Sunday, May 31, 2009

A Nation of Hyenas

One never knows where one will find profound metaphors for human existence and society, and I certainly wasn’t looking for one while channel surfing last weekend after a morning of yard and house work. However, I had the good fortune to flip on Mutual of Omaha’s Wild Kingdom and observe a perfect analogy to what our once-great society has become.

That episode was about the cheetah, the fastest land animal on earth. The cheetah is a beautiful creature. As the show pointed out, it is literally built for speed at the expense of brute strength, of which it has relatively little compared to other predators in its habitat. While unfortunate for the antelope, it was nonetheless quite inspiring to watch a high-speed pursuit of that animal by the cheetah, exhibiting gracefulness which rose to the level of poetry. Having made her kill, the cheetah brought the antelope back to feed herself and her young.

However, the story was not to end so happily for this family. The smell of blood in the air had attracted a pack of one of the cheetah’s competitors, the hyena. While the aforementioned lack of brute strength would probably not allow the cheetah to fight off even one hyena, that fact was irrelevant in that it was ten or twelve hyenas which now threatened her. Why? They were after the antelope – the fruits of the cheetah’s labor – and were going to use their greater numbers to take it from her by force. They weren’t intent upon killing the cheetah or her young, but were willing to do so, if necessary, to obtain her property without her consent. The cheetah weighed the risks to herself and her cubs and retreated, left to try to make up the loss elsewhere to provide for her family.

A few nights later I broke an embargo of sorts and actually watched a “news” program. I tuned in Cavuto on Fox News[1], which is one of the few shows where actual journalism seems to occur occasionally, despite its network affiliation with right wing propagandists Hannity and O’Reilly.

Cavuto’s regular panel of guests is arguably the most libertarian one can find anywhere in the “mainstream media,” regularly featuring Jonathan Hoenig, Peter Schiff, and even Yaron Brook, President of the Ayn Rand Institute.

That night, the auto company bailouts were again on the docket, and familiar arguments were made by Hoenig and the other panelists about why the results would be worse if the government took control of the auto industry. Cavuto’s token panelist from the left[2] (a female panelist whose identity I have been unable to verify), made the now also-familiar argument that “we bailed out Wall Street and now Main Street is demanding that the government do something for them.” Most of the panelists answered correctly that they were against the Wall Street bailouts as well, a point that was left unemphasized due to several people talking at once. However, the real chance for a meaningful debate still lay ahead. The boisterous Cody Willard set the stage when he said, “if you want to help them, send them your money, but don’t hold a gun to my head.”

The reply from the panelist arguing the liberal perspective was monumental:

“That’s why we have a democratically-elected government and the people want the government to do something.”

When she gave that answer, it was time to stop the quips, the witticisms, and even delay going to a commercial, if necessary. Despite the fact that the host trivialized the exchange by talking over part of both her and Willard’s comments, the exchange between the two was enormous beyond what most viewers probably realized.

There are many who would probably consider Willard’s statement a half-facetious exaggeration for effect. It was not. It is the horrifying reality of what any government bailout or other redistribution of wealth represents. We as Americans have forgotten that all government action is exercised under exactly these circumstances: at gunpoint. That is the purpose of government, to exercise brute force on behalf of its constituents when it becomes necessary to do so. That is why our government was originally so limited. The founders of our nation believed that brute force was only justified in self defense. Therefore, government action was limited to protecting its constituents from harm by other people, whether it was harm by a fellow citizen or a foreign army.

However, when the government undertakes to “do something” about a failed bank or auto company, it really means that We the People have decided to apply brute force to the problem, even though it is not a matter of self defense. Willard was completely accurate: a government bailout of a distressed auto company, whether it saves jobs or not, is really the people using their collective means of brute force (the government) to take property from one group of people and give it to another. This exchange is done at gunpoint – there is no consent by the party being taken from. Had the managers or the employees of the auto company armed themselves and sought to raise the funds themselves by stealing them at gunpoint from the people directly, they would have been arrested and prosecuted for armed robbery. However, Willard’s opponent in the debate argues that there is some ethical difference because a “democratically-elected government” acts as the armed robber in their stead. What can the difference possibly be?

This is the fundamental question that we as a society must answer if we are ever going to reverse the downward spiral we find ourselves in. Do we believe that individuals have inalienable rights or do we believe that a majority vote can take those rights away?

If one takes an objective look at our society as it has evolved over the past century, one must conclude that we have already answered it. Stripped of euphemism, almost every government institution in our society amounts to us using the brute force of government to violate the inalienable rights of our neighbors. Let us consider just a few examples.

Government involvement in healthcare has driven the price so high (through the artificial demand it creates) that the poor and elderly cannot afford it. Our answer is to apply the brute force of government to steal the money at gunpoint from one group of people to provide healthcare to another. In a truly bizarre development, that practice has now resulted in such high prices that almost no one can afford healthcare. So, we will now steal from everyone to provide healthcare for everyone. Lewis Carroll couldn’t have dreamed of anything quite so mad.

In order to be able to stop working but still enjoy the quality of life we feel we deserve after a certain age, we use the brute force of government to steal from those who are still productive to support those who are not. We could save for our retirement, but we choose instead to steal. We call this “Social Security.” It should be called, “Anti-Social Insecurity.”

Similarly, in order to afford to buy a house without saving the necessary down payment and establishing superior credit, we use the brute force of government to compel our neighbors to guarantee our mortgage loans with their money. When the inevitable tsunami of defaults occurred last summer, some objected to the government stealing the money to cover the losses of the banks. In truth, the money had been stolen decades ago, the minute that Fannie Mae was established.

Rather than saving the money for college tuition or allowing our children to work their way through college if we cannot afford to pay the tuition in full, we use the brute force of government to compel our neighbors at gunpoint to guarantee our student loans with their money. As with healthcare, this evil practice has driven the price of college tuition so high that not only are students going into long-term debt just to pay for their education, but their parents are taking out decades-long loans as well.

Should fortune not smile upon us or should we not develop marketable skills with which to obtain employment, we use the brute force of government to steal the money needed to sustain us from our fellow citizens. We call this the “social safety net,” but it also should be recognized as “anti-social.”

If we believe that we have a scientific theory that could lead to a new discovery that will benefit society (and enrich ourselves), we do not seek out capital to research it from those who can provide it voluntarily. We use the brute force of government to steal the money from our neighbors with the flimsy justification that “federal funding of research” will “benefit all of society” with a new medicine or a new technology.

This is by no means the length and breadth of the ways in which we violate each other’s rights on a daily basis. Every program funded by government, besides those that have the express purpose of defending our rights (police forces, the courts, the military), amount to the same thing: using our collective means of brute force to extract money from one group and give it to another.

What should be obvious is that it is not one evil group (the poor, the elderly, the corporations, Wall Street, etc.) that engages in this morally repugnant practice. Politicians will pick their scapegoats to play to their own power bases. The Republicans will blame the poor to get votes and campaign contributions from their base, the corporations and the rich. The Democrats will blame the rich and the corporations to get votes and campaign contributions from their base, the unions, average Americans, and the poor (the poor have only their votes to give and get back only the most miserable portion of the loot).

However, we must wake up to the fact that we all have a hand in this. The steady growth of one redistribution scheme after another has made it virtually impossible to function in our society without in some way participating in the looting of our fellow citizens, while we are at the same time looted ourselves. We have established all of these redistribution schemes through the democratic process. This past century has not been a progressive century. It has been a regressive one. We have regressed from a society of free people that respect each other’s inalienable rights to a society that is based upon competing groups stealing from one another through the brute force of government. We use only the support of greater numbers (majority vote) to justify the institution of each new crime. We have regressed to the brutal law of the jungle. We have become a nation of hyenas.

This has all followed logically from one fundamental break we made from our founding principles. We have elevated democracy to an ideal, at the expense of the individual rights that our government – and any government of free people – was constructed to protect. We have convinced ourselves that anything a majority vote sanctions is just, even if it violates those rights. Once we accepted that premise, the seeds of our destruction were sown.

As one might expect, this is something that the founders of our nation warned us specifically against. When one takes an objective look at our founding documents, the first thing that should jump off the pages is how little democracy there really was in our original government. Only the House of Representatives was chosen directly by the people, with the president and senate chosen indirectly by electors or the state legislatures, respectively.

More importantly, it is vital to realize what all of the limits, checks and balances, and even the Bill of Rights were intended to protect us from. They were intended to protect us from democracy.

One does not need to engage in interpretation to support this claim. The founders said it explicitly on more occasions that one could count. Here are just a few examples:

“Democracy is the most vile form of government ... democracies have ever been spectacles of turbulence and contention: have ever been found incompatible with personal security or the rights of property: and have in general been as short in their lives as they have been violent in their deaths,”[3]

“The majority, oppressing an individual, is guilty of a crime, abuses its strength, and by acting on the law of the strongest breaks up the foundations of society.”[4]

“There is no maxim, in my opinion, which is more liable to be misapplied, and which, therefore, more needs elucidation, than the current one, that the interest of the majority is the political standard of right and wrong.”[5]

These vitriolic attacks upon democracy and majority vote from the founders of our nation would probably surprise most Americans. Nevertheless, there they are. The founders understood that democracy was a means, not an end. Their end was protection of the inalienable rights of each individual. Democracy was only good and just insofar as it helped to defend those rights. Furthermore, it must be prevented from being used to violate them. Again, the founders said this explicitly.

“In short, it is the greatest absurdity to suppose it in the power of one, or any number of men, at the entering into society, to renounce their essential natural rights, or the means of preserving those rights; when the grand end of civil government, from the very nature of its institution, is for the support, protection, and defence of those very rights; the principal of which, as is before observed, are Life, Liberty, and Property. If men, through fear, fraud, or mistake, should in terms renounce or give up any essential natural right, the eternal law of reason and the grand end of society would absolutely vacate such renunciation. The right to freedom being the gift of God Almighty, it is not in the power of man to alienate this gift and voluntarily become a slave.”[6]

This passage elucidates another conclusion that proceeds from natural law. Not only is each individual prohibited from using the majority vote to violate the rights of his fellow citizens, he is prohibited from using that vote even to relinquish his own rights. That is because rights are not granted by society. They are inherent in man’s nature itself. They are non-transferable. They cannot be taken or even given away. That is the meaning of “inalienable.”

It was at the turn of the last century that we made the fundamental change in our philosophy. Since that time, we have held democracy up as our ideal at the expense of our natural rights. We did this primarily to justify the routine violation of one specific right: property. It is no accident that as democracy has become more and more extolled as an ideal, property has become more and more reviled. We have even had professors in American universities teach their students that “property is theft.”

Of course, like the hyena, we really do not care what our fellow citizens say or believe. We will not expend much energy in violating their rights to free speech or freedom of religion, because in the end we have nothing to gain from violating those rights. However, by violating their rights to the fruits of their labor, we do gain enormously at their expense. This is the true danger of democracy. We must face up to this plain fact and stop talking about everything but property. As Adams also said, “Now what liberty can there be where property is taken away without consent?”

We are at a crossroads. The system we have built upon the brutal law of the jungle is about to collapse. We are presently suggesting even more brute force (government) to try to preserve it. If we continue on this course, the relationship between predator and prey on the African savannah will seem civilized compared to the state of our society. Unfettered democracy – not unfettered capitalism – has brought us here. We must choose respect for our inalienable rights over the loot that unfettered democracy can provide us with. If not, we must admit to ourselves that the way in which we live and deal with one another is no different from that of the savage beasts of the jungle. A return to our founding principles is our only hope.

Are we not men?

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

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[1] “Cavuto” Fox Business News May 27, 2009.
[2] While hard-core progressives might call her a “Fox News Liberal” for even appearing on the hated network, her role on this telecast was without question to argue the liberal side of the issue.
[3] Madison, James Federalist #10
[4] Jefferson, Thomas To Dupont de Nemours Washington ed. vi, 591 1816
[5] Madison, James Letter to James Monroe October 5th, 1786
[6] Samuel Adams The Rights of the Colonists (1772) The Report of the Committee of Correspondence to the Boston Town Meeting, Nov. 20, 1772 Old South Leaflets no. 173 (Boston: Directors of the Old South Work, 1906) 7: pg. 419.

Tuesday, May 19, 2009

The Myth of the Laissez Faire President

It is generally accepted that one must wait several decades before looking back at an event or an era with sufficient “historical perspective.” Only from that vantage point can the significance and long-term effects of any piece of history be objectively observed, quantified, and analyzed. However, there is a dilemma inherent in this long-standing tradition. It is that there are always interested parties who wish to characterize significant events or eras in history in a way that suits their own agenda. As a result, by the time sufficient time has passed to satisfy the need for “historical perspective,” these interested parties have created an official story regarding the events in question and have had time to convince the majority of people that this official story is the truth. By the time a generation has passed, the official story has become both accepted history for academia and “conventional wisdom” for average citizens. Regardless of facts, reason, or any perspective whatsoever, the official story now is the truth.

Such has been the case countless time throughout American history. It is universally accepted that America’s Civil War started over slavery, and credits Abraham Lincoln with “freeing the slaves.” History and conventional also wisdom tells us that the quality of life of the working class in America declined during the industrial revolution, and credits the “progressive movement” for instituting needed reforms that saved the working class from capitalism. Most relevant to our situation in America today, history blames the Great Depression of the 1930’s on Herbert Hoover’s “laissez faire capitalism” and “unregulated free markets,” and credits FDR’s New Deal with ending the Depression and restoring prosperity.

When presented in the textbooks of high school history or college survey courses, there is a certain logic and reasonableness to these versions of historical events that makes them very easy to understand and accept. There is only one problem: none of them are true.

Americans are already familiar with the official story of our present crisis. Too much laissez faire capitalism” has resulted in an unprecedented crisis caused by predatory lenders, irresponsible borrowers, speculators, and other market participants acting in an environment with too little regulation. Without oversight, “unregulated free markets” naturally resulted in market players choosing short term profits over long-term prudence. This process was fueled during the past decade by George W. Bush’s “laissez faire policies.”

There is only one problem with this story – none of it is true, either. None of the problems we face today were caused by unregulated free markets and the policies of George W. Bush were in no way “laissez faire.” This is much more than an academic argument. The premise that unregulated capitalism is to blame for our present economic crisis is the basis for every action that our government is taking right now. If that premise is incorrect, then the results of action taken based upon it could be disastrous.

It is probably a good idea at this point to define some terms. Assuming that “laissez faire capitalism” and “free markets” mean the same thing, what I mean when I use those terms is this: a market economy where all exchanges of property are made with the mutual, voluntary consent of all parties to those transactions. While government’s role is limited in such a system, it is nevertheless crucial: to ensure that all transactions are made with the mutual, voluntary consent of all parties. To put it most succinctly, government’s role in a free market is to protect the property rights of each individual.

Is this what George W. Bush did or at least attempted to do? Let us examine the Bush economic policies and see for ourselves.

Bush campaigned on and did follow through upon a promise to cut taxes. He did this by reducing the income tax on the highest income earners and by sending each American family a “refund” of several hundred dollars. One might be tempted to argue that this was a move in the direction of free markets, as the returned money represented reductions of a government that had grown far beyond its role of defending life, liberty, and property. Thus, the tax money collected for these illegitimate functions was a violation of the property rights government was supposed to protect and the tax cuts were a partial remedy for those violations. This is what any self-respecting Republican would have you believe.

There is only one problem: there were no reductions in government. In fact, Bush greatly increased the size of the government with military and new entitlement spending. As a result, he ran huge deficits and doubled the national debt. Looked at objectively, there was a tenuous relationship at best between the money taxpayers had previously paid in taxes and the checks sent out by the government after all of that tax money was already spent. Furthermore, millions of Americans who hadn’t even paid taxes received “refund” checks anyway. Seen for what it was, this “tax refund” was merely a ploy to buy votes with other people’s money dressed up in Republican rhetoric, as well as a way to perpetuate debt-fueled consumerism for the benefit of President Bush’s friends in corporate America. Handing out money to people to whom it doesn’t belong has nothing to do with free markets, whether that money is borrowed from other nations or printed out of thin air. It represents complete distortion of the markets by government, along with a fundamental violation of the property rights of present and future generations.

Amidst this confusion we seem to have forgotten one major contributor to the aforementioned deficits: the Medicare drug plan. The Medicare drug plan was the Bush administration’s program from start to finish, and it was rammed through the legislature despite its dubious administrative plan and complete lack of funding. While it was rightly criticized for both of these faults, no media outlet seems to have recognized its complete antagonism toward free markets. In addition to violating property rights by forcing one group of individuals to pay for the healthcare services of others, Medicare and other government health care programs completely distort the health care market, creating artificial demand that inflates prices and suspends market forces. Here we have another major component of President Bush’s policy that is the complete antithesis of laissez faire capitalism.

The mass illusion about this president’s policies doesn’t stop there. The American public also seems to think that major deregulation occurred under President Bush, but actually the exact opposite is true. It was the Gramm-Leach-Bliley Act (repealing the Glass-Steagall Act) that lead to the massive expansion of derivates in the stock and real estate markets that helped fuel the housing bubble. However, this legislation was actually passed when President Clinton was still in office. In fact, Bush’s only significant effect on the regulatory structure was to increase regulation, not decrease it.

Due to the political fallout from the accounting scandals during the early years of Bush’s presidency, especially the Enron scandal, Bush championed new, completely unnecessary, and profoundly destructive regulations under the Sarbanes-Oxley act. Despite the fact that the accounting scandals were clear cases of fraud, which was already illegal and which could be prosecuted without a single new regulation, President Bush had a political need to show that he was “doing something” about corporate crime.

So, again in complete opposition to “free markets,” Bush signed Sarbanes-Oxley into law, saying as he did so that the bill represented “the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt."[1] Invoking FDR should have been enough on its own to erase any perception of Bush as a champion of free markets, but the hated “laissez faire” moniker seems to be a tough one to shake. As we now know, the Sarbanes-Oxley Act has been terribly destructive to American markets and has contributed to a migration of new investment away from America and to more business-friendly countries. Chalk up another victory for Bush against free markets.

Finally, there is Bush’s role in the housing bubble, the straw that broke the proverbial camel’s back regarding America’s borrow and spend economy of the past several decades. Here it should be noted that the lion’s share of the blame for this debacle should go to the Federal Reserve System, which kept interest rates artificially low and expanded money and credit to counter what would have been two recessions in the late 1990’s and early 2000’s. Remember, the private Federal Reserve System does not answer to any branch of the federal government. One could certainly argue that both Clinton and Bush merely happened to be in office while the Federal Reserve blew up two massive bubbles during their presidencies (the NASDAQ bubble and the housing bubble).

However, it was not just low interest rates or the expansion of money and credit that caused the housing bubble to inflate. There was also the role of government-sponsored enterprises Fannie Mae and Freddie Mac, which guaranteed mortgages that would not have been written in a free market. Starting with Clinton and continuing with Bush, the executive branch played cheerleader to the “ownership” society whereby every American was entitled to own their own home, whether they could afford the mortgage that went with it or not.

The mortgage debacle is often cited as an example of the “unregulated free market” producing negative results. Since both the “predatory lenders” and the “irresponsible borrowers” were acting voluntarily, the millions of subsequent defaults are characterized as the result of too little regulation on the market, allowing these freely-acting participants to eschew prudence for short-term profits. However, this analysis omits one very important fact: there were not two parties to most of these mortgage transactions, but three.

The forgotten third party was, of course, the taxpayer. It was the taxpayers’ money that was put up as collateral for the loans guaranteed by Fannie Mae and Freddie Mac, and the taxpayer was not acting freely. The taxpayer was forced by government to back these loans without his consent and against his best interests. Had the government not committed this crime against property rights to serve its goal of an “ownership society,” none of the defaulting loans would have been made.

In a truly free market, the desire for profit is balanced by the presence of risk. When one is lending one’s own money, the possibility that the borrower will default forces the lender to adhere to high lending standards to avoid making a bad loan. This is not done out of some civic duty or professional integrity (not that many lenders don’t possess both of these qualities), but out of recognized necessity for economic survival. The balance between desire for profit and risk is a naturally occurring market force when all participants are acting voluntarily in their rational self interest. However, by allowing lenders and borrowers to use other people’s money as collateral, this natural market force was suspended. To go on to call the resulting disaster the result of “unregulated free markets” is nonsense in the first degree.

Ironically, Clinton and Bush each pursued the exact same policy regarding the housing market for very different reasons. Clinton pressured Fannie Mae to take more and more risk in order to play to his base: low-income Americans who would not qualify for a mortgage in a truly free market. Bush went right on encouraging the process in order to appease his base: Wall Street investment houses that were making a killing securitizing mortgages. Regardless of the motivation, what is important to realize is that this policy is completely antithetical to the concept of free markets or laissez faire capitalism.

Of course, once the crisis began, most people recognize that nothing President Bush did could be characterized as “laissez faire.” Bush himself admitted that he was abandoning free market principles because “the market is not functioning properly,” a bizarre statement from one who supposedly believes in free markets in the first place. His massive intervention into the economy and egregious redistribution of wealth are characterized by the media as a departure from his previous “laissez faire approach.” Yet, anyone can see that this “laissez faire approach” was complete fiction. So why do all but a few contrarians keep saying it anyway?
There is an answer to that question. Characterizing Bush’s policies as “laissez faire” does serve a very useful purpose for politicians. It provides them with justification to loot more property and seize more power. The all-out war on free enterprise presently being waged by President Obama and his cohorts in Congress would not be possible if most Americans did not believe the official story that Bush’s presidency was an era of “laissez faire capitalism” or “unregulated free markets” and that these policies caused the economic crisis. Only the continued willingness by the majority of Americans to swallow this economic gibberish allows the destruction of our liberty to march forward.

To my fellow Americans, I say this: No politician (save perhaps one) is going to come forward and tell you the truth. Most of them don’t know the truth, and those that do have figured out that this official nonsense serves their own ambitions, just as saying that the world was flat once served the ambitions of medieval rulers. It is up to you to rub your eyes and look at the world as it really is. Two plus two does not equal five and you know that. Similarly, people voluntarily exchanging their own goods and services with one another can never cause anyone harm and deep down you must know that, too. It is time to reject the idiotic history that is being written about our present difficulties and demand that the evil incursions into our liberty cease immediately. You have enormous power when you know what to demand. It all starts with recognizing the obvious despite the well-funded efforts of those who wish to deceive you. As the good book saith, the truth shall set you free.[2]

[1] Bumiller, Elisabeth (2002-07-31). "Bush Signs Bill Aimed at Fraud in Corporations". The New York Times
[2] John 8:32

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

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