of saving. The most ingenious technological inventions would be practically useless if the capital goods required for their utilization had not been accumulated by saving.
So despite the many statist regimes in Latin America, the informal economy has been representative of guerrilla capitalism which has breathed life to the region's middle class.

Sovereign Life Cycles and the Bubble Psychology

Via Bridgewater:

Throughout history, Dalio advises these two influences have changed countries’ competitiveness and indebtedness which have caused changes in their relative wealth and power. He goes on to add that since different experiences lead to different psychological biases that lead to different experiences, etc., certain common cause-effect linkages drive the typical cycle of a nation's growth, power and influence.

To summarize, we believe that countries typically evolve through five stages of the cycle:

1) In the first stage countries are poor and think that they are poor.

In this stage they have very low incomes and most people have subsistence lifestyles, they don’t waste money because they value it a lot and they don’t have any debt to speak of because savings are short and nobody wants to lend to them. They are undeveloped.

2) In the second stage countries are getting rich quickly but still think they are poor.

At this stage they behave pretty much the same as they did when they were in the prior stage but, because they have more money and still want to save, the amount of this saving and investment rises rapidly. Because they are typically the same people who experienced the more deprived conditions in the first stage, and because people who grew up with financial insecurity typically don’t lose their financial cautiousness, they still a) work hard, b) have export-led economies, c) have pegged exchange rates, d) save a lot, and e) invest efficiently in their means of production, in real assets like gold and apartments, and in bonds of the reserve countries.

3) In the third stage countries are rich and think of themselves as rich.

At this stage, their per capita incomes approach the highest in the world as their prior investments in infrastructure, capital goods and R&D are paying off by producing productivity gains. At the same time, the prevailing psychology changes from a) putting the emphasis on working and saving to protect oneself from the bad times to b) easing up in order to savor the fruits of life. This change in the prevailing psychology occurs primarily because a new generation of people who did not experience the bad times replaces those who lived through them. Signs of this change in mindset are reflected in statistics that show reduced work hours (e.g., typically there is a reduction in the average workweek from six days to five) and big increases in expenditures on leisure and luxury goods relative to necessities.

4) In the fourth stage countries become poorer and still think of themselves as rich.

This is the leveraging up phase – i.e., debts rise relative to incomes until they can’t any more. The psychological shift behind this leveraging up occurs because the people who lived through the first two stages have died off or become irrelevant and those whose behavior matters most are used to living well and not worrying about the pain of not having enough money. Because the people in these countries earn and spend a lot, they become expensive, and because they are expensive they experience slower real income growth rates. Since they are reluctant to constrain their spending in line with their reduced income growth rate, they lower their savings rates, increase their debts and cut corners. Because their spending continues to be strong, they continue to appear rich, even though their balance sheets deteriorate. The reduced level of efficient investments in infrastructure, capital goods and R&D slow their productivity gains. Their cities and infrastructures become older and less efficient than those in the two earlier stages. Their balance of payments positions deteriorate, reflecting their reduced competitiveness. They increasingly rely on their reputations rather than on their competitiveness to fund their deficits. They typically spend a lot of money on the military at this stage, sometimes very large amounts because of wars, in order to protect their global interests. Often, though not always, at the advanced stages of this phase, countries run “twin deficits” – i.e., both balance of payments and government deficits.

5) In the last stage of the cycle they typically go through deleveraging and relative decline, which they are slow to accept.

After bubbles burst and when deleveragings occur, private debt growth, private sector spending, asset values and net worths decline in a self-reinforcing negative cycle. To compensate, government debt growth, government deficits and central bank “printing” of money typically increase. In this way, their central banks and central governments cut real interest rates and increase nominal GDP growth so that it is comfortably above nominal interest rates in order to ease debt burdens. As a result of these low real interest rates, weak currencies and poor economic conditions, their debt and equity assets are poor performing and increasingly these countries have to compete with less expensive countries that are in the earlier stages of development. Their currencies depreciate and they like it. As an extension of these economic and financial trends, countries in this stage see their power in the world decline.
I agree that the final stage has always been about “relative decline which nations are slow to accept”, but this has not translated to “deleveraging”.

On the other hand, in most occasions, the final phase has been marked by hyperinflation or war, as revealed by the conditions of their respective currencies. Others simply defaulted.

In my view Ray Dalio’s Sovereign Life Cycle represents no more than Bubble psychology shaped by political trends. 

As caveat, history rhymes but events which led to them have been markedly different.

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US Post Election Politics: 20 States Petition to Secede

In the Philippines, accusations of cheating typically marks the post-election political environment.

In the US, the recently concluded presidential and national elections has prompted malcontents from 20 states to petitioned the White House to secede.

From the BBC,
More than 100,000 Americans have petitioned the White House to allow their states to secede from the US, after President Barack Obama's re-election.

The appeals were filed on the White House's We the People website.

Most of the 20 states with petitions voted for Republican Mitt Romney.

The US constitution contains no clause allowing states to leave the union. By Monday night the White House had not responded.

In total, more than 20 petitions have been filed. One for Texas has reached the 25,000-signature threshold at which the White House promises a response.

'Blatant abuses'

The last time states officially seceded, the US Civil War followed.

Most of the petitions merely quote the opening line of America's Declaration of Independence from Britain, in which America's founders stated their right to "dissolve the political bands" and form a new nation.

Currently, the most popular petition is from Texas, which voted for Mr Romney by some 15 percentage points more than it did for the Democratic incumbent.

The text complains of "blatant abuses" of Americans' rights
Growing secession movements in the US and in Europe are symptoms of snowballing forces of decentralization, or the paradigm shift to localize and diversify power which have been gnawing at the architectural foundations of the 20th century political establishments.

Yet secession movements could turn out to be bloody as governments typically tend to resist or counteract the prospects of yielding territorial and taxation privileges by the suppression of political dissident by force.

Nevertheless secession movements are signs of grassroots opposition to centralized political power.

As Austrian economics Professor Thomas DiLorenzo duly notes,
Government will never be limited unless the citizens take matters into their own hands by resurrecting the states’ rights mechanisms of nullification, interposition, and secession.

Monday, November 12, 2012

Essay of the Day: Tom Palmer: The Origins of State and Government

A profound essay on the origins of the state and government from Cato’s Tom G. Palmer

Some excerpts: 

People’s savings as the foundation of the state: 
What exactly is a state? The canonical definition was offered by MaxWeber,who defined the state as “that human community which (successfully) lays claim to the monopoly of legitimate physical violence within a certain territory.”

In fact, it cannot be the case that all wealth is attributable to the state.

Historically, the existence of a state apparatus required a pre-existing surplus to sustain it in the first place. The state,in other words, would not exist without wealth being produced before its emergence. Let’s explore that a bit further

Why do people have wealth? Charles Dunoyer, an early libertarian sociologist, explained that “there exist in the world only two great parties; that of those who prefer to live from the produce of their labor or of their property, and that of those who prefer to live on the labor or the property of others.” Simply put,makers produce wealth while takers appropriate it…
Predatory nature of the state:
State formation represents a transformation from “roving bandits” to “stationary bandits.” As the economist Mancur Olson wrote, “If the leader of a roving bandit gang who finds only slim pickings is strong enough to take hold of a given territory and to keep other bandits out, he can monopolize crime in that area—he can become a stationary bandit.”That is an important insight into the development of human political associations.

The state is, at its core, a predatory institution. Yet, in some ways, it also represents an advance, even for those being plundered. When the choice is between roving bandits—who rob,fight, burn what they can’t take, and then come back the following year—and stationary bandits—who settle down and plunder little by little throughout the year—the choice is clear. Stationary bandits are less likely to kill and destroy as they loot you and they fend off rival bandits. That is a kind of progress—even from the perspective of those being plundered..
 Incentives of the governing class and the roots of taxation:
What are the incentives of the rulers? Overly simplistic models posit that rulers seek to maximize wealth, or gross domestic product. Scott,however, argues that the ruler’s incentive is not to maximize the GDP,but to maximize the “SAP,” the state-accessible product,understood as that production that is easy to identify, monitor, enumerate, and confiscate through taxation: “The ruler. . .maximizes the state-accessible product, if necessary, at the expense of the overall wealth of the realm and its subjects.”
The inculcation of society for the need of the state
State systems of social control—from military conscription to compulsory schooling—have thoroughly permeated our consciousness.Consider,for example, the passport. You cannot travel around the world to day without a document issued by the state. In fact, you can no longer even travel around the United States without a state-issued document.Passports are very recent inventions. For thousands of years, people went where they wanted without permission from the state.
Laws originated from spontaneous order and not from the state;
Modern states also claim to be the sole source of law. But historically,states mainly replaced customary law with imposed law. There is a great deal of law all around us that is not a product of the state,for law is a byproduct of voluntary interaction. As the great jurist Bruno Leoni argued, “Individuals make the law insofar as they make successful claims.” Private persons making contracts are making law.
The need to educate people in order to free our captive minds from our dependence on the state
The evolution of freedom has involved a long process of bringing power under law. The imposition of force has none the less left a powerful imprint on our minds. Alexander Rüstow, a prominent sociologist and a father of the post war revival of liberty in Germany, meditated on the origins of the state in violence and predation and its lingering imprint: “All of us, without exception, carry this inherited poison within us, in the most varied and unexpected places and in the most diverse forms, often defying perception. All of us, collectively and individually, are accessories to this great sin of all time, this real original sin, a hereditary fault that can be excised and erased only with great difficulty and slowly, by an insight into pathology, by a will to recover, by the active remorse of all.” It takes work to free our minds from our dependence on the state