Category: Uncategorized

 

Despite making a recovery after the 1998 market crash, Russia remains weighted with numerous holdovers from the Communist era that keep its economy from taking advantage of free-market reforms. In short, Russia has not prospered under capitalism because it has not yet discovered it. In order to do so, the Russian government must engage in extensive reform in several key areas: improving the rule of law, creating stable monetary policy, and ending a policy of favoritism to particular businesses. Engaging in these reforms would lower the extremely high transaction costs of doing business legally, stimulating a wave of new investment and wealth creation within Russia, as well as encouraging investment from abroad.

While the causes of Russia’s economic problems are numerous, the absence of a rule of law causes enormous unpredictability and uncertainty that is the primary barrier to economic growth. The regulatory mess caused by presidential decrees, legislative changes and numerous bureaucracies putting out contradictory rulings is just one aspect of this problem. The court system, which is supposed to be a neutral arbitrator of private disputes, is highly politicized, and even worse, it is used by the governments to silence critics and unfavorable companies.

One of the major challenges to reform is the uncooperative nature of the bureaucratic apparatus in carrying out laws and policies enacted by the executive. While Yeltsin and Putin have generally been in favor of free-market reforms, the bureaucrats meant to carry out their policies are often rich oligarchs who stand to lose financially or politically from reform. To combat this, Putin has replaced most of the Yeltsin-era ruling cabinet with his own men, but it is unclear whether they will be any better than their predecessors.

The lack of clearly defined and enforced property rights is another major problem. The communist-era criminal code has only been partially replaced, and each contract must be carefully examined to check whether it contradicts an ever shifting mess of regulations. In addition, it is unclear what success the communists will have in the next election, so long term planning is very difficult because the future is so unpredictable.

Despite an ambitions privatization program, many of the large factories remain state owned, partly because of the fact that their outdated and inefficient production would immediately and properly put them out of business under a free market. However, because the government has so much influence over the banks, it keeps funding these inefficient enterprises to earn the support of the many workers they hire. Many of the factories that were privatized, simply signed ownership to their communist bosses, and because of their pull with the government, stay alive by government aid.

Despite all the issues mentioned above, the biggest challenge to Russian economic growth is probably its monetary policy. The Russian central bank is a direct holdover from Soviet times and needs to change its policy drastically to adapt to a free-market economy. In a capitalist economy, private banks serve to store money and provide investment to business. Because banks lose their investment when a debtor defaults, they are careful to insure that entrepreneurs large and small have sound business plans and refuse to loan to companies whose profits are dubious. The central bank functions independently of private banks (ideally) serving only to manage the size of the monetary supply indirectly by open market operations, varying the discount rate, and setting reserve requirements.

In a socialist economy, the function of the banking system is entirely different. All banks are part of a single system to distribute funds from the central government to individual business and factories. Branch banks don’t care whether any business is profitable or not because the credit risk of any investment is zero, since the government simply sends more money to an unprofitable factory instead of letting it go under. Private savings accounts are small or nonexistent because there is nothing to invest in, and no interest to earn from the investment, and event if there was money to be saved, there is usually nothing to spend it on in the stores. Instead of being independent, the central bank is simply an accounting organ of the state to determine which industry receives what funds. Inflation however is kept low because all large purchases require permission from the state, exchanging rubles into other currencies is illegal, and outside the black market, there is nothing to spend money on anyway.

When the USSR collapsed, the banking system was officially privatized on some levels, but remained much the same in function. Most banks remained either partially state owned or state controlled, even if officially privatized. These banks fund inefficient public and private enterprises with funding from the central bank, which simply prints new money to cover the expense. State workers receive new rubles for doing little or nothing. Of course, basic economic theory dictates that printing money without a corresponding increase in wealth is going to create huge inflation, which it did on a grand scale, with the ruble falling more than 20% in value on some days.¹ One of the insidious effects of inflation is to transfer money from the money making companies to the recipients of new government money, diminishing the incentive of workers to get jobs in the private sector. In an attempt to protect the value of the currency, the government made it illegal to exchange rubles for dollars, making them even more worthless because there was so little to spend the rubles on. In effect, the government was printing enormous amounts of money to keep inefficient state enterprises alive, but not allowing workers to spend any of the money so as not to devalue the currency.

If the monetary policy of the Russian government is not bad enough, the International Monetary Fund directly supported it by funding the government with billions of dollars in loans. Because more and more money was necessary to support the old state enterprises, the foreign aid went directly into dilapidated old factories, which often were not producing anything at all, with most workers employed elsewhere, but registered as working at the factory for the state salary. As Russian reformer Grigory Yavlinsky said in 1993, “It has become clear that new Western credits are no longer a remedy for Russia, but a drug helping to maintain an unfit system.”¹⁰

Inevitably, the ability of the Russian government to pay back loans steadily declined until it was forced to default in its debt in 1998. The IMF failed to learn its lesson however, as it continues to fund inefficient and government favored enterprises all over the world, notably in South America, creating a false sense of economic stability that politicians use to stay in power and the IMF uses to prove its relevance until the country is no longer able to pretend to be able to pay back loans and engages in the familiar scenario of funding payments with inflation while trying to limit citizens ability to spend the new money. At no time is any investment in new, economically efficient infrastructure actually made, something Russians would do well to mind when asking for international loans.

Historically, the inflationary policy of the new Russian government is typical of both Soviet and tsarist era central banking. ³ The nature of printing money to cover losses from inefficient state enterprises means that high inflation will be inevitable unless the government either confiscates private savings accounts or limits the ability to withdraw money from the savings accounts to drastically decrease the real money supply. The former has happened several times during the Soviet era, most recently in 1991, when Gorbachev allowed only a small amount of rubles to be converted into smaller bills, wiping out private savings of millions, and not surprisingly leading to the familiar sight of pensioners begging on the street, which the western media blamed on the effects of privatization rather than irresponsible monetary policy. The 1991 savings confiscation destroyed any remaining confidence in the ruble or the banking system, leading to a mass conversion of rubles into dollars, or dollarization. Today, Russians illegally hold over 40 billion in dollars, five times more than they hold in rubles, ¹ and this despite ruble to dollar conversion being against the law. The difficulty in converting dollars to rubles combined with the inflationary instability of the ruble and the socialist era banking system is perhaps the primary factor in the huge underground economy.

The solution to Russia monetary crisis is simple: the ruble must be made sound by making it convertible and establishing an independent central bank which is not a puppet of the government and aims to maintain a stable monetary supply (as opposed to supporting state industry) as its primary goal. This action would free up many billions of dollars by giving Russians confidence in the ruble. It would also force the government to pay for state industries through taxation, not inflation. In the immediate short run, the government would be force to cut loose thousands of state enterprises – which is why this policy is so difficult to implement, but in the long run Russia would benefit enormously from the increased investment. Lenin correctly pointed out that the best way to destroy the capitalist system was to debauch the currency — and vice versa, the best way to inspire confidence in capitalism is to establish a sound and secure currency.

One way of making the ruble convertible is to make the dollarization of the currency official by creating a currency board to establish a fixed rate of conversion between rubles and dollars. ⁵ This board must be limited to maintaining the exchange rate it set, so it would be unable to support state firms by inflationary policy, since that would drain its reserve of dollars. Such a board would greatly reduce the size of the black market and enjoy popular support by following earlier dual currency policies employed both by the left and right, only it would be much more orthodox in its ability to control the monetary supply. ³

Whatever policy Russia employs to stabilize its currency, if it wishes to partake of the advantages of capitalism, it has to somehow let go of inefficient state enterprises which keeps millions of workers idle and sink a large chunk of the economy every years. As many as 40% of industries in Russia are still unprofitable, a situation that could never be tolerated for long in any capitalist economy. ⁷ The classic argument that a maintaining a losing enterprise is “for the good of the workers” ignores the fact that the rest of the nation must pay for the idle workers, something nations all over the world would do well to mind. While critics argue that cutting lose millions of workers will lead to economic depression and a popular revolt, this argument ignores the fact that these industries are not producing anything worthwhile anyway, and that many of the workers already have other jobs to supplement the small and often tardy incomes they receive from the state.

In addition to cutting lose failing industries, the government must stop playing favorites with business. Both the central and regional government regularly favor certain companies for lower taxation, less regulation and outright subsidies. Oftentimes, the businesses show their appreciation by practically enrolling various bureaucrats on their payrolls. At other times, bureaucrats are owners or stockholders of the industries they regulate, as conflict-of-interest laws are practically non-existent. Additionally, much of the foreign aid that Russia receives is funneled directly to these favored businesses, which then “thank” the officials who provided the aid. Obviously, this is not an especially good situation for encouraging the most efficient companies to grow, but the ones with the most pull with the government. This is also a leading cause of corruption in Russia as well as in many other developing countries that receive foreign aid.

A similar problem exists with both the central and regional government using economic pressure to bend business to their will. Recently, the last independent television station in Russia was shut down when a minority shareholder (controlled almost entirely by the government) sued it and had the court declare bankruptcy and shut down the network despite the fact that in was one of the few profitable companies among a government controlled industry. ⁹ Not surprisingly, the station had been critical of the Putin government. Such political favoritism is common and does little to inspire investors’ confidence in impartial courts, further depressing both domestic and foreign investment.

Despite failing to adopt an active program of reform, Russia has shown several promising signs since Putin took power. Putin has taken actions to consolidate control and establish oversight over the regional provinces, helping him carry out policies that were previously resisted in distant provinces, some of which have remained de facto communist and ignored many of the central government’s rulings. Another significant new measure to improve the economy has been a 13 percent flat tax that has helped the economy grow at 5% last year and boosted tax revenues 28%. (The new tax rate doesn’t guarantee a responsible fiscal or monetary policy however, as Russia has used seignorage rather then taxes as the primary source of income, imposing much greater costs on the citizens in the process.) A new generation of entrepreneurs is becoming proficient at managing private enterprises and learning the principles of individualism and self sufficiency, as well as pushing for a radical deregulation of the economy. These entrepreneurs have cooperated, with help from the government and western advisers, to establish a stock market and worked together to push for reforms. Nevertheless, Russia’s economy remains mired in regulation, bad monetary policy, unsound and corrupt banks, and an other vestiges of communism that drag it down.

In conclusion, despite several positive reforms under the Putin administration, Russians needs to take major steps to embrace capitalism if they want to partake in its benefits. The most important reforms are:

A radical reduction in federal and local government regulation. Simple, clear, well publicized, standardized, and long term regulations and laws to establish a clear and predictable rule of law. Increased transparency on both the central and local levels, centrally published regulations, standard forms, and well published government statistics would also help in this area.

A complete privatization of the banking industry. This would stop the hidden flow of money to failing industries and increase access to credit for private entrepreneurs.

Establishment of an independent central bank and a dollar convertible currency to stop inflation, allow people to invest their dollar savings, and secure confidence in the stability ruble.

The IMF and other foreign lenders should exercise much more caution in the policies they promote, by focusing on funding promising private ventures, not corrupt government officials who funnel foreign aid into their own private accounts.

Some of these changes will not be easy, especially in the short run, but unless and until Russia bites the bullet and jumps head first into capitalism, it will continue to experience economic instability, corruption, and mass poverty like all other socialist and pseudo-socialist regimes.

References

1. Kurt Schuler and George A. Selgin, Cato Policy Analysis No. 348: “Replacing Potemkin Capitalism: Russia’s Need for a Free-Market Financial System”. June 7, 1999.
2. The Heritage Foundation: 2002 Index of Economic Freedom – Russia. http://cf.heritage.org/index/country.cfm?ID=122
3. Steve H. Hanke, “Create a Currency-Board Law for Russia.” September 14, 1998. http://www.cato.org/dailys/9-14-98.html
4. Central Bank of Russia: http://www.cbr.ru
5. Steve H. Hanke, “The Case for a Russian Currency Board System”. October 14, 1998 http://www.cato.org/pubs/fpbriefs/fpb-049.pdf
6. Kurt Schuler and Robert Stein, “The Mack Dollarization Plan: An Analysis” Paper for the Federal Reserve Bank of Dallas conference “Dollarization: A Common Currency for the Americas?” March 6, 2000 http://www.dallasfed.org/htm/dallas/pdfs/schuler.pdf
7. Clifford G. Gaddy and Barry W. Ickes, Russia‘s Virtual Economy, Brookings Institute, 2002. Excerpt at http://www.brookings.org/dybdocroot/press/books/chapter_1/russiasvirtualeconomy.pdf
8. Gary T. Dempsey, “Mafia Capitalism or Red Legacy?” January 7, 1998 http://www.cato.org/dailys/1-07-98.html
9. Dmitry Pinsker, “TV6 saga nears final episode.” The Russia Journal http://www.trj.ru/index.htm?obj=5321
10. James A. Dorn and Ian Vasquez. Ending Russia‘s Chaos, September 9, 1998 http://www.cato.org/dailys/9-9-98.html
11. Daniel J. Mitchell, “Tax Reform: Russia, 1; United States, 0,” March 21, 2002 http://www.heritage.org/views/2002/ed032102.html
12. Rose Brady, Kapitalizm : Russia‘s Struggle to Free Its Economy, New Haven, Conn. Yale University Press, 1999.
13. Martha De Melo, and Gur Ofer, “Private Service Firms in a Transitional Economy: Findings of a Survey in St. Petersburg”
    Studies of Economies in Transformation, 1014-997X ; Paper No. 11: 1994.
14. William C.Gruben, “Dollarization: The Greenback Goes Global,” Federal Reserve Bank of Dallas Expand Your Insight, March 1, 2000 http://www.dallasfed.org/eyi/money/0003.html

 

For entertainment’s sake allow me to take on your accusations about “Libertarianism” being a religion and in fact posit that it is YOUR socialist/leftist/anti-capitalist ideology that is not only religious in nature, but is in fact a dogmatic, faith-based, feel-good ideology that closely resembles the organized religion which we both reject. I would very much like to see you try to defend your ideas with actual logic instead of personal attacks on my character and vague generalizations without any supporting evidence. (However, I am quite sure that being unable to actually refute any of the arguments below you will resort to precisely that, or simply pretend to ignore this email — but please, prove me wrong.)

 

First, I am going to define what a religious attitude in fact is, then I am going to show how it perfectly applies to your socialist/leftist ideology, then I am going to show you why there is in fact no such thing as “Libertarianism” and how my principles and my personal philosophy (which is not in fact “Libertarianism” OR Objectivism) is perfectly compatible with a rational, skeptical, atheistic attitude that you falsely claim to possess.

 

To start with, let us examine what religion and a religious attitude do in fact entail. Religion is a primitive form of philosophy (philosophy being the study of universally applicable questions, as opposed to those that apply to a single field) and as such tries to answer basic questions about the world and make value judgments about how to act given the answers obtained from religion. The distinguishing characteristic of religion’s metaphysics (metaphysics being the study if the nature of reality) is to use faith as the fundamental axiom and method of knowing reality. Faith is simply someone’s assertion of some fact, and to have faith is to base your knowledge on what someone (be it a person or something they in a book, such as the bible) said.

 

To have faith as a guide to life is to base your understanding of the world on what someone said without actually attempting to independently find go out and determine what the world is actually like and/or random feelings, usually the result of an emotional response to a theologians preaching. Faith is dangerous (that is, harmful to your and others lives) because it falsely assumes that everything claimed by a theologian and reflected by your emotions is true and leads a person to act on these false premises. Usually these premises are based on some dead theologian’s unbridled selfishness in their desire for greed, power, or usually, both. Even when these theologians have good intentions, they are usually wrong, and following them not only leads one to ignore reality, but to sacrifice the interests of themselves and those they care about in order to reach a nirvana or reach some heavenly paradise that does not exist. Even worse, it teaches a person to follow and believe the preaching of whatever public orator is best and leads them commit horrible crimes against humanity, often sacrificing their own goals, their loved ones, their happiness and even their own lives in the process.

 

So why is liberalismsocialismleftism a religious faith-based ideology? Precisely because liberals and especially socialists are generally categorized by the same traits that characterize religion — that is ignoring reality in favor of blind reliance on the preaching of some (dead) philosopher, politician, or other talking head. Furthermore, liberalism (the current variety, not classic liberalism, which is something totally different) is fundamentally based on emotions and “instinctive” feelings — and these feelings, as with religion, are usually the self-reinforcing emotional reaction that comes from listening to some false prophet’s speech. Furthermore, the habit of basing one’s views in rhetoric and ignoring factual evidence becomes so ingrained in a liberal, that he or she will consciously and almost automatically ignore factual evidence to the contrary in favor of rhetoric. What evidence is there for this view? Take any random liberal position and you will find it aplenty. For example, environmentalism.

 

Environmentalists will often claim that the earth is on the edge of imminent destruction from a multitude of human-caused evils despite overwhelming scientific evidence to the contrary. They will claim that the earth is exploding from a population crisis when the population in the industrial world has been declining for decades and the population in third world countries shows clear signs of peaking at a world total of 8 to 10 billon (as even the UN now admits) instead of the previous claims of over 40 billion. They will ignore the evidences that there is plenty of food available to feed many times the current population of the world, if only it was distributed freely and that technology has and will continue to multiply that amount at an exponential pace. The will ignore the historical evidence that global warming is common throughout history, that England was one warm enough to grow grapes, that the world is actually ending a mild cool period, that the vast majority of scientist believe that the human impact on the climate is minimal, that even those scientists that agree on global warming will occur admit that there are many positive as well as negative effects from a warmer climate and that human as well as animal species have prospered in warmer climates to a greater degree than in the current cool period. They will argue that the ozone hole is going to expand and kill us all when scientists cannot even agree that CFC’s do in fact destroy ozone, and as cities pass laws against too much ozone in the air, they will blame the plague of skin cancer on the ozone when in fact sunbathing and skimpy clothes are more in vogue than ever, and in fact the increase in the popularity of tans in the western world is proportionate to the increase in skin cancer rates.

 

I could go on for hours, but my point is not that environmentalists are wrong, but that they will consciously ignore scientific evidence that is contrary of the ideas they hear from prominent environmental activists, and furthermore, that they base their ideas on an irrational, all-powerful love for “mother earth” –which is in fact, ultimately a hate of technology and humanity, as many environmentalists openly admit. This religion, call it Gaianism, or Environmentalism, or “post materialism” holds the inherent value of a snail or Alaskan microbe as a basic axiom, superior to any human needs or values. In fact, by groundlessly, faithfully, and emotionally embracing the environment as one’s highest value, environmentalists are clearly anti-human (often openly), anti technology, and anti-life. Almost all of these environmentalists are also upper or middle-upper class hypocrites who enjoy the comforts of technology and exploitation of the environment to mankind’s benefit. No poor third world worker would embrace this movement — because he truly values the benefits he receives from technology that allow him to live a longer life than his ancestors, who were lucky if half their children lived to adulthood, and any of them lived past the age of thirty. Environmentalists ignore this of course, and blame civilized, industrial countries from “stealing” the third world man’s “natural” way of life, or otherwise blame technology from lifting him up from the short, savage and brutal life man lives in nature.

 

But my point is not to criticize environmentalism, but simply to present the liberal’s basic attitude of the world. I can easily show the same behavior and the same attitude in any liberal position, especially my favorite topic — economics. I am not an ecologist or a biologist, but I do know something about economics and I can easily give you dozen of examples of the same attitudes liberals have when it comes to economics.

 

How am I able to claim all this knowledge of the liberals mind? Besides the fact that I have debated and associated with many such people, I used to be one myself. In fact, I was a loyal member of the Sierra club, who campaigned to stop evil companies from destroying the world. I was active in the Aggie Democrats as I campaigned for “social justice” and animal rights. Just about every liberal attitude and every liberal position I have mentioned, I once held myself with a deep passion. Chris, you may claim that I am the irrational exception, but in fact if you look around you will find the same attitude all around you, as I did when I woke up from my delusions.

 

But what about “Libertarianism”? Is it really the fervent religious movement you claim it to be? As I said, there is no such thing. That is, claiming to be libertarian says almost nothing about a person. There are Christian and atheist, subjectivist and objectivist, nihilist, humanist, naturalist and Kantian libertarians. There are anarchist, constitutionalist, social contract, and federalist libertarians. “Libertarianism” does have a certain general meaning, but it is simply the support of a free market economy and limited government, and little else. It is certainly not a religion, and there is certainly no “official” movement –most self-proclaimed libertarians vote for more democrat or republican then libertarian Party candidates.

 

What about Objectivism? Are Objectivists rabid Randroids who worship Ayn Rand and believe she could do no wrong? There are some to be sure, as there are extremists for any position, but even Leonard Peikoff, Ayn Rand’s own heir publicly disagrees with her on certain issues, and there are two different groups with very different stances who claim to represent her views. Regardless, even IF “Objectivism” was an irrational philosophy, my philosophy is not “Ayn Rand’s Objectivism”. My view of the world is my own, not borrowed from any book or any person, and it comes from 21 years of looking at the world and coming to conclusions about how it works. Ayn Rand (just as any good philosopher) may have given me many insights that might have taken me much longer (if ever) to find out for myself, but I only adopted her views after examining the world for myself and determining on my own whether her views made sense and whether they were in line with the evidence the world presented me with.

 

You claim that I am an irrational, dogmatic mystic — yet how could this be if I changed my mind on so many issues before reaching my (ever changing) current position? Have YOU as a hardcore liberal ever examined your fundamental understanding of the world, and then looked outside and critically and deeply questioned whether the two are compatible? I did, and I decided that my view on economics, politics, the environment, and reality itself was different from the world I experienced, and with help from others, but always with my own mind, I decided on what was the true and the good. On some issues that I was not sure about (like god and abortion) I found evidence to support my current position — but on others I found evidence to the contrary and changed my views 180 degrees.

 

When was the last time YOU did that, Mr. Langford?

Patiently awaiting your reply,

 

Sincerely,

David Leo Veksler

A follow up:

> You have yet to respond to actual data regarding

> population growth and economic development in China and India.

Actually I did respond. I posted dozens of statistics as well as my own and others’ arguments as to the fact that *economic freedom* NOT birth control is the key to wealth. You have yet to counter my stats or the basic argument.

>Not to mention your decision to ignore the logical

> error you made using your morality to argue against the Palestinians,

>when the contentious issue was “Why does the left support the

>Palestinians?”

While I have used my morality to argue against the Palestinians, the arguments given for liberals’ support of them are independent of those arguments. The point stands that liberals support Palestinians for reasons having very little to do with human rights violations and much to do with their flawed view of rights, force, the initiation of force, and reality (or lack of an absolute one) itself.

> Look David, just because you were a member of the Sierra Club, and know

> so little about science, does not mean that all

> socialist/leftist/andit-capitalist share your ignorance. As I

> scientist I am going to (waste?) my time trying to set you strait on

> the science, but I am not going to be able to waste my life helping

> you with the rest of you > problems-Although your understanding of

> logic and social science seems to > be equally retarded-just an onion

> there, not an actual proposition.

Err…am I supposed to respond to this? Am I missing a point somewhere here? In any case, the point of my original essay was that liberals choose to ignore facts, not that they are ignorant of the facts, which would at least be some sort of excuse.

> In fact the earth is experiencing a dramatic increase in population.

> This excessive population growth in developing countries stifles

> economic development in those countries and decreases the standard of

> living for people in those areas. We have had this discussion before,

> and you seemed to abandon it when confronted with actual demographic

> data (Sunday, May 05, 2002 8:06 PM).

This is a tired point, but I am going to address it anyways since you’re so insistent. Look at where population is exploding and where it the growth rate is decreasing. In particular, go to the CIA fact book or the UN web site and cross reference that with the Economist’s or Cato’s index of economic freedom by country. There is a clear correlation that shows that the more economically free (*not* politically) a country is, the lower the population growth rate. The cause and effect direction is evident when you look at the pattern trends, that is China, which is much freer economically than India (NOT politically, which is besides the point here) has had decreasing growth rates whereas India, which has one of the world most restrictive economies has a high and growing pop rate despite a decades long family planning program of its own. The situation in Africa is so much more obvious so that it’s blindingly clear that the populist policies of the various dictators there have led to a price control system which wiped commercial farms, leading to a return to subsidence farming, which as we all know, depends on large families. The facts are staring you in the face, it’s only the conclusion that’s lacking. For more, I suggest you read some good econ books by people such as Mises, Hazzlit, or even P.J. O’Rourke.

> man whose ideas are firmer than those of your favorite straw men.

> However I disagree that the amount of food that can be produced will

> continue to increase at an exponential rate.

But it has been so for the last one hundred years, and DNA technology has the potential to boost in many times more. (Unless those wacko greens have their way, of course) There is much other long-term research (hydro, etc) in boosting crop yields that should have dramatic payoffs in the long run, if the greens don’t get in the way.

> 1) Human activities have undoubtedly increased the amount of carbon

> dioxide in the earth’s atmosphere.

Ok, but just how much is still under question. Most scientists agree that a volcano generates more CO2 in one explosion that all the industry of the earth in several years. Meanwhile, more oil is leaked naturally in the Gulf early than all the oil ever spilled by tankers (feeding an active ecosystem in the process, btw) Interestingly, I have seen recent evidence point to the fact that oil is not always generated by ancient biomass — there are new oil field in areas where no large biomass presence existed, pointed to deeper, as yet unknown sources.

> 2) Carbon dioxide is a greenhouse gas that traps heat in the earth’s

> atmosphere and increases that net warming of the earth by solar

> radiation.

Indeed, but how much is not known, and whether warming is bad is not known either. Even if it were, pollution releases other chemicals that have been shown to have a *cooling* effect, making wacko greens rant about warming AND cooling in the same sentence (I’ve heard it myself)

The fact is, we really don’t know what effect human activity has on the earth, and whether we will be harmed or benefit from its side effects. In any case, let me point out a quote by Ayn Rand: “Even if smog were a risk to human life, we must remember that life in nature, without technology, is wholesale death.”

…and the green’s “back to nature” movement is exactly the wholesale death that Rand warns off. Their fault is not an error in the facts, it is an very basic ideological one.

> atmosphere. It is also and established fact that UV radiation is a

> mutagen, and does contribute to skin cancer. Also excess UV radiation

> has detrimental effects on other organisms in the ecosystem.

Ok, but scientists still don’t know HOW or IF CFC’s end up in the ozone hole. Also, note that due to the geometry of the earth and the nature of UV light rays (which don’t bounce, obviously) the increases in skin cancer rates in North America is NOT due to the ozone hole, unlike green propaganda claims (ignoring reality, again)

In any case, if benzene produces so much ozone in the city, a. the cities of the world are free from UV damage and b. sprinkling even a little benzene in the upper atmosphere can counteract the effects of CFC’s

> As an environmentalist, I have shown that you are the one who is wrong

> in your claims about environmentalists. I have a much better

> understanding of the empirical evidence and scientific theory behind

> the environmental issues addressed than someone who ignores scientific

> evidence in favor of prominent environmental activists, and obviously

> my understanding is much better than yours.

Ha, I doubt that. While Maya (or her $) was supporting drunken and stoned protesters in Seattle, I attended a conference on the effects of global warming last year at the Bush Conf Center. I got two things out of spending over 10 hours listening to a bunch of ecologists, biologists, economists, and other assorted scientists drone on: while the costs of regulating industry can be estimated, no one has any idea what they benefits of all those regulations would be. Listening to the proposed benefits was like listening someone ponder about the existence of E.T. in the galaxy: changing any one of a dozen factors changed the costs (or benefits, as was often the case) of global warming by several orders of magnitude. Meanwhile capping the US industrial output even slightly will lower GDP by several points, would take trillions of dollars out of the economy, making EVERYONE worse off. If you look at the exponential effects of such yearly % limits, and the global repercussions, the cost easily goes into hundreds of trillions of dollars, which is enough to build everyone on earth a personal igloo (more like a dozen) to stay out of that darn sun.

Back to my point, at the end of the conference, I attended a formal dinner and where I set next to a lobbyist for some big environmental consortium, who ranted on about “evil corporations destroying the earth” and totally ignored everything said the last three days, proving my point about liberals better than I ever could myself.

–David

Cavemen first decided to believe in gods and spirits because they had no other means to explain their world, and witch doctors and shamans quickly seized the chance go gain power by exploiting their fear of the world and offering a comforting but false view of the world. Throughout the ages, these witch doctors have held power and proclaimed that serving Re, Zeus, Gaea, Vishnu, Buddha, Jesus, and most recently Gaia (i.e. environmentalism) is the key to relieving worldly suffering and attaining eternal bliss. To the extent that religion provided the Opium to keep men sedate and make them serve whatever whims the current tyrant had, it served its purpose very well. Religious societies built great and wasteful structures such as pyramids and cathedrals, and killed people by the thousands for to satisfy whatever religious purge their witch doctor deemed appropriate, from the crusades to the inquisition, the Islamic conquests, to the pogroms of this century.

However, in every society, these witch doctors always worked hand in hand with the Thugs (to borrow a term) who never had much faith but sought power and wealth for the sake of wealth and power alone. There were the nihilists, and they existed in every age by the names of Gilgamesh, Khan, Caesar, Stalin, or Clinton. Sometimes they used Religion as an excuse for their quests, sometimes they were the witch doctors themselves, but in they have been as permanent and as destructive as the witch doctors in human history. Their power lay in their skills to control men’s minds — not in the ability to create but to use men to subvert others to their will. In modern day, most of these witch doctors rejected God and proclaimed the State or Society to be god that men were to serve. Kant was the first to define this idea, and Marx, Lenin, Stalin, Hitler and Mao followed as his loyal students, not surprisingly assuming the all the classic characteristic of both the witch doctor and the thug by using millions of men for their personal goals and in the process killing untold mullions (over 150 million men killed by their own state in the 20th century alone) On the fundamental level, God and Society have served the same purpose — to take away the personal goals of the individual and to replace them with a “greater” purpose, as defined by whichever whim the tyrant held, whether it was Kubla Khan or the Pope. The more influence and power these “mystics of the mind and muscle” (to borrow a term from Ayn Rand) have had, the more miserable the lives of peasants in their societies have been, from Egypt, to late Roman empire and the dark ages, to the two world wars of the 20th century.

In contrast to the two types on men described above, there have always been the Creators, the thinkers of society whose power lay solely in their ability to invent, to take raw materials and raw human muscle and create machines and organize men to do productive work and in the process increase the quality of human life, answer the secrets of the universe, and otherwise to give a productive purpose to life. They have been known as Aristotle, Archimedes, Aquinas, Benjamin Franklin, and Henry Ford. The more freedom these men have had to innovate, the richer and happier their societies have become — from ancient Greece, to early Rome to the Renaissance periods, to late 18th century Britain and late 19th century America.

The stakes of the conflict between the shamans and the creators are clear to any rational observer of history, but it was not until recently that the boundaries were drawn. For Kant, society defined good and evil, for Nietzche, religion was rejected for whatever personal motives the a person might stumble upon.

The problem with Kant’s ideas is that no one can feed a collective stomach or provide any other sort of collective benefit — only individuals can benefit from man’s labor, and a few men with the power of “pull” always became the elite that stole the product of all the other men in society and brutally suppressed anyone’s right to the product of their own effort. Nietzsche’s morality (if one were to call it that) fails as any kind of useful guide to life because saying “any values go” without any rational basis to choose between them is the ultimate nihilism — if men do not have a basis to choose values from, they will pick them up half hazard and end up seeking sex, power, violence or a combination of the above. Today’s society is a perfect example. School children are taught that self-esteem does not come from achievement but from collective group identity, such as race or ethnic group, that all achievement that does happen is a result of society, and that all values, morals, and cultures are equivalent. What is left to them? Nothing but nihilism, and the only means they have to gain self-esteem in this system is by popularity, whether by random sex, public exhibitionism or displays of aggression and violence in order to impress their peers. Furthermore, the Creators in society are brutally suppressed and denounced as “exploiters” — the factories and wages they provide are denounced as coercive, and the goods they invent as unsafe and forced upon brainwashed society. One wonders if these critics would be happier if the inventors and entrepreneurs sat around and let the factory workers to find other forms of income and consumers lived without the commercial goods they have come to rely on.

As you might have expected from me, I think that the alternative to this form of nihilism and state-worship was best presented by Ayn Rand — who defended the thinkers, inventors and creators of society as the engine that drove the world and improved the lives of men throughout the ages. Their work has sometimes been defended as pragmatically necessary, but Ayn Rand was the first to defend them as *moral* — not just a necessary evil, but the Good, as opposed to the witch doctors and tyrants who used the guise of God or the State to bend men to their will. Rand stated that the goal and purpose of man’s life is productive work — not for some dictator, priest or even neighbor — but for oneself, and the product of ones labor is to be exchanged with others only in return for another equal or greater value. Values are not chosen randomly nor dictated by any god or man — they are the values that sustained and enhance one’s life. A man can choose to live his life by any standard, but only one standard — rational selfishness will lead him to act to prolong his own life whereas standards of altruism will (by definition) lead him to act against his own life.

April 30, 2002

(This was written for my “Identity Issues in America” political science class,

and while I think multiculturalism is inherently a racist idea, if you’re going to write about it, might as well do it well.)

POLS 306 FINAL EXAM

DAVID V.

April 30, 2002

 

Question One:

Geoffrey Fox argues that the “Hispanic American” identity is an American construct, and just like any other identity, it is an artificial creation, not an inherent or permanent characteristic of the people it describes. He presents a convincing argument that the history of the Hispanic American is a recent creation, one that is a “statistical fiction being turned into a social reality” (p. 23)

 

On page 16, Fox writes “There is no such thing as authentic identity, ethnic or otherwise. There are only the identities that we make up or that others make up and impose on us, and the one that stick evolves in an ever present process of assertion and reaction.” The heart of an identity seems to be that it is an ever-shifting balance between outsiders assertions and definition of the group and the group member’s own view of their identity. An example of this process is presented in Koreans in the Hood, in which Kwang Chung Kim analyzes in detail the process through which a new identity is shaped. Kim argues that the Korean-American identity was a response to the Los Angeles riots and on page 205, he says “the US society’s ideological constructions of who Korean-Americans are played a pivotal role in their peripheralization” and in response, they “consciously engaged themselves in the (re)construction and politization of their collective identity as a way to challenge the situation.” From Kim’s arguments, we can conclude that while the Korean immigrant population existed as a distinct group and served the role of a go-between minority before the Los Angeles riots, Korean immigrants and their descendants did not feel that they needed to organize and assume a political aspect until the media and general populace formed a negative stereotype of them. In response, they organized as an “official” minority group so that they could participate in the political process and claim victim status as a group when both the looters and the media assaulted its members (the merchants in particular) in the LA riots.

 

For Hispanic Americans, several actors shaped and created their identity, with the US Census Bureau and the Spanish-language media playing major roles. As Fox mentions, the current use of the word “Hispanic” originated as “Spanish-Hispanic” in the 1980 census. Not long after the category was created, politicians began appealing to the “Hispanic vote” and two rapidly expanding Spanish-language television networks began to solidify and redefine the group. Because both Univision and Telemundo were able to reach the great majority of the Spanish-speaking population, they became the “mirror of the community” (p. 46) and function as a medium through which language and news are standardized and presented in a common format that further differentiates Hispanics both from English-speaking Americans and they countries from which they came. Their news stories focus on the concerns of their nations of origin as well as issues influencing Latinos in the United States, and because everyone hears the same stories, a common worldview is created and perpetuated. The language used in Spanish language media is also a standardized and English-influence version of Spanish, and because the same news anchors are seen throughout the US, a standard language is developed among the ethnic group. Thus, not only is the Hispanic political identity a recent creation, but it is constantly being redefined and influenced both by its American and foreign roots.

If identities can be created and adopted, they must also be susceptible to being discarded and destroyed, or at least weakened. Fox gives a great example of such a case with the German immigrant group. Despite 58 million Americans having descended from German immigrants, their status as a distinct ethnic group has all but disappeared except for a few small pockets that celebrate German cultures in a uniquely American way. (p. 240) Just as German –language schools once aroused Anglo fears of an “invading” culture, bilingual education is raising the same concerns. In the meantime however, American language and society seeps into Hispanic culture and language as even Spanish language television is directed and produced in English with many of the staff having only a basic grasp of Spanish, and the anchors themselves using English conventions in their Spanish. While the stream of new immigrants reinforces the Latino identity, the experience of other immigrant groups demonstrates that identity needs to be constantly reinforced or it will be absorbed into the mainstream society. Similarly, the Korean – American identity, while first meant solely to emphasize the “American” part for political purposes is taking on the role of highlighting and educating the public about Korean culture and working with the larger Asian-American movement in a fashion typical of an American interest group. As Fox says: “identities are subject to change and must be actively defended if they are to be preserved” (p. 16) and both the Korean-American and Hispanic movements provide evidence for his claim.

 

In conclusion, a “Hispanic American” or “Korean American” identity is just that – an uniquely American phenomenon that is a response to both outside and inside recognition of group identity that lasts only as long as both sides continue to reinforce such an identity. Both groups originated in response to “home-grown discrimination” as Fox calls it, and both identities will last only as long as there is a perceived need for their use. For Korean Americans, the “American” part of the identity servers as a reminder to outsiders that they consider themselves to be Americans, not temporary visitors. For Hispanics, the “Hispanic” part of their identity reminds of them of a common language and common problems and interest that can be addresses when they organize. Thus, what makes the people that use these identities unique is not their skin color but their shared desire to recognize a certain heritage for specific political and cultural purposes — and their identity will persist only as long as those needs are present and recognized.

Question Two:

The basic principle behind postethnicity is the view that all group associations should be fluid and voluntary and an individual should be able to choose which of the various groups he belongs to, if any as his primary identification. Postethnicity views all identities as constructed, appreciates that an individual may belong to multiple groups simultaneously and encourages a cosmopolitan attitude of being able to borrow different elements from different groups and create new identities in the process. The primary challenges to the postethnic perspective are that groups are often defined by outsiders rather than group members, and that groups often serve a specific function, particularly of redressing past harms, that would be harmed by a view of voluntary group membership.

 

The primary goal of postethnicity is to view identities as constructed and dynamic. As David Hollinger says on page 117 of Postethnic America, “Boundaries between groups deserve more rather than less respect according to the degree to which these groups reflect the will of the people bound to them.” In other words, we can tell much more about a person by looking at the choices they make in joining specific groups than the groups they were born into and had no choice in. Postethnicity states that while we may not be able to choose which country we originate from or which skin color our parents had, we still can decide how much emphasis, of any to give to those factors. This view contrasts with today’s multiculturalism as conservative African Americans are sometimes criticized for being “too white” or “selling out” just as liberal whites fighting racism used to be called “nigger lovers” who betrayed their white skin. The idea that one could somehow “sell out” to a skin color would be equality ridiculous to a post ethnic person whichever way the supposed sellout was. Of course, what one really is selling out to is the idea that race implies a fixed and immutable political identity – which is precisely what postethnicity rejects.

 

Postethnicity adapts the view that a person simultaneously may belong to several groups at once and can choose which ones he identifies within the context of his particular situation. Geoffrey Fox presents the example of the second-generation girl living in a minority area whose parents are Korean immigrants, whose friends are Spanish-speaking coworkers. She may identify herself as Korean-American, Hispanic, a woman or an American depending on the context. An even better example would be my roommate – who was born in Taiwan, moved to and grew up in Honduras and has become thoroughly acculturated with American influence since permanently moving to the States to attend college. Despite his Taiwanese origins, his primary language is Spanish, though he chooses to be an active member of the Chinese Student Association – which to me seems all the more unusual, since Taiwan is on less then friendly terms with China. The sort of cosmopolitan attitude in which a person is able to pick and choose among the various groups he belongs to and may even join new ones is exactly the sort of postethnic attitude that David Hollinger proposes.

 

Postethnicity is not without its challenges, however. There are many politically and financially motivated individuals who stand to lose from a postethnic perspective. The primary problem with postethnicity seems to be that many group identities are formed in response to negative outside stereotypes of groups and may not be so easily discarded even if desired. Hollinger proposes that a couple adopt a child of another race as a postethnic act by virtue of the parents choosing a family bond over a genetic bond, (p.117) but that child will still grow up in a world where he and his parents are viewed as belonging to different ethnic groups whether they like it or not. Similarly, I could not suddenly assume a Japanese-American identity just as I could not discard my Jewish identity because to many Jews I will always be Jewish no matter how secular my daily life is. Nevertheless, Hollinger would reply to this argument by saying that one cannot form a new identity from scratch, and any new identity I assume would still contain elements that originally shaped my personality. Furthermore, the many competing groups in today’s society all clamor for as many members and as much influence as possible and will not easily let go of the notion of fixed identity groups. The Jewish lobby for example, will push for more support of Israel and include me in its count of “voting Jews” when trying to influence politicians – and even thought I live a totally secular life, I might well be biased towards Israel because of the many relatives I have there.

 

Finally, fixed identity groups – the ethno-racial pentagon in particular — serve to address past harms, and in such cases, it makes more sense to view identities are perceived by outsiders rather than individual group associations. It would make little sense to measure discrimination by asking people what groups they feel they belong to rather than asking the public what attitudes they hold about these same groups. However, this is more of a problem of superficial and racist attitudes on the part of the public, and promoting a postethnic perspective may well be the solution to such attitudes. They key would be to distinguish between how an identity is viewed by outsiders versus how an identity is viewed by the person claiming it and then use the outside identity for the purpose of addressing discrimination and the self-identity for the purpose of developing a postethnic sense of individuality and group membership.

IHS:

A list of the five intellectual figures or books that have

most influenced your philosophical and political

thinking, and a single sentence for each stating how it

has influenced you.

Free to Choose – This book was my first introduction to free market concepts and the harmful effects of government regulation and intervention

Murray N. Rothbard – As I learned more about libertarian ideas, I started to read Rothbard from whom I gained a new perspective on the political spectrum and what it meant to choose freedom.

Economics in One Lesson – Henry Hazzlit explained many economic and social fallacies that I had grown up hearing, which confirmed and reinforced my belief in a free market.

Atlas Shrugged – Ayn Rand gave me a philosophical argument for free will and the pursuit self-interest and provided a foundation for my ethical system on top of my libertarian political beliefs.

Ludwig Von Mises – Reading daily articles and commentary from the Mises Institute gave me an introduction to Austrian economics and explained its application to current events and upcoming issues.

Dr. Morgan Reynolds – My Law and Economics professor explained the benefits of a free market and limited government from a Chicago-based efficiency standpoint and renewed my faith in academia, even though he has been the only libertarian professor I have ever taken.

A statement of no more than 250 words on your career

goals, immediate and long term, and how the

Summer Fellow Program would help you reach them.

As a political science and economics major, I am interested in graduating as a double major with a minor in Russian and eventually going on to business school to receive an MBA. I am passionate about my message of liberty and free markets and would like to promote market-based ideas in the business world. I am highly skilled in computer technology, and would like to apply those skills in the market while advancing the cause for freedom. I am currently fluent in two languages, English and Russian, and by the time I complete my education hope to be fluent in three. With these sets of skills, I am particularly interested in participating in business ventures in the former Eastern-Bloc which advance private investment and property rights (rather than the more common methods of quasi-government schemes attempting to mimic private firms). I am particularly inspired by the market-based management of Koch Industries, and I would like to use those concepts in my own business pursuits.

A statement of no more than 500 words about which

policy issues and potential host organizations interest

you and why. A complete list of participating policy

groups is available on the IHS web page; however, you

may indicate organizations not on the list.

I am interested in many policy issues, but primarily economic ones such as fiscal and monetary policy. I am also interested in health care and environmental policy – specifically free-market reforms of healthcare and private property solutions. I think that the CATO institute and CEI would be perfect places for me to have my internship. As a former member of the Sierra Club, I was very concerned with environmental issues. Since then, I have read several books on free market approaches to environmental problems, and CEI has been a major source of information for me, from whom I have discovered property rights as a superior alternative to corporate taxation and regulation. As an economics major, I am also very interested in various economic issues, such as social security, monetary policy, and regulation of international trade, which have lead to me to be a regular reader of CATO editorials and reports.

 

1. A brief essay, 500 words or less, about why you would like to participate in a seminar. You might discuss: what interests you about classical liberal or libertarian ideas; what intellectual figures or works have most contributed to your thinking on political, social and economic issues; or what you hope to learn or gain from the seminar

 

 

I would like to participate in the IHS summer seminar because I am deeply interested in ideas about liberty and would like to obtain the intellectual ammunition I need to support and promote my libertarian beliefs.

I have not always been a supported of classical liberalism. My family emigrated from the USSR when I was ten because my father believed that the things he believed made America great were liberty and self-determination – something I did not come to believe until much later. When I was going through high school, I was exposed to and accepted the dominant liberal ideology that viewed government intervention as crucial in all areas of society and economics. When I started college as an aerospace engineering major, I became involved in political issues that matched the liberal ideas I had been exposed to in high school, but as I read more and more about economics, I started seeing the fundamental incompatibilities of statist policy with reality. Milton Friedman’s _Free to Choose_ was my first introduction to free market concepts and the harmful effects of government regulation and intervention, followed by _Economics in One Lesson_ by Henry Hazzlit, who explained many economic and social fallacies that I had grown up hearing and confirmed and reinforced my belief in a free market.

At the beginning sophomore year, I decided to change my major to economics and political science so I could study my newly discovered interest in economics full time. Dr. Morgan Reynolds – my Law and Economics professor explained the benefits of a free market and limited government from a Chicago-based efficiency standpoint and renewed my faith in academia, even though he has been the only libertarian professor I have ever taken. Reading daily articles and commentary from the Mises Institute introduced Austrian economics and explained its application to current events and upcoming issues. Ayn Rand’s _Atlas Shrugged_ gave me a philosophical argument for free will and the pursuit of self-interest and filled in the ethical system on top of my libertarian political beliefs.

My formal academic education starkly contrasts the libertarian beliefs that I have come to hold — my classes are often a struggle to defend my ideas to myself, my professors and my classmates. Because of this, I would greatly appreciate the chance to learn about ideas on liberty first hand from a group such as the IHS. I have been very active in speaking about classical liberal ideas these last two years and with the help of the IHS, I can learn to present my ideas even more effectively.

 

 

 

*2. A brief essay, 200 words or less, about your career interests. You might explain your career interests and priorities, your plans for the next two years, or your seminar choice

As a political science and economics major, I am interested in graduating as a double major with a minor in Russian and going on to business school to receive an MBA. I am passionate about my message of liberty and free markets and would like to promote it from the perspective of a successful executive, whatever field I end up working at. I am currently fluent in two languages and by the time I complete my education, I hope to be fluent in three so that I can work with international firms and help spread capitalism and liberty around the world.

---

 

 

OAC:

 

Describe your career goals and how attending the OAC will be of value to you. 500-word limit.

I would like to participate in the OAC Undergraduate Program because I am deeply interested in Objectivism and would like to obtain the intellectual ammunition I need to

support and promote reason on campus and in my future vocation.

 

I will be graduating next year as a double major with a political science and economics double major degree and a minor in Russian and going on to get a Masters of Science in Management of Information Systems. I am passionate about my ideas on reason, liberty and free markets and would like to promote it from the perspective of a successful businessman, in whatever field I end up working at. I am currently fluent in two languages and by the time I complete my education, I hope to be fluent in three so that I can work with international firms and help spread capitalism and liberty around the world.

 

Despite having emigrated from the USSR in 1990 with my family, and experiencing communism firsthand, I became politically involved in the liberal movement in high school, and continued my involvement until my freshman year at Texas A&M, where I was first exposed to free-market economics and began to see more and more inconsistencies in the liberal position. As I became more and more interested in laissez faire ideas, I changed my major to economics at the beginning of my sophomore year. At this point, a friend recommended that I read Ayn Rand, who quickly changed my attitude on life.

 

Since then, I have helped start up and lead the local Objectivist Club where organized and promoted a speech by Dr Yaron Brook. I have promoted my view to several student groups, designed and spread fliers around campus giving rational perspectives on various current issues, and promoted and defended my ideas to my family, my friends, my classmates and my professors.

 

Because my formal academic education starkly contrasts the Objectivist beliefs that I have come to hold, my education is often a struggle to defend my ideas to myself, my professors and my classmates. The OAC would provide the ideas and arguments I need to defend and promote Objectivism in my formal education, my extracurricular activities and in my future vocation.

November 27, 2001

POLS 475 Essay #2

by David Veksler

Topic: When does “big government” become too big?

The Moral and Economic Basis of Government.

 

Throughout the last decade, “Big Government” has been frequently denounced by Republicans and Democrats alike, especially after the term was popularized by President Reagan in the 1980’s and Clinton announced that “the era of Big Government is over” during his second term. Nevertheless, the reality is that during Republican and Democratic administrations alike, the government keeps growing regardless of the party dominating Congress or the Presidency. While this fact may be surprising to the average American, the politically-savvy citizen knows that budgetary and political expansion is almost always in the interest of any given politician or bureaucrat regardless of which major party he belongs to.

The presence of such perverse incentives and bureaucratic inefficiency is often justified by the idea that there are certain activities and functions which are not supplied by the market, and while government is not always efficient at performing them, it is the only entity capable of providing them. However, when evaluating the size of the government, a crucial question is to ask whether the benefits of a certain government activity outweigh the costs – costs such as loss of income through taxes, decreased economic efficiency, and a loss of civil liberties.

Because government by its very definition has a monopoly on the use of force, all of its actions are acted through involuntary measures. Whether it is providing for a military or optional services to business, all its services cost money that must be paid in involuntary taxes that in principle depend on the “consent of the people,” but in practice are beyond the control of the average citizen. Thus, the economic justification of governmental action must be complemented by an equally important ethical justification, as each governmental action necessarily restricts individual rights. It is my opinion that these two mandates for the existence of a government are crucial to the justification of every governmental action and lead to the same conclusion – the only government that meets the twin mandates of moral legitimacy and maximal economic efficiency is a constitutional republic that limits its actions to the protection of life, liberty, and property and the creation of a few basic institutions to maintain an environment suitable for a free-market economy.

The Constitution of United States provides for a form of government very close to such an ideal, but governmental powers have quite clearly expanded far beyond the original boundaries of the Constitution. Thus, when we ask if government has become too big, we can answer the question by analyzing both the economic and ethical basis for government action and seeing if the current functions of government overstep these boundaries.

 

The Economic Basis of Government

It is worthwhile to consider the ideal model of democratic government and the reality of what happens when politicians come into the scene. Ideally, citizens demand government actions to “fix” situations of “market failure” – cases where the market leads to less-than-efficient outcomes, such as when a used-car salesman lies about the quality of the cars he sells. Ideally, taxpayers consent to the use of their money to correct the asymmetrical information problems, by say, mandatory information stickers on used cars. If politicians had the sole interest of the public in mind, this might indeed lead to greater economic efficiency, but human nature dictates that man is self-interested and reality quickly confronts such ideals. The bureaucrat who makes his living inspecting car dealerships is unlikely to suggest to his superiors that a consumer protection agency would be better at his job, or that bringing a mechanic to the dealership is a cheaper solution to government intervention. He is more likely to suggest that more regulations be placed on used car lots so that he may hire assistants or increase his work hours. Meanwhile, the consumer knows little of such inefficiencies in the inspector’s work, because the best judge of the efficiency of inspecting used cars – the government inspector himself is the one least likely to reveal the inefficiencies of his job — because they may lead to his demotion or loss of work. The point is not that regulation of used car dealerships is harmful to consumers, but that government bureaucracy is inherently inefficient and self-promotional, and the costs of such inefficiencies must always be balanced with the potential benefits.

There is another, more dangerous aspect of government regulation. The used-car dealership rarely takes regulation lying down. Rather, it will hire lobbyists, create ad campaigns to raise public support, court politicians, and in various other ways attempt to influence public policy. It is undeniable that business has such influence with the policy-makers of the United States. The problem is that as soon as an industry seeks to influence the government, it begins to compete on two levels – the competition for market power and the competition for bureaucratic power. Firms no longer strive to produce the best product at the lowest price, but for political “pull” – and the ones that win the war of pull are rarely the ones that are the most efficient. Thus, firms try to out-regulate each other out of existence rather than out-compete each other. Such is the inevitable side-effect of government regulation.

Finally, it is crucial to recognize that government is not especially good at producing any one good – it is only capable of transferring wealth from one party to another. Taxes, tariffs, licenses, and regulations either take wealth or create barriers to market entry, and private and corporate welfare, agricultural subsidies, tax-breaks, and regulations give wealth and monopoly powers to other parties. There are many arguments for such transfers of wealth, and it is impossible to answer them all in a short space, but it is sufficient to consider the previous two arguments, as they inevitably corrupt any good intentions legislators have when they enact such legislation.

When one considers the above effects of market regulation, it is easy to see why politicians have such a bad reputation. Many reformers propose further regulations and agencies to oversee politicians’ actions and finances – but this only increases the size of government. The real solution was provided to us by the Constitution of the United States — while imperfect, it contained built-in limits on the power of government to intervene in the market. When the government remains small and stays out of the regulation business, businesses have little interest in lobbying government because their livelihood is not at stake, and consumer groups have little success in imposing regulation because of court oversight of legislation. Such is the ideal size of government. When it strays into the market, it immediately becomes too big and acquires tremendous incentives to expand more and more.

At this point, it is reasonable to mention that the free market requires certain institutions to function optimally. Property rights are the basis of a capitalist economy and several government institutions provide for their protection. Civil and criminal courts provide for mediation of personal and business conflicts, a patent office creates additional property rights in trademarks and patents, and other agencies may extend property rights to airway frequencies, marine territories, and even space in the form of non-interfering satellite orbits. Today’s federal agencies accomplish all these tasks, but they also inject a large amount of additional regulation that creates much inefficiency. Radio and television spectrums are complicated by a complex grid of grants to use certain frequencies that have come to resemble quasi-property rights, yet grossly deviate from market outcomes due to massive lobbying in the part of telecommunications companies, radio and television content providers and other such groups. The same idea applies to the fields of aviation, medicine, and many others, and the net effect is a stifling of innovation and combined with massive, bloated federal and state governments.

Protection of life, liberty, and property includes protection from criminals and outside invaders. The police and the courts accomplish the first task, and a military accomplishes the second. As long as their task remains solely to protect the rights of citizens, agencies such as the FBI and CIA are justified parts of the government, and may even impose certain restrictions on trade and immigration for the sake of national security. But when the military or police agencies focus on missions that favor a certain industry (such as oil interests in the Middle East) or are unrelated to the protection of citizens rights, (such as politically motivated forays into distant nation such as Bosnia and Somalia) as they often do, they once again lead to “big government” and expand endlessly as they acquire more and more goals unrelated to their primary duties but favorable to their bureaucratic instincts.

Regulations designed to “protect” the public from “coldhearted” industry have several additional flaws. Besides the economic harms described above, they assume that the common law courts will be unable to create an environment that discourages dangerous and unsafe products from being introduced into the market. This is clearly not the case as there have been many well-publicized examples of courts being too harsh on business, not too lenient. Public juries and court judges are clearly less likely to be bought off by rich corporations than politicians. Protective regulations also ignore the role of consumer report services such as Consumer Reports, which will inevitably spring up in the place of regulation and provide efficient reporting product safety and quality ratings such as the Good Housekeeping seal does today. Furthermore, new legal tools such as class action suits and technological progress in measuring damages allow even widespread harms such as air and water pollution to be tried and discouraged by the courts.

It is worthwhile to mention that there are alternatives to civil courts in the form of private mediators, alternatives to the police and military through private provision of defense services through insurance firms, and alternatives to patents through trade secrets, but these are only supplements to the basic duties of a government and suitable replacements if and when they are judged to be better than their public alternatives.

This is the basic outline of government’s legitimate functions. Any additional functions lead to “Big Government” and can only be detrimental to its citizens, because just as the used-car salesman has perverse incentives, so do bureaucrats, and they have no market oversight to punish their trespasses.

 

The Moral Basis of Government

 

One of the reasons why a moral justification of government action is necessary is because oftentimes equity rather than efficiency arguments are used to justify redistributive programs such as welfare, Medicare, Medicaid, social security, various other job-preservation policies of government, and even public education. These functions are major portions of the federal and state budgets, and if one is to maintain that a limited Constitutional view of government is ideal, it is crucial to dispute these programs on ethical as well as economics grounds. The major problem with redistributive programs is that they violate the primary purpose of government – to protect rights, and condone legal theft under a guise of democratic approval.

Redistribution as theft may be explained by looking at the two basic models of elected government – republican and democratic. The basic purpose of a republican government is to maintain a monopoly on the legitimate use of force by the consent of those governed and use it to protect individual rights from being violated. These are the rights to life, liberty, and property. Any other supposed rights – such as the right to healthcare, food, or a job necessarily infringe on the primary rights to liberty and property because welfare requires that wealth be taken by force from one party and given another.

An alternative view is presented by a democratic government. Such a government is ideally a mirror of the majority opinion, and the larger the public participation in such a government, the stronger its mandate to rule. In such a government, equity may have a higher value than property rights in some instances, and the individual thus becomes a tool for a vague ideal known as the “social good”. The problem with such a notion is that society is not a living entity – only the individual is capable of enjoying goods, and a standard of social good ultimately leads to an inefficient and unjust redistribution of wealth to those groups of society who have the most political influence. The concept of social good is not only at the heart of socialist regimes, but also pervasive in all “mixed-economy” states, including America.

It is possible to debate redistribute policy in terms of individual versus social responsibility, as the major political parties do, but this is not necessary. It is sufficient to point out that such policies violate the basic mandate and purpose of government — to protect individual rights and subject them to social good under the guise of democracy.

Finally, redistribute policies also have perverse effects on the recipients as well as the involuntary contributors to such policies. By preempting private charity, they discourage voluntary charity and provide an excuse to bureaucratic expansion. In a sense, high taxation combined with government social programs in place discourages private donations. Ironically, the enormous funds earned for the 9-11 terrorist attack suggest that the private sector has the ability and interest in providing charity, given proper information about causes and widespread motivation to be active. Another case us social security — a program that despite being a pyramid scheme is popular with both parties. Nevertheless, it a classic example of a government program. It forces working persons to give up some of their wage for a retirement program that consistently has a lower rate of return than the market—even if the market is in a recession! While there are many private retirement plans that are much more efficient than social security, bureaucrats have incentives to promote their own version out of their own self-interest and successful sell the necessity of the program to the public, which is far less aware of the program’s faults that the people running it. Meanwhile, the cost of social security withdrawals prevents all but the well-to-do from being able to afford a real retirement policy, and is likely to be a giving a false sense of security to those who rely upon the government version if some of the dire predictions about its financial stability hold true.

Thus, the moral premise and sole purpose of government is the protection of individual rights. Any other claimed rights to a minimum provision of any good or service are invalid because they necessarily infringe on this basic purpose. Government is a contract among the people it governs that maintains a monopoly on the legitimate use of force, but the will of the majority does not give it the right to go against its basic purpose and make any individual a tool of the state or the whim of the majority.

October 8, 2001

How I Discovered Selfishness

From: David Veksler <webmaster@c…> Date: Mon Oct 8, 2001 12:14 am Subject: PHIL class response/Reaction to reaction to someone’s reaction/My Life’s Story/Command vs Autonomous Ethical Theory

So,
Unlike some of the "simple, sheltered minds" here, I've given my morality and philosophy a lot of thought for as long as I can remember,
so this is a long story, and if you are not willing to view your innermost beliefs in a critical light, you might as well skip over it.

I have never been satisfied with the dominant "social" morality that I found surrounding me. What follows is my reaction to the various
ideologies I have been exposed to in my lifetime and how they led to to my current beliefs.

*fadeout waaaay back to my childhood....*

Much of my childhood was spent in the former USSR, where the dominant morality was serving the State, -- blind faith in the actions of the State, and self-sacrifice of one's life- goals in exchange for the job which the state deemed you fit for. As an example, I remember, our teacher asking as what we wanted to do with our lives, and various kids in my 4th grade class said engineer, pilot, astronaut, etc. Then the teacher told us that that's all nice but we have to keep in mind that the State needs factory workers, potato pickers, etc, so we have to sacrifice our dreams, because the state knows what's best. Well, my parents didn't think that the State knew what was best, and they came to the U.S. shortly before the USSR collapsed because, as my dad told me long before the left --in America you decide what you want to do with your life. Because we were Jewish, we were quickly embraced by the Jewish community, and I, more that the rest of my family, discovered God with an intensity easily overshadowed the State. Even as a young child, perhaps because I was so young, I quickly adopted the idea that my life's purpose was to "serve God" and as I learned the horrors of the State (we lived close to Chernobyl for many years) I adopted what I thought was an Absolute (Divine Command Theory) in the form of the Ten Commandments, etc. The standard of value I adopted was God's Will, and the criteria I adopted was the ideal of the Torah (that's the Old Testament for you Christians) For several years I studied Jewish law in detail, including a summer-long trip to Israel. I learned a lot about Judaism, but I struggled to continually redefine my notion of God because I was unable to come to a logical notion of God, and I was unable to accept the idea that anything could be beyond my comprehension.

Eventually, I saw that an ethical life had its own benefit, without the need for heavenly reward or retribution, and adopted an Autonomy of Ethics position. I struggled for years as I read many different notions of God, and was particularly attracted by the writing of Baruch Spinoza, who had a semi-scientific first-cause notion of God. In effect, I became a secular humanist, whose standard of value was Society, as it was the only standard that provided me with a concrete evaluation of my actions. I believed that the Pious was that which was utilitarian, or provided the most good for the most people. With time, I stopped believing things "on faith" as my belief in God wavered, and yet I still embraced the ethic of the Jewish religion as a ready guide to life, and believed it its correctness by virtue of its practical success in leading to the happiness of the Greatest Number. I explored Christianity, but was dissatisfied with its negative view of existence, and refused to accept that man innately evil (i.e., original sin), and that man on earth is doomed to suffer, because I saw that happiness was indeed possible, and a virtuous life had its own earthly reward.

My ethical/religious development might have stopped there, but then I discovered Environmentalism. In search of the Greatest Good for the Greatest Number, I became a politically active liberal, and supported distributive economic policy, welfare, etc, as a means to the "debt" of self-sacrifice I felt we owed to society, and through environmentalism, to our grandchildren. This might have been all well and good, but I could not resolve the inner conflict I felt between the desire to "repay" the American society to whom I felt indebted for my welfare, and the happiness that I was supposed to achieve by doing this. This debate became a troubling issue to me, when I became an economics major in college, and learned, despite the insistence of my professors and religious leaders -- that self-interest was the one and only driving force behind wealth, that wealth had to be *created* not found and exploited as a natural resource in the form of a worker's labor or an ore dug up from the earth. I learned that the enforcement of property rights was the best way to protect the environment, and that charity based on need rather than merit encouraged men to live as moochers rather than producers -- basically that self-interest was the sole driving force behind the creation of the tools that raised our lives above that of cavemen, and allowed us to have the time to sit around discussing how we need to go back to a "simpler" time and decry the "materialism" that kept our lives from being "solitary, poor, nasty, brutish and short."

It was around this time that I discovered that it was the same idea that I had carried from my days in the USSR to America --- that whether I valued the State, God, or Society, it was collectivism that I had placed as my highest value, and collectivism meant the good of anyone but myself. About this time, a friend told me that my ideas resembled those of Ayn Rand, and in reading her books, I was suddenly able to name and define the beliefs that had recently changed the focus of my life.

*fadeout back to philosophy class...*

So, when we talk about what it is that gives morals their meaning, I say that morals to not come from God or a vacuum. It is MAN that gives values meaning, and it's is his welfare that defines them. The basic criteria of values is therefore man's LIFE. Anything that furthers one's life is moral and good, and anything that detracts from life, is thus immoral, and can only lead to death. The only way to live a moral life is then to follow our selfish, rational self-interest, not momentary hedonistic pleasure, but the long-term happiness that comes from living a successful life.

Well, that's all for now,

David V...
webmaster@c...

********************************

Aurelie Hardwick wrote:

> I've been struggling with this class from day one. Not because the
> topics or readings are difficult, but because my simple, sheltered
> mind refuses to "open up" during class discussions. I realized the
> extent of my problem just today. What follows probably isn't going to
> seem noteworthy to most of you, but for me, it's a huge breakthrough.
>
> In Tuesday's class, we were discussing/debating the Divine Command
> Theory and the Autonomy of Ethics position. As soon as I dutifully
> copied the definitions for each in my notes, I realized that the
> obvious theory for me to support was that of the Divine Command,
> because I am a Christian, and aren't I supposed to believe that
> /every/ good thing comes from God (morals certainly being good)? Since
> then I've been searching all of my C.S. Lewis books for some profound
> words to back up my "belief" in the idea that ethical principles are
> commands of God. Frustratingly enough, I found nothing. So I decided
> to read some more. While reading "What is Virtue" in our supplement
> packet, I kept thinking about what Pro! fessor Pappas said about
> someone being able to be a theist and still believe in the autonomy of
> ethics. Now maybe I'm just really simple-minded and confused in my
> thinking, but I think that if the whole idea of virtue can be separate
> and distinct from God, then perhaps morals are separate from God also.
> And I believe that the idea of virtue is very much separate from God.
> There is a quote in the article ("What is Virtue") based on an
> observation made by Aristotle that children "learn virtue by following
> rules of good behavior, hearing stories of virtuous people...and
> imitating virtuous models: parents, friends, and worthy public
> figures." This doesn't say anything about learning virtue by watching
> /religious, /or God-fearing people. This pointed out t! o me the
> obvious fact that not everyone who has morals has them as merely a
> by-product of their religion. I myself had morals long before I became
> a Christian. Now I don't know if these non-religious people get their
> morals from watching religious people acting on their morals, or from
> determining that they should do "good" just for the sake of doing
> "good." Either way, being non-religious, they probably aren't leading
> moral lives because they feel commanded by God to do so. Reading on, I
> came to this statement: "Sometimes virtues clash, as justice and
> compassion often do. Choices must be made, one good placed above
> another." Since choices have to be made between "goods," maybe God's
> commands are like hints on! which "good" to choose, because He has
> already made the choice for us (at least those of us who are
> religious.) And He makes His decision from the choices that are
> already there, apart from Him. So now I'm thinking that the idea of
> virtue is clearly autonomous. And while I have no proof of this right
> now, I'm going to say that if virtue is autonomous from God, and if
> virtue is a "branch" of ethics, don't ethics (morality) have to be
> autonomous from God also?
>
> (If anything I said sounded like total nonsense, y'all please go easy
> on me. This is the first time I've allowed myself to think outside the
> box- and it's really scary to be sharing this with all you
> philosophers! Still, I would love to hear your comments, so I can try
> to expand my thinking some more, and then hopefully clear things up.)
>

Monday, September 24, 2001

When should government promote or assist private business?

POLS 475 Essay #1

by David Veksler

Never. That is the short answer, and it is a substantial claim considering the plethora of subsidies and financial support given to business by the federal and state governments today. There are several reasons why government assistance is actually harmful to the economy and they clearly explain the failure of each government assistance policy to achieve the desired goals. The main policies used to “help” businesses are: tariffs and other protectionist measures, tax breaks and low interest loans, and subsidies to corporations and agriculture. Unfortunately, while every one of these measures is widely used today, they all end up hurting competition, business, and consumers.

It is no secret that protectionist measures hurt consumers and competition, as any introductory economics class will quickly show, but Congress rarely heeds the free-trade argument. America’s trade deficit at the end of 2000 was a record $370 billion according to Commerce Department figures, yet it accompanied the largest economic growth cycle in America’s history. This confirms the idea that trade deficits do not cause poor economic performance; rather, they typically accompany improving economic conditions because they are a sign of increasing foreign and domestic investment. Despite ideas to the contrary, trade deficits do not cause Americans to lose their jobs, as during the last nine (as of 2000) years of rising deficits, the unemployment rate has fallen by 0.4 to record lows. As the Cato Institute reports, as the economy experienced the recent recession, the monthly deficit figures fell right along with the stock market. (The 2000 U.S. Trade Deficit: Select Cato Commentary, http://www.freetrade.org/new/DGTD2000.html. February 21, 2001) Nevertheless, the Bush administration has been invoking protectionist measures for the steel industry among others, in what is probably a sign of their political influence. America’s protectionist policy is clearly a solely political one, and a costly one at that, as protectionist measures are harmful to consumers and manufacturers as well as hypocritical, since United States often encourages the WTO and other global free-trade organizations to lower their own member nation’s tariffs.

Tax breaks, low interest loans and other such financials incentives are used mainly by states to attract business to their area. These measures are costly to the taxpayers because as research shows, the money spent attracting business rarely pays of. It is hard to measure the effect of government economic policy on a national level, but it is possible to learn a lot from looking at individual states’ policies. As all states want to attract business to their area, all fifty states have passed a variety of tax and financial incentives that can be compared to measure their relative effectiveness. According to a study by Thomas R. Dye in the Journal of Politics # 42 (Winter 1980) pp 1085-1077 titled “Public Policies and Economic Growth in the American States,” there is actually a negative relationship between the number of incentives enacted by states and the foreign and manufacturing investment as percentage of GDP (’92-’94) The r coefficient is only .108, so there is no statistically significant relationship visible. There are however, several outliers, such as Minnesota and New Hampshire that only have one and two out of the six incentives studied and fare unusually bad in investment, while Kentucky, with all six investments, fares unusually well. Perhaps, politicians are impressed by these exceptions and ignore the general failure of state incentives in attracting business. If we look at employment growth, another important measure of a state’s economic well being, we find that there is a slight positive correlation, but the r-value is only .199, so once again there is no statistically significant relationship between economic incentives and employment growth. Additionally, these incentives have little effect becuase all of the states have at least one incentive to attract business, and 48 have at least three, with the majority having five or six. Once again, there is no relationship between the number of incentives provided, the wealth of a state, or the success it has in attracting business, and financially successful states like Texas and New Hampshire have three and two incentives respectively, while poorer southern states often have all six incentives enacted. (Friedman, Miles. Directory of Incentives for Business and Development in the United States. Washington: The Urban Institute, 1991.) As the evidence shows, the end effect of these state incentives to businesses is increased taxes to individuals with little or no reward in attracting business to a state.

Subsidies, the most expensive from of government assistance to business, otherwise known as “corporate welfare” are by far the most expensive form of government assistance to private business. Subsidies to businesses cost more than $75 billion of the yearly federal budget. (“Corporate Subsidies in the Federal Budget.” Testimony of Stephen Moore before the House Budget Committee, June 30, 1999.) Instead of helping business, they have several harmful consequences. Originally meant to correct marked failures, the highly political process of distributing these subsidies creates huge market distortions, effectively throwing a wrench in the market system. As Stephen More says, “The major effect of corporate subsidies is to divert credit and capital to politically well-connected firms at the expense of their less politically influential rivals.” While more than 90 percent of American businesses manage to survive just fine without subsidies, government grants, loan guarantees, or insurance, they do have to pay higher taxes to support their politically connected competitor, which lowers their competitiveness significantly. Agricultural subsidies are yet another case of price supports harmful effects. Out of 400 farm commodities, two dozen received price supports, of which 80 percent goes to farmers with a net worth of over $500,000. The end effect agricultural supports is that the bigger, politically well-connected farms get subsidies from the government, while over a million small farmers struggle to compete with them. (“Corporate Subsidies in the Federal Budget.) No wonder small farms have trouble staying in business.

The end result of all this government “help” is quite clear — government distorts the market system by politicizing the economy, and favors larger, better-connected bossiness over smaller, less influential ones. State financial incentives cost money in higher taxes without any visible success in attracting investment. Finally, tariffs lead to higher manufacturing costs for imported and domestic raw materials, and eventually lead to higher consumer prices. Meanwhile, the group most hurt by these programs is the consumer, who has little influence or knowledge of these programs, but ends up paying for them due to higher prices for imported and domestic goods and higher state and federal taxes to pay for the various government programs.