Category Archives: Socialism

Socialism and Authoritarianism: Perfectly Complementary

19 Wednesday Sep 2018

Posted by in Socialism, Tyranny

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The socialist left and the Marxist hard left both deny their authoritarian progenitors. Leftists are collectivists, many of whom subscribe to an explicit form of corporatism with the state having supreme power, whether as a permanent or transitional arrangement on the path to full state ownership of the means of production. Collectivism necessarily requires force and the abrogation of individual rights. At this link, corporatism, with its powerful and interventionist state, is aptly described as “de facto nationalization without being de jure nationalization” of industry. To the extent that private ownership is maintained (for the right people), it is separated from private control and is thus a taking. But the word corporatism itself is confusing to some: it is not capitalism by any means. It essentially means “to group”, and it is a form of social control by the state. (And by the way, it has nothing to do with the legal business definition of a corporation.)

Of course, leftists distance themselves from the brutality of many statist regimes by asserting that authoritarianism is exclusively a right-wing phenomenon, conveniently ignoring Stalin, Castro, Mao, Pol Pot, and other hard lefties too numerous to mention. In fact, leftists assert that fascism must be right-wing because it is corporatist and relies on the force of authority. But again, both corporatism and fascism are collectivist philosophies and historically have been promoted as such by their practitioners. Furthermore, these leftist denials fly in the face of the systemic tendency of large governments to stanch dissent. I made several of these points four years ago in “Labels For the Authoritarian Left“.

I find this link from The Federalist fascinating because the author, Paul Jossey, provides quotes of Hitler and others offering pretty conclusive proof that the Nazi high command was collectivist in the same vein as the leftists of today. Here are a few of Jossey’s observations:

“Hitler’s first ‘National Workers’ Party’ meeting while he was still an Army corporal featured the speech ‘How and by What Means is Capitalism to be Eliminated?’

The Nazi charter published a year later and coauthored by Hitler is socialist in almost every aspect. It calls for ‘equality of rights for the German people’; the subjugation of the individual to the state; breaking of ‘rent slavery’; ‘confiscation of war profits’; the nationalization of industry; profit-sharing in heavy industry; large-scale social security; the ‘communalization of the great warehouses and their being leased at low costs to small firms’; the ‘free expropriation of land for the purpose of public utility’; the abolition of ‘materialistic’ Roman Law; nationalizing education; nationalizing the army; state regulation of the press; and strong central power in the Reich.”

Are you feeling the Bern? Does any of this remind you of the “Nasty Woman”, Liz Warren? Here is more from Jossey:

“Hitler repeatedly praised Marx privately, stating he had ‘learned a great deal from Marxism.’ The trouble with the Weimar Republic, he said, was that its politicians ‘had never even read Marx.’ He also stated his differences with communists were that they were intellectual types passing out pamphlets, whereas ‘I have put into practice what these peddlers and pen pushers have timidly begun.’

It wasn’t just privately that Hitler’s fealty for Marx surfaced. In ‘Mein Kampf,’ he states that without his racial insights National Socialism ‘would really do nothing more than compete with Marxism on its own ground.’ Nor did Hitler eschew this sentiment once reaching power. As late as 1941, with the war in bloom, he stated ‘basically National Socialism and Marxism are the same’ in a speech published by the Royal Institute of International Affairs.

Nazi propaganda minister and resident intellectual Joseph Goebbels wrote in his diary that the Nazis would install ‘real socialism’ after Russia’s defeat in the East. And Hitler favorite Albert Speer, the Nazi armaments minister whose memoir became an international bestseller, wrote that Hitler viewed Joseph Stalin as a kindred spirit, ensuring his prisoner of war son received good treatment, and even talked of keeping Stalin in power in a puppet government after Germany’s eventual triumph.”

Some contend that the Nazis used the term “socialist” in a purely cynical way, and that they hoped to undermine support for “real socialists” by promising a particular (and perverse) vision of social justice to those loyal to the Reich and the German nation. After all, the Bolsheviks were political rivals who lacked Hitler’s nationalistic fervor. Hitler must have thought that his brand of “socialism” was better suited to his political aspirations, not to mention his expansionist visions. Those not loyal to the Reich, including Jews and other scapegoats, would become free slave labor to the regime and its loyal corporate cronies. (It’s striking that much of today’s Left, obviously excepting Bernie Sanders, seems to share the Nazis’ antipathy for Jews.)

Socialism, corporatism and fascism are close cousins and are overlapping forms of statism, and they are all authoritarian by their practical nature. It’s incredible to behold leftists as they deny that the National Socialists Workers Party practiced a brand of socialism. Perhaps the identification of the Nazis as a fascist regime has led to confusion regarding their true place along the ideological spectrum, but that too is puzzling. In their case, a supreme corporatist state enabled its most privileged advocates to exploit government power for private gain, and that’s the essence of fascism and the archetypical outcome of socialism.

New Socialists Fail Socialism 101

02 Sunday Sep 2018

Posted by in Big Government, Socialism

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Not many self-styled socialists can actually provide a proper definition of socialism these days. That includes the celebrated Alexandria Ocasio-Cortez, the New York congressional candidate who has proven herself to be an incredible stumble-bum in numerous media appearances since her primary victory over incumbent democrat Joe Crowley. Maine Wire‘s Matthew Gagnon calls her “belligerently ignorant” as she tweets what she believes to be examples of democratic socialism. Gagnon dissects some of her flakey assertions. The sad truth is that Ocasio-Cortez is fairly typical of her generation, despite her dual college majors in economics and political science.

Gagnon notes that socialism is public ownership of the means of production. But socialism is somehow regarded as a “soft” version of communism: less authoritarian, perhaps. That premise deserves closer examination. There is only one way that the public sector can take possession of private property: by force. A new, authoritarian regime might simply commandeer property, nationalize it, and revoke prior ownership claims at the point of a gun or a club. The government would ultimately impose new rules under which management of formerly private enterprises must operate, and it would engage in centralized decision-making and planning to a large extent. This is essentially communism. Some personal freedoms might be preserved, but they are likely to be severely curtailed; dissidence is not likely to be tolerated.

There is another mechanism by which society can declare public ownership of productive resources that is nominally less authoritarian: democracy. Citizens or their elected representatives simply vote for the state to acquire particular resources and enterprises, in whole or in part. Enabling legislation might authorize administrative agencies to determine how the former private owners of these enterprises are to be compensated. To one extent or another, this involves takings of private property and rights, and it boils down to a very real tyranny of the majority: we will vote to take possession of your business; we will vote to create a bureau that will determine its worth and your compensation; we will vote that henceforth you may not operate this business on your own behalf, but only in the service of the people; and we will vote on what rights you possess. This is the ugly tyranny of democratic socialism, and it still requires force.

Self-proclaimed socialists are fond of proclaiming that we already have socialism in many sectors of the economy. They cite public parks, roads, bridges, K-12 education, and other goods and services sometimes provided by the public sector. There is a key distinction, however, that separates many of these examples from actual socialism: whether a good is actually a “public good”, meaning that its benefits are non-exclusive, as opposed to a private good that yields exclusive benefits. A more precise definition of socialism, in my view, is public ownership of the means of producing private goods.

The typical example of a public good is national defense: the benefits I receive do not reduce the benefits you receive, so those benefits are non-exclusive. I have little personal incentive to pay for national defense if anyone else is willing to pay for it, as I’ll receive the benefits anyway. But who will pay if everyone tries to free-ride on others? That’s why the provision of public goods is an appropriate function of government, and it is not generally what is meant by socialism. Gagnon is correct that government involvement in an activity is not the same as socialism, and he correctly ridicules some examples of governmental activities (and non-governmental activities like cooperatives) that Ocasio-Cortez believes to be socialism.

In contrast to public goods, private goods are exclusive in their benefits. The development of a private market can be counted upon to fulfill demands for such goods because private individuals are willing to pay. However, when government grants itself an advantaged position as a provider in such a market, such as a monopoly franchise, we can safely describe it as socialism. Many goods are not purely private, having some degree of non-exclusivity in their benefits. This is commonly asserted to be the case for K-12 education, but the matter is not as clear-cut as the public education establishment would have you believe. The bulk of the benefits to education accrue privately. Therefore, it is fair to describe public K-12 education in the U.S. as socialism. And it is largely a disaster.

Is a social safety net rightly described as socialism? Gagnon thinks not and, strictly speaking, the welfare state does not require public ownership of the means of production, only a means of redistribution. It requires funding, so private resources will be extracted via taxes, and the same is true of public goods. Taxes do not make it “socialism”. Let’s stipulate for the moment that there is a true safety net supporting only those unable to support themselves, either on a temporary or a permanent basis. This may yield non-exclusive benefits to the extent that such a “lifeline” reduces crime, begging, and our personal discomfort with the possibility that other individuals might starve. However, on an ex ante basis, some of these benefits represent a form of risk reduction that, in principle, could be arranged privately. To the extent that we vote to provide these potentially private benefits, those parts of the safety net can be construed as democratic socialism. In practice, our “safety net” covers a large number of able-bodied individuals. Unfortunately, it does a poor job of encouraging self-sufficiency. Like most public benefit programs, it is expansive, poorly designed, and has pernicious effects on the private economy that act to the long-term detriment of its intended beneficiaries.

Leftists fancy that socialism is “compassionate” and righteous, despite its predictably harsh outcomes. The misleading conceit that universal alms-giving by the state is always empowering to individual recipients, and potential voters, is an extremely corrosive element of democratic socialism. William Voegeli, Senior Editor of The Claremont Review of Books, writing in Imprimis makes “The Case Against Liberal Compassion“. (I dislike his misuse of the word “liberal” — too many conservatives are willing to cede that label to the Left.) Voegeli notes the “never enough” mentality of welfare statists, who refuse to acknowledge that the expansive growth of the welfare state over the past five decades has failed to reduce rates of poverty. The programs are rife with fraud, waste and bad incentives. If leftists are truly compassionate, Voegeli insists, they ought to take more interest in fixing problems that leave less for the truly needy and create dependencies rather than simply increasing the flow of funding.

Many well-meaning individuals are careless about affiliating with socialist causes because they do not understand what it actually means, and they often lack any historical and theoretical perspective on the implications of socialism. The flirtation is dangerous, and we can only attempt to educate and reason with them. Some will grow into greater wisdom. Some, like Bernie Sanders, will never come around. While we educate, let’s keep their hands away from the reins of power.

Don’t Worry: Your IOUs To Yourself Are In a Trust Fund!

10 Sunday Jun 2018

Posted by in Medicare, Social Security, Socialism

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The Social Security and Medicare trust funds should offer no comfort as the obligations of those programs outrace revenues. Between them, the funds hold about $3.1 trillion of federal government bonds purchased with past surplus “contributions” from FICA and Medicare payroll taxes. In other words, those surplus contributions were used to pay for past government deficits. Here’s what Warren Meyer has to say on the topic:

“Imagine to cover benefits in a particular year the Social Security Administration needs $1 billion above and beyond Social Security taxes. If the trust fund exists, the government takes a billion dollars of government bonds out and sells them to private buyers on the open market. If the trust fund didn’t exist, the government would …. issue a billion dollars in bonds and sell them to private buyers on the open market. In either case, the government’s indebtedness to the outside world goes up by a billion dollars.”

Therefore, the trust funds do not provide any real cushion against future obligations. As Meyer says, you can write IOUs to yourself, put them in a piggy bank and call it a trust fund of your very own, but that won’t increase your wealth.

As it happens, last week the Trustees of the Medicare (MC) Trust Fund released the latest projections showing that it will be exhausted by 2026. Likewise, the Trustees of the Social Security (SS) Trust Fund reported that it will be depleted by 2036. But again, those trusts do not enhance the federal government’s fiscal position, so they really don’t matter. Even with the interest earned on the bonds held in trust, which is itself owed by the federal government, the trusts are merely placeholders for an equivalent dollar value of unfunded federal obligations. And in a very real sense, these funds hold no more than our own future tax liabilities: that debt is our debt.

Federal spending on discretionary and other on-budget entitlements is deeply in deficit on an ongoing basis, expected to be greater than $1 trillion annually by 2020, according to the Congressional Budget Office. Then add the bonds that will be sold to the public from the SS and MC trust funds, and total government borrowing from “the public” will become that much larger. After the trust funds are exhausted, accounting for the impact of the annual SS and MC system deficits will be more transparent.

The previous use of SS and MC contributions to pay for other government outlays strikes many as a violation of trust. Remember, however, that contributions to these systems are taxes, after all. And despite apparent impressions to the contrary, and perhaps for worse, individual vesting was never part of the SS system. But if the government must borrow a dollar (on a unified basis), is it always better to do it later? That was essentially the decision made (repeatedly) when FICA and Medicare taxes were used to purchase government bonds. The answer depends on whether the government has an immediate uses for the surplus that can be expected to earn returns superior to investment opportunities of suitable risk otherwise available to the trust funds. I would argue, however, that most of the “spent” funds from surplus FICA and Medicare taxes were put toward government consumption, and much less to investment in physical or social infrastructure. In fact, the availability of the SS and MC surpluses probably encouraged that consumption. To that extent, it was a certainly a mistake.

If the question is at what point must the government address the shortfall in its ability to pay future obligations to seniors, the answer is not “2026 and 2034”. It is now. The programs are racking-up obligations to future retirees that will be impossible to meet. The long-run (75-year) SS deficit projected by the trustees has a present value of $13.2 trillion, with an annual deficit growing to about 1.5% of GDP. By then, the Medicare deficit is expected to bring the combined shortfall of the two programs up to 2.3% of GDP. The trustees estimate that SS benefits would have to be cut by 25% in order to eliminate that deficit, with additional cuts to Medicare.

Oh, but those estimates treat the trust funds as if they are meaningful assets, and they are not! Of course, there are other solutions to the funding shortfall, but I truly hope that current workers have realistic expectations. They should adjust their saving rates to avoid excessive reliance on government social and medical insurance programs.

Inferior Schools, Venom For Reformers

28 Monday May 2018

Posted by in Regulation, School Choice, Socialism, Uncategorized

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We all want better K-12 education in the U.S., which has an extremely uneven — even dismal — record of student outcomes. The U.S. ranks below the OECD average in both math and science scores, despite spending 35% more per student than the OECD average. Yet there is a faction that leaps to the defense of the status quo with such viciousness that its members deride sensible reform proposals as classist and racist. Then, of course, they call for additional spending! These antics reveal their self-interest in doubling down on the status quo.

An obvious starting point for reform, and one that would save taxpayers roughly $40 billion (K-12), is to dismantle a federal education bureaucracy that adds little value to educational outcomes. Another element is expanding the set of alternatives available to parents over the way their children are educated. Betsy DeVos, President Trump’s Secretary of Education, favors both of these steps as general principles, though she lacks direct control over either, especially school choice.

Both of these steps are fiercely resisted by the public educational establishment and teachers unions. And no wonder! Who wants to lose their privileged monopoly power over a local market? The public school establishment does not wish to be troubled by demands that schools respond to competitive forces, that teachers be rewarded based on performance, or that schools should be answerable to parents and taxpayers. As for the federal role, the public school cartel seems to welcome federal money, even if it means that the feds impose control in the process.

Choice

For those skeptical of reforming public schools by allowing choice, Don Boudreaux proposed a useful thought experiment that I discussed in my earlier post “Public Monopolists Say Don’t Be Choosy“. It examines a hypothetical world in which supermarkets are structured like public schools. Consumers pay for their food via local taxes and must shop at one local public supermarket, and only one, at which food products are available at no additional marginal cost. However, parents are free to pay their taxes and pay for food elsewhere, at a private supermarket. Most thinking people would probably agree that this is a spectacularly bad idea. Public supermarkets would deteriorate relative to private supermarkets. Rural and inner city supermarkets would likely suffer the most. Public supermarket worker unions would lobby for higher food taxes. And of course proposals for supermarket choice would be met with hysteria. Read the earlier post for more discussion of the likely consequences.

One of the arguments often made in favor of today’s public school monopoly is that K-12 education should be regarded as a necessity, but few would take that as a compelling reason to grant government a monopoly in the retail food business. A better argument for government schools, were it strictly true, would be that education is a public good, yielding significant non-exclusive benefits to the community. And in truth there are some external benefits to society from an educated citizenry. The primary benefits of an education, however, are exclusive to the student. Kevin Currie-Knight offers an excellent treatment of the education-as-public-good question, and he concludes otherwise. And the public-good argument does not imply that parents should be denied choice in their selection of a school for their children. Ultimately, the policy question hinges on whether government schools, as currently structured, do a good job in educating students, and as Corey A. DeAngelis points out, they do not.

There is no shortage of evidence that school choice is beneficial for students and society in several respects, including academic outcomes for students and schools, racial integration, fiscal impacts, and parental satisfaction. This paper by MIT researchers found that school choice improved educational outcomes for special education students and those who were not proficient in English. This essay in Education Week, signed by nine educational researchers, emphasized the preponderance of positive findings on school choice and some additional dimensions of improvement on which they hope the education research community will focus.

The promise of choice is seldom greeted objectively by the public education establishment and its reflexive allies. To their dishonor, distortions of fact and ad hominem attacks on choice advocates are almost the rule. For example, John Stossel writes the following in “Why the Left Hates Betsy DeVos“:

“When she spoke at the Kennedy School of Government, students held up signs calling her a ‘white supremacist.’ … When she tried to visit a school, activists physically blocked her way. … The haters claim DeVos knows little about education, only got her job because she gave money to Republican politicians, and hates free public education.“

Of course, public education is not free! But it is a disgrace that someone so dedicated to the cause of improved education should be treated this way. The DeVos family has given over a billion dollars to various causes over the years, much of it to educational initiatives, and even those gifts, somehow, are seen by critics as a pretext for vilifying Betsy DeVos. But she knows much more about the poor performance of public schools than her critics care to discuss, as well as the dynamism and improvement that choice and competition can bring to education. Her critics disparage the performance of charter schools in DeVos’s home state of Michigan even while the facts show that they have performed well.

The idea that charter schools “hurt” public schools by creating educational choice is the very weakest protest a monopolist can put forward. These critics conveniently overlook the fact that most charter schools are in fact public schools! More importantly, an erstwhile monopolist must respond by adding value for consumers! If it fails to do so, it must be closed or reorganized. THAT is a good idea!

Monopoly public schools do not earn a profit in the way of monopolistic business enterprises, but remember that perhaps the greatest social costs imposed by monopolies are languid effort and a poor product. This is not to dismiss the great efforts of many teachers who toil under trying circumstances, though the current system also tends to protect bad teachers. And much of the waste in government schools is caused by bloated bureaucracy and costs imposed on teachers and schools of complying with regulation. 

The Federal Bureaucracy

Another priority of Secretary DeVos is to reduce the federal role in education. Hurry, please! The unpopular Common Core standards, implemented in 2009, proved a failure. Test scores declined for student cohorts expected to benefit the most (those in the lowest percentiles). At the last link, Nancy Thorner discusses more recent legislation:

“It was in December of 2015 that Congress passed the Every Student Succeeds Act (ESSA), that replaced the often criticized No Child Left Behind Act (NCLB). ESSA, in contrast to NCLB, signified a clear move away from federally prescribed standards. In fact, ESSA expressly forbid federal regulators from attempting to ‘influence, incentivize, or coerce’ states to adopt the Common Core.”

That’s progress, but 36 states plus DC still use those standards. Curriculum mandates are only one area of federal school regulation that must be addressed. “Educational equity” is also mandated along several dimensions, requiring schools to devote a disproportionate share of resources to various subsets of students who might not benefit from the extra instructional intensity. Then there are the administrative costs of demonstrating compliance with these mandates, not to mention the virtual prohibition under these mandates of developing innovative, local solutions to the problem of educating their charges.

There is well-deserved pushback against federal control over school discipline, which requires schools to implement policies that avoid disparate impacts on certain minorities (African Americans, Latino, and special-ed children) such that they are no more likely to receive detention, suspension, or expulsion than the general student population. This is an absurdity, potentially requiring schools to go light on offenders should they happen to belong to a minority. Even worse, if the enforcement of discipline results in an observable bias in favor of any minority, it is likely to be noticed by the minority students themselves, creating a negative behavioral incentive and potentially stoking resentment among non-minority students.

In April, President Trump signed an executive order authorizing a review of federal education rules imposed on states and local school districts. Again, central regulation is costly: it involves rule-making at the federal level to interpret enabling legislation, then review by state departments of education where specific policies are designed, which are then passed down to school districts and individual schools, who must review and attempt to implement the policies, and who then must report back on their success or failure in meeting the mandates. Resources are consumed at every level. In the end, the process creates increased complexity, and the policies have proven to be of questionable value to the goal of good education. While spending on education has soared over the past 30 years, student achievement has remained static, and the same disparities of outcome remain.

Secular Statism

Robert P. Murphy provides a brief history of U.S. public schooling. It is a fascinating take on the history of secularization of education in America. It is the story of the substitution of state for private institutions, including family and church, in the development and socialization of children. Murphy offers a telling quote:

“Thus Henry Brown, second only to Horace Mann in championing state education, commented, ‘No one at all familiar with the deficient household arrangements and deranged machinery of domestic life, of the extreme poor, and ignorant, to say nothing of the intemperate—of the examples of rude manners, impure and profane language, and all the vicious habits of low bred idleness—can doubt, that it is better for children to be removed as early and as long as possible from such scenes and examples.'”

Whoa! The K – 12 public education system, as it now stands, is striking in its failure to benefit the children and families it is intended to serve. Critics of meaningful reform do not acknowledge the abysmal condition and performance of many government schools in America today, except to insist that they need more money. These critics, including the educational bureaucracy, teachers unions, and misguided statists generally, behave as if they accept the attitudes expressed by Henry Brown. They have no respect for private decision makers — families, churches, private schools of any stripe, and private markets in general. They do not understand the power of incentives and competition to allocate resources efficiently and maximize well-being. But they know how to disparage, defame, and propagate hateful rhetoric for those with a true interest in creating a better educational system for all.

Charitable Intent

31 Saturday Dec 2016

Posted by in Charity, Redistribution, Socialism

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charity

I’m not accustomed to writing about religious matters, but I must say that I’ve never been persuaded that Jesus himself approved or advocated for socialism and state-enforced redistribution of wealth. Instead, I believe that Jesus would have endorsed the message above: charity inheres to individuals, and it lives in their hearts. It is not a concern that individuals can ever satisfy by promoting public tax and transfer policies, pressing claims on the resources of others.

This week, an essay on this topic caught my eye. It appeared in Lawrence Reed’s “Cliches of Progressivism“, at the Foundation for Economic Education: “#42 – ‘Jesus Was a Progressive Because He Advocated Income Redistribution  to Help the Poor’“. It covers a number of Biblical scriptures sometimes quoted in support of this notion, and Reed’s considered refutation of each. I provide just a few of Reed’s examples below, but read the whole thing, as they say:

“Make my brother share the wealth“:

“In Luke 12: 13-15, Christ is confronted with a redistribution request. A man with a grievance approaches him and demands, ‘Master, speak to my brother and make him divide the inheritance with me.’ The Son of God, the same man who wrought miraculous healings and calmed the waves, replies thusly: ‘Man, who made me a judge or divider over you? Take heed and beware of covetousness, for a man’s wealth does not consist of the material abundance he possesses.’ Wow! He could have equalized the wealth between two men with a wave of His hand but he chose to denounce envy instead.”

“Sell all your goods and share“:

“What about the reference, in the Book of Acts, to the early Christians selling their worldly goods and sharing communally in the proceeds? … In his contributing chapter to the 2014 book, ‘For the Least of These: A Biblical Answer to Poverty,’ Art Lindsley of the Institute for Faith, Work and Economics writes,

‘Again, in this passage from Acts, there is no mention of the state at all. These early believers contributed their goods freely, without coercion, voluntarily. Elsewhere in Scripture we see that Christians are even instructed to give in just this manner, freely, for “God loves a cheerful giver” (2 Corinthians 9:7). There is plenty of indication that private property rights were still in effect….’“

“Render Unto Caesar…“:

“‘Wait a minute,’ you say. ‘Didn’t He answer, “Render unto Caesar the things that are Caesar’s, and unto God the things that are God’s’ when the Pharisees tried to trick Him into denouncing a Roman-imposed tax?” … It’s found first in the Gospel of Matthew, chapter 22, verses 15-22 and later in the Gospel of Mark, chapter 12, verses 13-17. But notice that everything depends on just what did truly belong to Caesar and what didn’t, which is actually a rather powerful endorsement of property rights. Christ said nothing like ‘It belongs to Caesar if Caesar simply says it does, no matter how much he wants, how he gets it, or how he chooses to spend it.’

The fact is, one can scour the Scriptures with a fine-tooth comb and find nary a word from Christ that endorses the forcible redistribution of wealth by political authorities. None, period.“

While I generally agree with Reed’s analysis of this last point, I believe he missed the real message regarding any legitimate claims Caesar might have possessed. It is a statement about the value of material goods relative to faith and acts in the name of God. Obviously, as Reed says, it is not an endorsement of a power to tax and transfer.

The teachings of charity in the Bible have to do with the goodness of voluntary, self-motivated generosity. There are no lessons advocating compulsory taxes and transfer payments. If you say that Jesus would have supported such programs as deeds of a caring society, I would question your logic on several grounds. First, there are always political motives at play in crafting such policies, which usually include vote-buying and scapegoating. In that respect, those policies fall short of the standard for “good works”. Second, as already noted, the power to tax is backed by the police power of government, not quite the sort of “giving” about which Jesus preached. And, by extracting resources from those in a position to give unto others, tax and transfer policies reduce the capacity for private generosity. Granted, a charitable tax deduction might establish an incentive strong enough to encourage a level of continued giving. But then, the “noble” social deed becomes the hostage of tax policy, administrative definitions, rulings relative to recipient organizations, and the whims of self-interested politicians. A presumption is that individuals will not perform good works in sufficient amounts. Therefore, the state must step in, along with an army of bureaucrats and lobbyists who can be counted upon to feed off the taxpayers’ largess. The individual acts of charity encouraged in Jesus’s teachings could hardly be subject to greater convolution.

Suspending the Economic Problem With Free Stuff

27 Saturday Aug 2016

Posted by in Central Planning, Socialism, Subsidies

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denial

When things are scarce, they can’t be free. That’s an iron law of economics. It’s true of everything we ever wish for and almost everything we take for granted. Things are naturally scarce, but when we are told that things can be free, it always comes from likes of whom Jeffrey Tucker calls “scarcity deniers”. Bernie Sanders and Hillary Clinton have told America that a college education should be free, and a large number of people take that seriously. They are scarcity deniers. On one level, the Sanders/Clinton claim is like any other promise that simply cannot be met at the stated cost — a rather garden-variety phenomenon among politicians. These promises are not harmless, as such initiatives usually involve budget overruns, compromised markets, underproduction and wasted resources.

The Sanders/Clinton claim, however, is a form of scarcity-denial that comes almost exclusively from the political left. That is really the point of Tucker’s article:

“This claim seems to confirm everything I’ve ever suspected about socialism. It’s rooted in a very simple error, one so fundamental that it denies a fundamental feature of the world. It denies the existence and the persistence of scarcity itself. That is to say, it denies that producing and allocating is even a problem. If you deny that, it’s hardly surprising that you have no regard for economics as a discipline of the social sciences.“

Our socialist friends (who otherwise claim to be defenders of science) contend that free things can be offered to a broad swath of the population with little consequence. The least cynical among them (perhaps including Sanders) believe that the costs can be shouldered by the wealthy and/or big corporations and banks. Others (including Clinton) know that the cost of “free things” must be met by higher taxes on a broader share of the population. Doesn’t that mean they recognize scarcity? Only superficially, because they fail to grasp the dynamics of resource allocation, the subtle forms in which costs are imposed, and the true magnitude of those costs.

If a thing is scarce, available supplies must be balanced against demand. The reward to suppliers at the margin must match the willingness of buyers to pay. That means there is no surplus and waste, nor any loss attendant to shortage and non-price rationing. The price creates an incentive for consumers to conserve and an incentive for producers to bring additional supplies to market when they are demanded.

A crucial prerequisite for this to work is the establishment of secure property rights. Then, absent coercion, one can’t overuse what isn’t theirs. One can’t simply take a thing from those who create it without a mutually agreeable payment. Creators cannot be forced to respond on demand without compensation. No one can be required to husband resources for others to simply take. No one can be asked to pay for a thing that will be commandeered by others. The establishment of property rights serves these purposes. Incentives become meaningful because they can be internalized by all actors — those consuming and those producing. And the incentives solve the problem of scarcity by balancing the availability of things with needs and desires, and balance them against all other competing uses of resources. Then, the market-clearing price of a thing reflects its degree of scarcity relative to other goods.

The socialist bluster holds that all this is nonsense. Would-be central planners propose that more of a thing be produced because they deem it to be of high value. Furthermore, it must be made available to buyers at a price the planners deem acceptable, or quite possibly for free to their intended constituency! Property rights are violated here in several ways: first, the owner/producer’s authority over their own resources is declared void; second, the owner has no incentive to care for their resources in a responsible and sustainable way; third, a confiscation of resources from others is required to pay at least some of the costs; fourth, the beneficiaries overuse and degrade the resource.

We know a scarce thing cannot be provided for free. Here are some consequences of trying:

  • Overuse of resources. When the buffet is free, the food disappears.
  • The “free thing” will be over-allocated to those who benefit and value it the least. (Example: the education of students for whom there are better alternatives.)
  • Supplies will evaporate unless producers are fully compensated. Otherwise, quality and quantity will deteriorate. This is a form of “contrived scarcity” (HT: Don Boudreaux).
  • If supplies dwindle, new forms of rationing will be necessary. This might involve time-consuming queues, arbitrary allocations, bribes, side payments and favoritism.
  • If suppliers are compensated, someone must pay. That means taxes, public borrowing or money printing.
  • Taxes weaken productive incentives and chase resources away. The consequent deterioration in productive capacity undermines the original goal of providing  something “for free” and inflicts costs on the outcomes of all other markets. This creates more contrived scarcity.
  • So-called progressive taxes tend to hit the most productive classes with the greatest negative force.
  • Government borrowing to fund “free stuff” today inflicts costs on future taxpayers. More fundamentally, it misallocates resources toward the present and away from the future.
  • Printing money to pay for a “free thing” might well cause a general rise in prices. This is a classic, hidden inflation tax, and it may involve the distortion of interest rates, leading to an inter-temporal misallocation of resources.

Scarcity denial is a carrot, but it inevitably becomes a stick. To voters, and to naive shoppers in the marketplace of ideas, the indignant assertion that things can and should be free is powerful rhetoric. Producers, too, might happily accept “free-stuff” policies if they expect to be fully compensated by the government, and they might be pleased to have the opportunity to serve more customers if they think they can do so profitably. However, serving all takers of “free stuff” will escalate costs and is likely to compromise quality. It is also likely to create unpleasant circumstances for customers, such as long waiting times and unfulfilled orders. The stick, on the other hand, will be brandished by the state, blaming and penalizing suppliers for their failure to meet expectations that were unrealistic from the start. The fault for contrived conditions of scarcity lies with the policy itself, not with producers, except to the extent that they allowed themselves to be duped by scarcity deniers. Tucker notes the following:

“Things can be allocated by arbitrary decision backed by force, or they can be allocated through agreement, trading, and gifting. The forceful way is what socialism has always become.“

Politicians and would-be planners with the arrogance to claim that naturally scarce things should be free are dangerous to your welfare. These scarcity deniers cannot provide for human needs more effectively than the free market, and ultimately their efforts will make you subservient and poor.

Bernie, Breadlines and Bumpkins

05 Tuesday Apr 2016

Posted by in Capitalism, Socialism

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12923208_223278574701995_2096558007828525663_n

For sheer stupidity, you can’t top the remarks made in this video by Bernie Sanders, uttered as an adult, praising the fact that consumers in socialist countries must stand in line to receive food rations! Here is his distorted logic:

“It’s funny, sometimes American journalists talk about how bad a country is, that people are lining up for food. That is a good thing! In other countries people don’t line up for food: the rich get the food and the poor starve to death.“

I try to avoid derogation of individuals in favor of demonstrating the weakness of their words or ideas. I must admit that it’s hard to maintain both ends of that policy in Mr. Sanders’ case. He’s never availed himself of the well-known laws of economics that invalidate his primitive views. For example, he doesn’t grasp that the price system in a market economy provides incentives for conservation and for extra production when supplies are short. In Sanders’ mind, that mechanism is unacceptable because it means someone will profit. Of course, the cooperative nature of markets and voluntary exchange is lost on Sanders. Part of that cooperation is the willingness of buyers to reward able sellers, giving them the incentive to meet future demands. And they do!

Sanders doesn’t understand the universal tendency of government to waste resources. The state’s command over resources derives from coercive power, and it lacks the discipline and incentives for efficiency that are always present in markets. Sanders has not reflected on the shackles the regulatory state places on the productive, private sector. He imagines that government can be trusted because good-hearted people, like him, will always be in charge under a socialist state, and they will design the way forward. Yes, with the aid of their coercive power.

As for breadlines, Sanders has never assimilated the fact that the widespread, plentiful food supplies available in capitalist societies are unprecedented historically. Or that socialist systems have always been typified by chronic shortages of food and other consumer goods. Those are simply empirical facts, on one hand, but they are not accidents. Sanders hasn’t noticed these “details”, remaining immersed in a wild fantasy that prosperity is possible under socialism. Don’t point to Scandinavia as a counterargument, as Sanders supporters are wont to do. There, democratic socialism has wrongly been credited for prosperity that owes more to wealth created under capitalism, before those countries began to feed on themselves.

Bread lines are awful, but they aren’t the worst of it. Mr. Sanders has also praised certain tyrannical regimes, as well as the crackdown on the press under the communist Sandinista regime in Nicaragua. Here is a quote in Reason from Michael Moynihan, a former Reason editor who has uncovered a treasure trove of material on Sanders’ past pronouncements:

“When challenged on the Sandinistas’ incessant censorship, Sanders had a disturbing stock answer: Nicaragua was at war with counterrevolutionary forces, funded by the United States, and wartime occasionally necessitated undemocratic measures.“

Well, the First Amendment may be passe, and the revolution is at hand, eh?

Another Reason article by Matt Welch covers ten of “Bernie’s Bad Ideas“, most of which are grounded in an understanding of economics that can only be described as child-like: the “living” wage, free college tuition, universal pre-K education, opposition to international trade, and Medicare for all are just a few of Sanders’ nitwitted plans. I’ve written about many of these topics on Sacred Cow Chips in the past (a few of those posts are linked in the last sentence). Sanders’ supporters are seduced by the falsehood that government can reward the “deserving” justly for something, in some way, by some miracle, without destroying the incredible font of (under-appreciated) prosperity that is the market economy.

To end on a high note, as it were, here’s a fun Facebook page called “Bernie Sanders Bread Line” with some interesting takes on the lunatic ravings of the socialist candidate. All of those memes ring true, including the one at the top of this post.

 

Evil Force Multiplication

15 Tuesday Mar 2016

Posted by in Liberty, Socialism, Tyranny

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big-govt compassion

Following up on “Socialism Is Concentrated Power“, check out “Because government is a force multiplier for evil, a vote for the small government candidate is a vote for good” from the Bookworm Room. I’m four days late making my 2nd anniversary post on Sacred Cow Chips, so this is it. I’ll try to keep it brief so I can get it out before bedtime on a school night.

I don’t agree with everything in Bookworm’s analysis, but I certainly agree with the general thrust:

“The problem with government is that, as it grows, no matter the original good intentions behind it, it invariably becomes a force multiplier for evil. Thus, once government power passes a certain point, government becomes the equivalent of a bull in a china shop, with its every motion causing massive damage. Incidentally, the china in that shop is always you — the individual.“

Bookworm discusses two major forms of force multiplication of evil by the state: money and death. Governments are incredible graft machines and resource wastrels. More tragically, the many genocidal acts over the course of history would not have been possible without government as the machine of authority and “legitimization”. Fear of the government’s police power may ultimately spur normal people to participate in “banal” acts of unspeakable evil. And here, Bookworm points out a few ironies about the “nice” people who root for state control:

“A compassionate government will talk itself into euthanizing people who, because they are very old or sick, use up more than their fair share of medical care. This has already happened under England’s National Health Service, which kills off old, sick people, and whose ‘ethicists’ advocate even more killings (out of ‘compassion’ of course).

A compassionate government dedicated to efficiency will convince itself that individuals or organizations that stand in the way of efficiency must be controlled and, if they won’t be controlled, must be destroyed. After all, without mandated efficiency, people will suffer.

A compassionate government dedicated to “fairness” (usually thought of in economic terms), will quickly conclude that it’s entirely unfair that one distinct group or another is wealthier or healthier than the rest. That group must be brought to heel and, failing that, destroyed.

A compassionate government dedicated to national purity will naturally have to kill the impure within its borders and, once that’s done, it would be even more compassionate to extend that purity throughout the world.

Even the most murderous theocracies will argue that compassion guides them. Their tortures, executions, and Holy Wars are meant to bring people closer to God, which is the highest form of human existence. Isn’t that a nice, compassionate thing to do?“

Bookworm offers praise to the genius of the U.S. founding fathers in crafting governing principles designed to limit government power. And Bookworm recognizes Senator Ted Cruz as the only major party candidate to consistently stand for small government and constitutional principles. I’m not all in on this endorsement, as Cruz has taken stands and aligned himself with individuals not supportive of civil liberties such as gay marriage. However, in many important ways, Cruz recognizes the danger of government power. Bookworm might have mentioned Gary Johnson, the likely Libertarian Party nominee, as the most consistent critic of big government among the names likely to appear on presidential ballots in the fall.

Some might object to Bookworm’s discussion of the many failed experiments with government domination of society by noting that he never mentions the alleged success of European social democracies, particularly the Nordic states. Sweden and Denmark are the most cited examples. However, Europe is not an economic success story, with median incomes comparable to states with the lowest incomes in the U.S. Moreover, the “Nordic Nirvana” is something of a myth. In “How Laissez-Faire Made Sweden Rich“, Johan Norberg gives a detailed history of Sweden’s political and economic evolution:

“It was not socialist policies that turned Sweden into one of the world’s richest countries. When Sweden got rich, it had one of the most open and deregulated economies in the world, and taxes were lower than in the United States and most other western countries. The Social Democrats kept most of those policies intact until the 1970s, when they thought that those excellent foundations—unprecedented wealth, a strong work ethic, an educated work force, world-class exports industries, and a relatively honest bureaucracy—were so stable that the government could tax and spend and build a generous cradle-to-grave welfare state on them.

They couldn’t. At least not without costs. Because that welfare state began to erode the conditions that had made the model viable in the first place. And the fourth richest country became the 14th richest within three decades.“

Fortunately, for more than 70 years, Western Europe has avoided the kind of dire, genocidal consequences that often flow from a dominant state, but Europe has stagnated economically. Hazards await them as a growing and increasingly diverse population competes for diminished economic gains; government control is a dead-weight on their prospects. I hope we can avoid that fate in the U.S., though we’re already far down the road. Like the Bookworm says, vote for small government!

 

 

Bernie, Donald and Ignatius?

29 Friday Jan 2016

Posted by in Immigration, Socialism, Uncategorized

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BernieTrump

We have candidates vying for the nominations of both major U.S. political parties with tendencies toward nationalism: Bernie Sanders and Donald Trump. They both oppose liberalized immigration and they are both anti-trade, playing on economic fears in articulating their views. Sanders has attempted to soften his rhetoric on immigration since last summer, when he alleged that it harms U.S. workers.

There are differences between Sanders and Trump on the treatment of existing illegal immigrants. Despite Trump’s protests to the contrary, his nationalism has had ethnic overtones.

Trump’s positions on immigration and trade protectionism are not necessarily at odds with Republican tradition, which is a mixed bag, but they are consistent with a faith in big government and central planning. An anti-immigration and anti-trade platform is certainly no contradiction for Sanders, because central planning is integral to his avowed socialism.

Sanders has been called a “socialist with nationalistic tendencies”. He favors government provision of free health care and higher education, heavy redistribution, and severe restrictions on property rights via high taxation. Trump, on the other hand, has been called a “nationalist with socialist tendencies.” He too has called for nationalized health care, increasing certain transfer payments, as well as compromises to state rights. It would probably be more accurate to describe Trump as a corporatist, a system under which large business entities both serve and control government for their own benefit. For example, Trump has used and favors eminent domain to secure land for private projects, generous bankruptcy laws to eliminate business risks, and “deal-making” between government and private enterprise in order to “get things done.” Corporatism is a flavor of fascism, and it is perfectly consistent with a statist agenda.

Thus, each party has candidates who are by degrees both nationalist and socialist. In using these labels, however, I plead innocent to a violation of Godwin’s Law. Of course they are not Nazis, but they are nationalistic socialists. The distinction is explained nicely by B.K Marcus in The Freeman. Both candidates take positions that are consistent with the platform of the National Socialist German Workers Party, circa 1920.

As an aside, Marcus provides some fascinating etymology of the word “Nazi”, quoting Steve Horwitz:

“The standard butt of German jokes at the beginning of the twentieth century were stupid Bavarian peasants. And just as Irish jokes always involve a man called Paddy, so Bavarian jokes always involved a peasant called Nazi. That’s because Nazi was a shortening of the very common Bavarian name Ignatius. This meant that Hitler’s opponents had an open goal. He had a party filled with Bavarian hicks and the name of that party could be shortened to the standard joke name for hicks.“

Marcus also quotes Mark Forsyth on this topic:

“To this day, most of us happily go about believing that the Nazis called themselves Nazis, when, in fact, they would probably have beaten you up for saying the word.“

Back on point, I’ve written about both of these candidates before: Trump here and here; Sanders here. To keep things even, here is one more interesting take on Bernie.

“His family managed to send him to the University of Chicago. Despite a prestigious degree, however, Sanders failed to earn a living, even as an adult. It took him 40 years to collect his first steady paycheck — and it was a government check.”

Read the whole thing!

It’s difficult for me to take these two candidates seriously because they do not take individual liberty seriously, nor do they understand the power of private markets to promote human welfare. I also have strong reservations about their understanding of constitutional principles, and I suspect that either would have few qualms about taking Mr. Obama’s cue in stretching executive authority.

Instead of the headline above, it would have been more accurate to say “Bernie, Donald and Ignoramus!” Unfortunately, one of these guys could be our next president. Well, it won’t be Sanders.

Bernie Sanders Wants To Deal… Your Property

18 Sunday Oct 2015

Posted by in Socialism, The Road To Serfdom

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Fall In Hole giphy

Bernie Sanders is very sincere in his beliefs, and yet he is profoundly ignorant regarding economic growth in the U.S. and the futility of socialism as form of economic organization. Chelsea German, at the HumanProgress blog, presents some simple facts that contradict a few of the Senator’s favorite assertions. In “Senator Sanders and the Fixed Pie Fallacy“, German quotes a line that Sanders has been using for at least 41 years: “The rich are getting richer and the poor are getting poorer.” Granted, his first utterance of that expression might have been in a recession, but aside from those relatively brief episodes, he’s been wrong for the duration. Apparently, Sanders cannot fathom the widespread gains made possible by capitalism and economic growth. Only a “fixed pie” (or worse) would necessarily imply that gains must come at the expense of others, as he seems to believe. (H.T. to Ken DeVaughn on the brilliant gif above.)

One chart in German’s post shows that after-tax income grew in every quintile of the U.S. income distribution from 1979 (pre-recession) to 2010 (post-recession). The chart is taken from CBO data used by Gary Burtless in a piece published by Brookings. Sanders should have a look. However, it’s also important to note that people generally don’t remain in the same strata of the distribution over time. A second chart, from Angus Deaton’s “The Great Escape“, shows that U.S. poverty rates have generally declined over time. Finally, German shows that with a few interruption, GDP has grown over time. All of these facts might be something of a surprise to Sanders. German quotes the great Deirdre McCloskey:

“The rich got richer, true. But millions more have gas heating, cars, smallpox vaccinations, indoor plumbing, cheap travel, rights for women, lower child mortality, adequate nutrition, taller bodies, doubled life expectancy, schooling for their kids, newspapers, a vote, a shot at university, and respect.“

Sanders showcases his lack of familiarity with economic principles almost every time he opens his mouth, or his Twitter account. He recently opined that rates of interest on student loans should be lower than rates on loans for autos and mortgages. Of course, both auto loans and mortgages are secured by valuable collateral and have much lower default rates. It’s a good thing for Sanders that he didn’t pursue a career in lending.

Recently, Hillary Clinton has been unable to restrain herself from chasing Sanders off the rhetorical cliff. Clinton is offering the public lots of “free stuff“, like Sanders, in a transparent attempt to buy votes with promises of future largess. Neither candidate has offered a credible plan for funding their promises. Higher taxes on “Wall Street” and other top earners are the supposed answer, but those measures would be woefully inadequate. Look out, middle class!

By the way, another recent Brookings study shows that increasing the top marginal income tax rate, a policy of which Sanders would approve, would do little to reduce the degree of income inequality.

Of course, Sanders seems just as unfamiliar with the great failures of socialism over the past century as he is with the successes of capitalism in eliminating poverty. He thinks the U.S. should adopt the socialist policies in Scandanavia, but the truth is that socialism has served to inhibit the continued success of capitalism in those countries (also see here). Perhaps that’s why Denmark is scaling back its redistributionist policies.

The Left, including Bernie Sanders, are burdened by a naive utopianism so powerful that they can rationalize the confiscation of private property to support their personal preferences and those of the political class. The aristocratic Left, like Hillary, differ only in the power they hold to influence policy. Perhaps a few suffer from a strong sense of guilt regarding their own circumstances. No, not Hillary. But both Bernie and Hillary are guilty of gross social and economic misdiagnosis. Politicians, heal thyselves!