A Consideration Of Helicopter Rides

In recent years, the meme of throwing one’s political rivals out of helicopters has become popular among certain right-wing and libertarian groups. Unfortunately, people from all over the political spectrum tend to misunderstand the historical context of the meme, and thus interpret it incorrectly. Let us consider the backstory of helicopter rides in order to better understand their use, ethics, and utility.

Socialism in Chile

In 1970, Socialist candidate Salvador Allende became President of Chile, winning a plurality of votes and allying with the third-place Christian Democrats to gain the necessary majority to rule. He was the first openly Marxist head of state in a Latin American country to come to power through democratic means. The CIA and KGB both spent significant amounts of money to interfere in the election.

Once in power, Allende’s government took over control of large-scale industries, health care, and education. He expanded government theft and redistribution of land initiated by his predecessor Eduardo Frei Montalva, such that no estate exceeded 80 hectares (198 acres) by the end of 1972.[1] Payment of pensions and grants resumed, and social programs were greatly expanded. The arts became funded by the state. Diplomatic relations with Cuba were restored, and political prisoners were released. Price fixing for bread, wages, and rent occurred. Taxes on small incomes and property were eliminated. College was made tuition-free. The voting age was lowered to eighteen and literacy requirements were removed. Between October 1970 and July 1971, purchasing power increased 28 percent.[2] In that year, inflation fell from 36.1 percent to 22.1 percent, while average real wages rose 22.3 percent.[3]

Like all socialist experiments, the short-term results were good. But as Margaret Thatcher would later observe, “Socialist governments…always run out of other people’s money.” Government spending increased 36 percent from 1970 to 1971.[3] The national debt soared and foreign reserves declined. Declining prices in copper, Chile’s chief export commodity, only worsened matters. Black markets in staple foods emerged as rice, beans, sugar, and flour disappeared from store shelves. The Allende government announced its intent to default on debts owed to international creditors, including foreign governments. Strikes began in 1972, to which Allende responded by nationalizing trucks to keep truckers from halting the economic life of the nation. The courts intervened and made Allende return the trucks to their owners.

By the summer of 1973, Allende’s government was ripe for overthrow. On June 29, Colonel Roberto Souper surrounded the presidential palace with a tank regiment but did not succeed in overthrowing Allende. In May and again in August, the Supreme Court of Chile complained that the Allende government was not enforcing the law. The Chamber of Deputies accused Allende of refusing to act on approved constitutional amendments that would limit his socialist plans, and called on the military to restore order. Following embarassment and public protest, General Carlos Prats resigned as defense minister and commander-in-chief of the army, being replaced in the latter post by General Augusto Pinochet. Allende accused the Congress of sedition and obstruction, and argued that the accusations were false.

The Chilean Coup

On September 11, 1973, the Chilean Navy captured Valparaiso by 7:00 a.m. They closed radio and television networks in the central coast. Allende was informed of this, and went to the presidential palace. By 8:00, the army closed most broadcast stations in the capital of Santiago, while the Air Force bombed the remaining active stations. Admiral Montero, the Navy commander and an Allende loyalist, was cut off from communication. Leadership of the Navy was transferred to Jose Toribio Merino, who worked with Pinochet and Air Force General Gustavo Leigh in the coup. The leaders of the police and detectives went to the palace with their forces to protect Allende. Allende learned the full extent of the rebellion at 8:30 but refused to resign. By 9:00, the armed forces controlled all but the city center in Santiago. The military declared that they would bomb the palace if Allende resisted. Allende gave a farewell speech, and Pinochet advanced armor and infantry toward the palace. Allende’s bodyguards fired at them with sniper rifles, and General Sergio Arellano Stark called in helicopter gunships to counter them. The palace was bombed once Air Force units arrived. At 2:30, the defenders surrendered and Allende was found dead by his own hand.

Following the coup, the military killed around 3,000 leftists and imprisoned 40,000 political enemies in the National Stadium of Chile. Ninety-seven of those killed were eliminated by the Caravan of Death, a Chilean Army death squad that flew by helicopters in October 1973. The squad, led by General Stark, would travel between prisons, ordering and carrying out executions. The victims were buried in unmarked graves. This is one origin of the meme of helicopter rides, though squads other than Stark’s were responsible for the literal act referenced, having thrown 120 civilians from helicopters into the ocean, rivers, and lakes of Chile.

Peronism in Argentina

In 1946, Juan Perón of the Labor Party became President of Argentina. The majority of the Radical Civic Union, the Socialist Party, the Communist Party, and the conservative National Autonomist Party had formed an unusual alliance against him, but lost by 10 percent. His two stated goals upon becoming President were economic independence and social justice, but he had no serious plans to achieve those goals other than to attempt to hire the right advisors and underlings while refusing to side with the US or the USSR in the Cold War. Perón was intolerant of both leftist and rightist opposition, firing more than 1,500 university faculty who opposed him[4], shuttering opposition media companies, and imprisoning or exiling dissident artists and cultural figures.

Perón’s appointees encouraged labor strikes in order to obtain reforms for workers, which aligned large business interests against the Peronists. Upper-class Argentine’s resented Perón’s reforms, feeling that they upset traditional class roles. He nationalized the central bank, the railroads, public transport, utilities, universities, and merchant marine. He created the Institute for the Promotion of Trade (IAPI), which was a state monopoly for purchasing foodstuffs for export. Average real wages rose by 35 percent from 1945 to 1949,[5] while during that same period, labor’s share of national income rose from 40 percent to 49 percent.[6] Healthcare and social security were made nearly universal during Perón’s first term. GDP expanded by over 25 percent during this time,[4] which was largely due to spending the $1.7 billion in reserves from surpluses from World War II.

The economic success of Perón’s reforms would not last. The subsidized growth led to an import wave that erased the surplus by 1948. A debt of roughly $650 million owed by Great Britain to Argentina went mostly unpaid, further complicating matters.[4] The Argentine peso was devalued 70 percent between 1948 and 1950, leading to declining imports and recession. Labor strikes began to work against Perón, who responded by expelling the organizers from the unions and calling for a constitutional reform in 1949.

Perón faced no serious opponent for his 1951 re-election campaign, despite being unable to run with his wife Eva, who had fallen ill and would die the following year. Exports fell as low as $700 million in 1952, producing a $500 million trade deficit. Divisions among Peronists grew, and many of Perón’s allies resigned. He accelerated construction projects and increased rank and pay to top generals in an effort to reduce tensions. After Eva’s death, opposition to Perón intensified. On April 15, 1953, terrorists bombed a public rally of Perón supporters, killing seven and injuring 95. He responded by asking the crowd to retaliate. They responded by burning down the Jockey Club building and the Socialist Party headquarters.

In March 1954, Perón had to replace his Vice President, and his preferred choice won in a landslide. This, combined with stabilized inflation rates, motivated him to create new economic and social policies. This brought in foreign investment from automakers FIAT, Kaiser, and Daimler-Benz, as well as from Standard Oil of California. But Perón’s legalization of divorce and prostitution turned the Roman Catholic Church against him, which excommunicated him in June 1955. Perón responded by holding a public rally, and for the second time it was bombed, this time by Navy jets that fled to Uruguay afterward. 364 people were killed, and Peronists again carried out reprisals by attacking eleven churches. This led to the coup that ousted Perón on September 16, performed by nationalist Catholics in the Army and Navy led by General Eduardo Lonardi, General Pedro E. Aramburu, and Admiral Isaac Rojas. Perón barely escaped to Paraguay.

Resistance, Return, and Repression

Shortly afterward, Peronist resistance movements began organizing among disgruntled workers. Democratic rule was partially restored, but political expression for Peronists was still suppressed, so guerrilla groups began operating in the 1960s. Early efforts were small and quickly quashed, but more successful movements formed toward the end of the decade. The Peronist Armed Forces (FAP), Marxist–Leninist-Peronist Revolutionary Armed Forces (FAR), and the Marxist–Leninist Armed Forces of Liberation (FAL) were the three major players before 1973. The FAR joined an urban group of students and intellectuals called the Montoneros, while the FAL and FAP merged into the Marxist People’s Revolutionary Army (ERP).

In 1970, the Montoneros captured and killed Pedro Eugenio Aramburu, a military leader in the 1955 coup. In a few years, such events happened on a weekly basis, as did bombings of military and police buildings. Some civilian and non-government buildings were also bombed. Juan Perón returned from exile and became President again in 1973, and sided with the right-Peronists and the government against the left-Peronists. He withdrew support of the Montoneros before his death in 1974. His widow Isabel Martinez de Perón became President after his death, and she signed a number of decrees in 1975 to empower the military and police to defeat the ERP and other such groups. The right-wing death squad known as Argentine Anticommunist Alliance emerged at this time. Isabel was ousted by a coup in 1976, and the military took power. Up to this time, leftists had killed 16,000 people in their guerrilla efforts. The United States government financially backed the Argentine military, while the Cuban government backed the left-wing terror groups.

The juntas that held power between 1976 and 1983 repressed leftist dissidents, being responsible for arresting, torturing, and/or killing between 7,000 and 30,000 people. Many were Montoneros and ERP combatants, but others were civilians, students, left-wing activists, journalists, intellectuals, and labor organizers. Some of those executed were thrown from airplanes to their deaths in the Atlantic Ocean, providing another basis for the meme of helicopter rides. The worst repression reportedly occurred in 1977, after the guerrillas were largely defeated. The junta justified its action by exaggerating the threat and staging attacks to be blamed on guerrillas.

The “National Reorganization Process,” as it was called, failed in its efforts to suppress the left. As the roundup was overbroad, it sowed resentment. Some of those arrested had done nothing other than witness others being arrested in public places. Severe economic problems only added to civil unrest. The military tried to regain popularity by occupying the Falkland Islands, but their defeat by Britain in the Falklands War led them to step aside in disgrace and restore democracy.

Aftermath in Chile

In Chile, Pinochet remained in power until 1990. His 1980 constitution remains in effect, though significantly amended in 1989 and 2005 and slightly amended on eleven other occasions. In the 1990 elections, a coalition of democratic and socialist parties with the Christian Democrat Patricio Aylwin at the head was successful. Eduardo Frei Ruiz-Tagle, the son of Allende’s predecessor, led the coalition from 1994 to 2000. The Socialist Party and Party for Democracy led the coalition from 2000 to 2010. The center-right National Renewal won in 2010, but the Socialist Party regained power in 2014.

During Pinochet’s rule, Chicago School economists influenced the regime to adopt free market policies. Despite the prevalence of leftists in power since Pinochet’s rule ended, many of his economic reforms have remained in place and the economy is among the freest in the world. Aylwin and Ruiz-Tagle increased spending on social programs and reformed taxes, but avoided radical changes. Chile managed to avoid serious impact from the Mexican peso crisis of 1994 by using capital controls.

Aftermath in Argentina

In Argentina, voters elected Raul Alfonsin of the center-left Radical Civic Union once democracy was restored in 1983. He both created a commission to investigate forced disappearances and passed an amnesty law that stopped the investigations until 2005. His administration was unstable due to friction with the military and economic issues, leaving office early to let Peronist candidate Carlos Menem take office early after winning in 1989. Though he privatized many industries that Perón nationalized, he expanded both executive power and the role of the state in the economy. He won again in 1995, but the Radical Civic Union was growing and a new alliance called FrePaSo formed. By 1999, all three major parties supported free market economics. UCR and FrePaSo allied behind Fernando de la Rua to defeat Peronist Eduardo Duhalde. After some resignations and turmoil, Duhalde would get his chance in 2002. He managed to bring inflation under control, then called for elections in 2003. This brought another Peronist, Nestor Kirchner, to power. He overturned the 1986 amnesty for members of the military dictatorship and oversaw a strong economic recovery. His wife, Cristina Fernandez de Kirchner, took over in 2007. She distanced herself from traditional Peronism after Nestor’s death in 2010, favoring instead the La Campora movement that reveres the Montoneros guerrilla group. In 2015, her party lost to Mauricio Macri and his Republican Proposal party, which was allied with the Radical Civic Union.

The governments from the 1930s to the 1970s used import substitution to increase industrial growth, but this came at the expense of agricultural production. Import substitution was ended in 1976, but growth in government spending, inefficient production, and rising national debt led to inflation problems in the 1980s. The government responded to inflation in the 1990s by auctioning state-owned companies and pegging the Argentine peso to the US dollar. De la Rua followed an IMF-sponsored economic plan to deal with the government budget deficit, but an economic collapse occurred at the end of 2001. The peso was devalued again, and recovery occurred by 2005. A judicial ruling in 2012 led to a selective default in 2014 that was resolved in 2016.

Contemporary Application

Now that the context from which the meme of helicopter rides emerges is understood, we may consider its potential application against contemporary leftist rulers and agitators. Helicopter rides for political enemies are a form of ultraviolence, which is the use of force in an excessive and brutal manner as a public display to make an example out of a particular person or group. This is done for the purpose of establishing dominance and suppressing rivals within a territory, from which peace and order may follow. Utilized correctly, this will break the spirit of resistance movements and solidify one’s hold on power, which will prevent further death and destruction that would otherwise occur from terrorism and civil war. If misused, whether by subjecting overbroad numbers of people to cruel punishment or by utilizing methods that the population deems to be completely beyond the pale, ultraviolence will create resentment that will resurface later as another, stronger resistance movement. Misuse will also have a negative psychological impact on the perpetrators, causing them to lose their humanity through the commission of needless atrocities.

The above examples of Chile and Argentina suggest that ultraviolence by rightists against leftists appears to be insufficient to counter the leftward slide that naturally occurs in politics over time. One possible reason for this is that a continual march leftward is the political variant of entropy, the physical process by which the universe becomes increasingly disordered and chaotic over time. If so, this would explain why all great civilizations eventually fall and all attempts by right-wing movements to use the state to advance their agendas fail to produce lasting change. Another potential explanation is that the state is an inherently leftist institution, in that the nature of the state is to allow some people to do with impunity that which would be considered criminal if anyone else behaved identically, and the nature of the left is to disrespect individual rights in favor of their view of the collective good. This meshes well with Robert Conquest’s second law of politics; any organization not explicitly right-wing sooner or later becomes left-wing. A third explanation is that power does what it wants due to its inherent lack of accountability, meaning that a military junta has no real incentive to limit its removal of leftists to those whom have actually committed crimes. Thus, the use of helicopter rides naturally becomes overbroad when coupled with the state, and the distrust and resentment that fuels a revolution against the military government naturally follow.

Many alt-rightists who suggest the use of helicopter rides to eliminate their political rivals do not understand the above context with sufficient clarity. This leads them to long for the day when they get to pilot a massive fleet of helicopters that drops their enemies from staggering heights. For their stated goals, helicopter rides are a tool not fit for purpose, as the cost of helicopters, fuel, and pilots far exceeds that of other methods of physical removal. Helicopter rides as historically practiced also fail at performing ultraviolence, as rumors of helicopter rides pale in comparison to theatrical executions carried out in the public square on live television. The obvious retort that the victims should be dropped onto a hard surface in the public square is likely to fail by being too gruesome for the public to stomach. And ultimately, no matter how many leftists are killed, their ideas and the state apparatus to implement them remain. Overall, the alt-right approach fails because its adherents seek to use the ultimate enemy (the state) against the proximate enemy (the left) without any intention or plan to eliminate the ultimate enemy afterward, which results in long-term losses for short-term gains.

Moral Issues

While the alt-right seeks to misuse the practice of helicopter rides, libertarians and leftists tend to decry the idea as mass murder. The leftists will typically assert that the use of deadly force against someone who does not pose a deadly threat at the moment is murder. But the immediate danger doctrine, as it is known in legal circles, is a standard used by the state to perpetuate itself by creating an artificial demand for its functions of legislation, security, criminal justice, and dispute resolution while rendering the population dependent and irresponsible. Such a standard is not provable from first principles and is clearly at odds with libertarian theory on the use of force.

Libertarian theory allows one to use any amount of force necessary to not only defend oneself against aggressors, but to make people who refuse to perform restitution do so, to stop people who recklessly endanger bystanders, to reclaim stolen property, and to eliminate crime bosses and other unrepentant aggressors. While this does not allow for the full extent of the helicopter rides given by the militaries of Chile and Argentina, it can allow for statists who held power and those who carried out certain acts of aggression on their orders to be executed. Of course, rightists who wield state power (or libertarians who wield private power) in an overzealous manner against leftists would also be legitimate targets for helicopter rides if they kill people who have not committed crimes worthy of death.

A more appropriate libertarian use of helicopters is not to execute anti-libertarians by throwing them out, but to transport them out of a libertarian-controlled territory and warn them not to return. Exile and ostracism, after all, are perfectly legitimate exercises of property rights and freedom of association. Furthermore, removing people who advocate against the norms of a libertarian social order from a libertarian community is a necessary preservation mechanism, but such removal need not be fatal unless all reasonable efforts that do not involve deadly force have been tried without success.

Conclusion

There is a rich historical context behind the idea of helicopter rides for leftist agitators. Unfortunately, most modern advocates of such methods do not understand this context, which leads them to make recommendations which do not align with reality. Though leftists and some libertarians decry all uses of helicopter rides as murder, there are cases in which such acts are morally justifiable.

References:

  1. Collier, Simon; Sater, William F. (2004). A History of Chile, 1808–2002. Cambridge University Press.
  2. Zipper, Ricardo Israel (1989). Politics and Ideology in Allende’s Chile. Arizona State University, Center for Latin American Studies.
  3. Larrain, Felipe; Meller, Patricio (1991). The Socialist-Populist Chilean Experience, 1970-1973. University of Chicago Press.
  4. Rock, David (1987). Argentina, 1516–1982. University of California Press.
  5. Dufty, Norman Francis (1969). The Sociology of the Blue-collar Worker. E.J. Brill Publishing.
  6. Dornbusch, Rüdiger; Edwards, Sebastian (1991). The Macroeconomics of populism in Latin America. University of Chicago Press.

On the Supply Objection to the Gold Standard

Since the gold standard was abandoned in 1971, many people have sought to return to such a standard in order to combat inflation and rein in central banks. Keynesians and others who support fiat currency and central banking present several criticisms of this approach. One of these criticisms is particularly nonsensical, but occurs with increasing frequency: that there is not enough gold in the world to back the quantity of currency in existence, and thus returning to gold would set off a deflationary spiral while destroying several industries that depend on gold. Let us address this question from a scientific standpoint, return to economic matters, and address the claimed effects.

Physical Limits

Let us begin by finding the absolute limit of what gold can do for a monetary system. As the United States dollar is the world reserve currency at the time of this writing, it makes sense to use it as the currency to peg to gold. The smallest unit of gold is the atom, and the smallest unit of dollars is the penny. The most extreme possible case would be to set one penny equal to one atom of gold. What would this look like in practice? Any basic text on chemistry can lead us to the answer. The only stable isotope of gold is Au-197, and its molar mass is 196.967. This means that in about 197 grams of gold, or 6⅓ troy ounce coins of the type minted by many governments and private mints, there will be Avogadro’s constant of atoms, which is 6.022140857×10^23. Setting one penny equal to one atom of gold, this is $6.022×10^21 or $6.022 sextillion easily fitting in one’s hand.

This amount of money is so large that people cannot truly understand it due to the lack of a frame of reference for it. Few people will handle anything beyond millions of dollars at any point in their lives. Large businesses may deal with billions of dollars. The most powerful governments have budgets in the trillions of dollars. According to a History Channel documentary, the dollar value of the entire planet is in the quadrillions of dollars, checking in at $6,873,951,620,979,800, and subtracting Earth’s gold content leaves $6,862,465,304,321,880. As the limit of one penny per atom allows one to hold the current market value of a million Earths in one’s hand, it is clear that science imposes no physical limit to make a gold standard infeasible.

Another useful exercise is to try setting the value of all available gold equal to the value of the rest of the planet. The total available gold content at present amounts to 186,700 metric tons. Defining this amount of gold to be worth the above figure of $6,862,465,304,321,880 gives a gold price of $36,756.64 per gram or $1,143,259.40 per troy ounce. This is very expensive by current standards, but current standards do not come close to economizing the entire planet. The actual price would therefore be far lower than this, but this exercise is useful for setting an upper bound.

Current Prices

Perhaps critics of restoring sound money mean to say that the gold standard could not be reintroduced at current gold prices. In this, they are correct; at the time of this writing, gold trades at $1,284 per troy ounce. Multiplied by the 186,700 metric tons of gold available, this gives $7.707 trillion of gold-backed currency, which is not enough for the United States economy, let alone the entire world. The solution, then, is to devalue fiat currencies to fit the available gold supply. According to the CIA World Factbook, the gross world product in 2015 was $75.73 trillion. Covering this with the available gold gives a gold price of $12,616.75 per troy ounce, which is an order of magnitude above current prices, but not outlandish.

Possible Effects

Gold has gained several practical applications in recent times, particularly in medicine and technology. Critics claim that returning gold to monetary use would devastate these industries, along with the jewelry industry. In each case, critics are overreacting. Research toward creating substitutes which work nearly as well in electronics is promising. Gold salts in medicine have numerous side effects, monitoring requirements, limited efficacy, and very slow onset of action. Finally, there is no particular reason why we should care about an industry that produces impractical novelties to the extent of protecting it through fiat currency. It would be better to free up jewelers to do something more productive and helpful to others.

The other major criticism is that returning to a gold standard will cause a harmful episode of deflation. Paul Krugman writes,

“[W]hen people expect falling prices, they become less willing to spend, and in particular less willing to borrow. After all, when prices are falling, just sitting on cash becomes an investment with a positive real yield – Japanese bank deposits are a really good deal compared with those in America — and anyone considering borrowing, even for a productive investment, has to take account of the fact that the loan will have to repaid in dollars that are worth more than the dollars you borrowed.”

But those who are less willing to spend or borrow are necessarily more willing to save, which will allow them to spend more later or fund new businesses and investments. There is also the matter that one cannot hold out forever; one must eventually purchase goods and services. That the technology industry thrives despite producing the most deflationary goods shows that there is nothing harmful about this. It turns out that the value of using a current computer over the next year is worth more than holding out for a more powerful computer next year. It is also true that holding out for more food next month does not work if one cannot survive until then without food now. One may object that this would concentrate wealth in the hands of those who can hold out, but this is a feature rather than a bug because it redistributes resources to those who have been good stewards of resources.

Those who have already borrowed face a larger debt burden in a deflationary environment, and though creditors experience an equal gain, creditors are unlikely to increase their spending to offset the reduced spending of debtors. But again, this is a feature rather than a bug because it incentivizes saving over borrowing while pushing some debtors into default, thus punishing unwise lenders with loss of principal and unwise borrowers with bad credit ratings.

With falling prices, profits and wages usually have to fall as well. But profits are a function of prices and costs, which are also prices. This leaves profits largely unaffected on a percentage basis. Wages are prices as well, and the need to cut nominal wages in a deflationary environment could both incentivize firms to release their worst employees and provide pushback against minimum wage laws.

Finally, there is the belief that the sort of deflation that may be caused by returning to gold would cause a recession. But the above rebuttals deprive this problem of any mechanism by which it might occur. In fact, the empirical evidence suggests that deflation is linked to economic expansion, as occurred in the United States during the 19th century. The only period in which a correlation between deflation and depression does appear is the Great Depression (1929-34), and this may be linked to the central bank policies of the 1920s, which fraudulently inflated the money supply beyond the set gold exchange rates of the time.

Conclusion

While a free market in money would be the most desirable condition from a libertarian perspective, returning to a gold standard is a superior option to that of allowing fiat currency and central banking to continue as they are. The concerns about a lack of gold supply for returning to a gold standard are without merit, and the fears of deflation and devastation to industry are unfounded.

Tucker, Spencer, Libertarianism, and Fascism

On February 18, white nationalist and alt-right leader Richard Spencer was present in the bar of the Marriott hotel that hosted the International Students For Liberty conference. He was invited by the Hans-Hermann Hoppe Caucus, a group of right-libertarians with no official affiliation with SFL. A sign and the claims of several Hoppe Caucus members made it seem as though Spencer was an official part of the event, although he was not.

“We started the Hoppe Caucus with just a small group of people to spread diversity of conversation into the libertarian movement,” said Mitchell Steffen, founding member of the Hoppe Caucus. “We don’t agree with what Spencer believes in a lot of ways, but we still wanted to hear his point of view.”

For the better part of an hour, he and a small gathering of supporters, other listeners, and some SFL attendees engaged in political conversation in a peaceful and mostly quiet manner. Things got more raucous over time, then Jeffrey Tucker and others arrived to loudly denounce Spencer. Tucker left the scene, but those who came with him kept yelling, prompting hotel security to ask the entire crowd at the bar to leave. Spencer requested an escort out by hotel security, which they provided.

“It was really unfortunate how it turned out,” Steffen said. “I think the Hoppe Caucus did a good job of pushing the envelope and exposing hypocrisy though. Spencer’s ideas should be challenged with better libertarian ideas. He should not be bullied.”

The Exchange

First, let us analyze the exchange between Tucker and Spencer, transcribed below from the source video:

“JEFFREY TUCKER: I think fascists are not welcome at an anti-fascist conference! Not welcome! Students For Liberty is about human dignity, about liberty for all and not about fascism and that is what that man represents! You know the only reason you’re here is because of public accommodation laws; otherwise you’d be thrown out immediately, buddy.
RICHARD SPENCER: Oh, its Jeffrey Tucker! (unintelligible)
JT: (unintelligible) Yeah, this hotel, because you’re devaluing this property, my friend.
RS: Oh, really? By you, Jeffrey? I’m not sure you could throw out a fly, little Jeffrey. Hey Jeffrey, I used to read those articles by you, Jeffrey.
JT: Look, you don’t belong here. You absolutely don’t belong.
RS: Oh, I don’t belong here? What?
JT: You know why? Because we stand for liberty.
RS: Do you support the deep state, dude? That’s awesome.
JT: You stand for fascism, and you don’t belong here. Students For Liberty opposes everything that you stand for, buddy.
RS: You tweeted that you support the deep state over Trump. I think you might be a little fascist there, little Jeffrey.
JT: You are a troll. You can’t organize your own conference, so you come to our conference.
RS: That’s not an argument.
JT: You know the last time you tried, you had a bunch of losers in a room making Nazi salutes. That’s what happened at yours.
RS: That’s not an argument.
JT: So you come to our conference and troll us. If you were on Twitter right now, we’d all block you.
RS: I was invited by people here to come speak to them, Jeffrey.
JT: You are a liar! You are a liar! Fascists are liars! (exits)”

Inaccuracies

First, despite potentially misleading statements and signage made by the Hoppe Caucus, Spencer was not technically at the conference. He never went inside the part of the building reserved for the conference that required paid admission, but rather remained in a bar outside which was not reserved for ISFLC participants. Nor did Spencer himself claim to be part of the conference. Tucker is free to voice his opinion that fascists are not welcome at an anti-fascist conference, and although he does not officially speak for SFL, SFL released a statement in support of Tucker’s actions. However, the wisdom of such a position is questionable. The reaction of Tucker and his ilk is precisely why the alt-right is growing. Neutral observers see a fascist engaged in rational discussion while leftists angrily shout him down and cause a disturbance that gets the venue’s security involved, thus making the fascist seem reasonable by comparison.

Tucker then said that SFL is about human dignity, whatever that may mean, which means that it is not really about libertarianism. Libertarianism is a philosophical position on what constitutes the acceptable use of force. It says that initiating the use of force is never moral, but responding to an initiation of force with defensive force is always moral. Libertarianism says nothing about human dignity one way or another. In a libertarian social order, those who overindulge in vices, engage in criminal behaviors, and/or refuse to be productive people could very well find themselves living a life without dignity, especially if their particular community has a more socially Darwinian ethos. To be fair, Spencer is in the wrong here as well; while peaceful methods could partially achieve his stated goals, many of his goals could only be fully achieved by initiating the use of force.

Tucker claimed that Spencer would be thrown out if not for public accommodation laws and was devaluing the hotel’s property. It is impossible to know whether this is so because it is a counterfactual, but the fact that Spencer has been there several times beforehand without incident suggests otherwise. Ironically, Tucker used the pragmatic libertarian case against open borders to justify his outburst. Open state borders are a form of public accommodation, in that they require the force of government to prevent people from using their freedom of association and private property rights to exclude other people. He cannot be unaware of this inconsistency at this point, so we may reasonably conclude that Tucker is being malicious rather than simply ignorant. What is known is that chanting obscenities, as people accompanying Tucker did, diminishes the quality of experience for bystanders, thus devaluing the hotel’s property.

As an aside, one must wonder if Tucker would be so quick to denounce a similar figure who is of a protected class, such as a member of the Hotep movement, which is in many ways the black counterpart of the white nationalist alt-right. Perhaps inviting someone like Ali Shakur would be a more effective move at ISFLC 2018 than inviting Spencer. Then we could see whether Tucker would be consistent or would fear the social justice warriors around him calling him racist.

Spencer asked if Tucker supports the deep state over Trump, and suggested Tucker might be a bit fascist for doing so. This referred to a February 15 article by Tucker, arguing that however bad the establishment may be, Trump could be worse. While his analysis in that article is suspect, the only hint of fascism from Tucker is in his reaction to Spencer’s presence.

Libertarianism and Fascism

Tucker claimed that SFL stands for liberty while Spencer stands for fascism, and thus Spencer did not belong there. Let us examine the relationship between libertarianism and fascism, for there has long been a link between the two. Ludwig von Mises wrote favorably of fascism in 1927, saying,

“It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.”

Mises was prescient on the matter of how fascism in particular and reaction in general arises. There is no need to fix that which is unbroken, so a healthy social order will contain nothing to the right of conservatism, meaning the desire to maintain the status quo. Reactionary thought arises when a society makes a mistake and the social order becomes unhealthy, and fascism in particular arises as a response either to the threat of a communist takeover or to the suffering caused by socialism. Libertarianism and reaction are pieces of a whole, and libertarianism and fascism can work together in some circumstances because they share the common enemies of democracy, socialism, and communism. There is a danger here, as Mises would learn the hard way when fascists forced him out of his academic position in Vienna and away to America, but history clearly demonstrates that as bad as fascism can be, communism and socialism wreak more havoc.

The 1973 Chilean coup d’état led to another confluence between libertarianism and fascism. Before Augusto Pinochet took power, Chile was suffering from 140 percent annual inflation and contracting GDP under Marxist leadership. Pinochet was willing to listen to Milton Friedman’s students, and although the Chicago School of Economics is not as libertarian in disposition as the Austrian School, this led to an important series of market reforms and improvements in the mid-1970s and the 1980s known as the Miracle of Chile. These policies were continued after Pinochet’s rule ended in 1990, and the percentage of people living in poverty was reduced from 48 percent to 20 percent from 1988 to 2000. In 2010, Chile was the first South American nation to win membership in the Organization of Economic Cooperation and Development, an organization restricted to the world’s richest countries.

In more theoretical terms, if a private property owner under libertarian standards wishes to administer his estate after the form of a fascist dictatorship, it is his right to do so. Being the owner of the property means that he has a right to exclusive control over it, including its governance structure. However, he cannot force people to stay, so a libertarian fascist will have to be far less oppressive than statist fascists in order to keep his regime populated. This kind of governance, which offers people no voice and free exit, has proven best at limiting state power throughout history. It would also be best for limiting the tyranny of the private property owner that so concerns critics of libertarianism. This sort of libertarian fascism is not what Spencer advocates, but Tucker’s claim that fascism is necessarily opposed to libertarianism is both logically false and contradicted by the historical case of Pinochet’s Chile.

Trolling, Heiling, Blocking, Lying

Tucker claimed that Spencer came to ISFLC because he could not organize his own conference, then contradicted himself by referencing Spencer’s National Policy Institute Conference in November 2016 at which Spencer said, “Hail Trump! Hail our people! Hail victory!,” and several people in the audience responded with Nazi-style salutes. Though Spencer’s conference was much smaller (275 attendees versus 1,500+ attendees), Tucker’s claim is clearly false.

Tucker accused Spencer of being a troll and of lying about being invited to the venue. Spencer was not lying about being invited, as the Hoppe Caucus invited him and Spencer never went into the part of the building reserved for ISFLC where he was not invited. Whether Spencer is a troll or not is mostly a matter of opinion. He is not the most informed person, having been caught in numerous errors of fact throughout the years, but he was engaging in a peaceful discourse. Being offended was a choice made by Tucker and his ilk because Spencer was attracting enough attention to make the SFL establishment uncomfortable. It is telling that Tucker and company would resort to causing a disturbance and involving security forces because his side appeared to be losing in the marketplace of ideas that night.

Tucker said that if the confrontation had occurred on social media rather than in the physical world, then all ISFLC attendees would block him. This is another untestable counterfactual, but judging by the amount of people engaging with Spencer, Tucker’s claim stretches credibility.

Aftermath

The Hoppe Caucus released a statement on their Facebook page, saying,

“The Hoppe Caucus hosted Richard Spencer at ISFLC not because we were trying to start some kind of commotion, but rather an important dialogue. Hans-Hermann Hoppe invited him to his own Property and Freedom Society Conference several years ago for that very reason. After all, event organizers thought it would be a good idea to have leftists and even full-blown communists at the event as apart of the ‘big tent.’ So why not discuss the alternative right? Why not enlarge the tent a little bit further? Furthermore, who gets to define the tent? Is it the big money funders? Is it the oligarchs? Is it is the intellectual elite? Or is it the rank-and-file libertarians? These are all questions we should be pondering considering what happened this weekend.”

SFL has declared that “[t]hose responsible for the disruption have been identified, and are no longer welcome at Students For Liberty events.” Again, this is their right, but Spencer was not inside the event proper and attempting to silence Spencer and the Hoppe Caucus only makes them look like winners of the debate to a neutral observer.

Robby Soave demonstrated an ignorance of the facts of the case and libertarian principles, as well as political autism concerning group dynamics in his write-up of the matter. This would not be so notable, except that media outlets from Salon to The Blaze ran with his deeply flawed narrative. But this is to be expected, as accepting a narrative from someone else is easier than researching and thinking for oneself.

Overall, this incident illustrates why the libertarian moment seems to have passed and the alt-right movement continues to grow. Regardless of what one may think of Tucker, Spencer, fascism, or libertarianism, the tactics employed by Tucker and his ilk ensured that Spencer and fascism emerged victorious while the flawed application of libertarian ideas by those who either do not understand them or intentionally misuse them harmed the cause of liberty.

Book Review: The Age of Jihad

The Age of Jihad is a book about political unrest in the Middle East by Irish journalist Patrick Cockburn. The book is a compilation of his notes and articles over a 20-year period (1996-2016) while traveling throughout the Middle East. Cockburn did direct reporting where possible, and relied upon first-hand accounts when venturing into certain places was too dangerous.

Cockburn begins with his reporting from Afghanistan in late 2001 as the United States began its intervention to remove the Taliban from power. Next, he shares his experiences of Iraq under sanctions from 1996, 1998, and 2001, followed by his experiences there during the American occupation from 2003 to 2010. This is followed by his next forays into Afghanistan from 2009 to 2012.

The next part of the book focuses on the Arab Spring and the events that followed, with particular emphasis on countries in which the rulers were not quickly deposed. Cockburn begins with the Libyan Civil War of 2011 that removed Muammar Gaddafi from power, along with the difficulties that followed. Sectarian violence in Yemen from 2009 to 2015 and the failed uprising in Bahrain in 2011 each get a chapter.

The last part of the book covers recent developments in Syria and Iraq. First, the Arab Spring in Syria and its development into the Syrian Civil War from 2011 to 2014 is discussed in two chapters. Another two chapters are devoted to the contemporaneous destabilization of Iraq. This culminates in the rise of ISIS and the establishment of the Caliphate, in and near which the final four chapters take place.

The book gives important insight into just how terrible daily life is for people in war-torn lands, including the near-absence of basic utilities, shortages of essential items, rampant unemployment, and fear of mistreatment both from rebel groups and one’s own government. The book is filled with anecdotes of behavior which have not been seen since the Renaissance in the West, and knowledge of this behavior helps to explain animosity toward migrants from that region. The reader may be familiar with some of the events described, but almost anyone would find new information somewhere in the book.

One comes away from the book with a sense that both Western and regional powers had to be trying to perform so poorly. Western powers sought to punish Saddam Hussein without regard for the Iraqi people who bore the brunt of sanctions. They ignored cultural attitudes and sectarian divisions while turning a blind eye to mass corruption that greatly weakened the nation-building projects in Afghanistan and Iraq. They removed dictators who were stabilizing forces, thus creating power vacuums which were filled by al-Qa’ida and its affiliates. It is difficult to be so maliciously incompetent without intending to do so.

Overall, Cockburn does an excellent job of conveying the reality on the ground in most of the conflicts in the War on Terrorism and the Arab Spring. The only real improvement would be to add sections on recent events in Egypt and Tunisia, which only get passing mentions as sources for jihadists in other places. The Age of Jihad belongs on the bookshelf of any serious student of recent history, the Middle East, revolutions, war, and/or the effects of foreign intervention.

Rating: 5/5

Book Review: The Invention of Russia

The Invention of Russia is a book about the history of the Soviet Union and the formation of modern Russia by Russian journalist Arkady Ostrovsky. The book focuses on the time period of the rule of Mikhail Gorbachev, Boris Yeltsin, and Vladimir Putin. Special attention is paid to the role played by the media in shaping narratives and steering the population from the Soviet era to the present.

The prologue deals with the author’s experience during and immediately after the assassination of Boris Nemtsov on February 27, 2015. He briefly overviews events over the past few decades that factored into Nemtsov’s murder, and the author’s experiences through those years are also discussed.

The book proper is divided into two parts, each with five chapters. The division between the parts is roughly set at the 1993 Russian constitutional crisis. The first chapter begins with the end of the Soviet Union, then backtracks to give the reader a sense of Soviet history up to Gorbachev’s rise to power, with emphasis on the events that foreshadowed it, such as de-Stalinization and the crushing of the Prague Spring. The second chapter covers the time from Gorbachev’s appointment to the fall of the Berlin Wall. The nature of perestroika and glasnost are discussed, as well as how the Chernobyl incident affected both. Later in the chapter, Ostrovsky details the split between the liberal reformers and the Stalinist hardliners, as well as the beginnings of the privatization of state assets which formed the class of Russian oligarchs. The third chapter explores the final two years of the Soviet Union, including the economic difficulties, the rise of Yeltsin, the worries of the KGB and other elements of the Soviet power structure, the January Events in Lithuania, and the 1991 Soviet coup attempt. The fourth chapter looks at the role played by the media in the dissolution of the Soviet Union and how the generational shift from the shestidesiatniki to their children affected the changes. The Kommersant newspaper is highlighted as an example of the new Russian media, as well as one of several examples of less than honest business practices in the early 1990s, which occurred due to the moral vacuum left by communism. The fifth chapter covers the time from the end of the Soviet Union up to the 1993 crisis, with particular attention to the role of television, radio, and print media in shaping the narrative and saving Russia from another Communist takeover.

The sixth chapter continues the discussion of the 1993 crisis, then moves on to the creation of NTV, Russia’s first Western-style television station. Of course, NTV had to compete with Channel One and other state media, which caused tensions with the state when NTV covered the first Chechnya war from the Chechen point of view. The chapter concludes with the 1996 election, in which the media played an essential role in bringing Yeltsin up from single-digit polling to a victory over Gennady Zyuganov, his Communist challenger. The seventh chapter continues with the events after the election, including a battle between oligarchs that turned into a political crisis, continued troubles with Chechnya, the search for a vision for Russia moving forward, and finally, the 1998 Russian financial crisis.The eighth chapter shows how this milieu combined with NATO airstrikes in Serbia and an overly propagandistic media was able to elevate an obscure KGB agent named Vladimir Putin to the presidency of Russia. The decision of most of NTV’s leadership to side against this was the beginning of the end for the station. The ninth chapter covers the time from the beginning of Putin’s rule to the invasion of Ukraine in 2014, including the ouster of several high-profile opponents of the regime, the bringing of NTV into the control of Gazprom and its gradual turn toward the regime, further trouble with Chechen terrorists, the Russo-Georgian War, and the activities of various media personalities. The tenth chapter looks at Putin’s rule in light of Russian popular culture, the rise of the bureaucrat-entrepreneur, the protests of 2011-13, the military operations in Crimea and eastern Ukraine, and the use of propaganda to manufacture support for foreign aggression.

The book is excellent at face value, providing a perspective that can only come from a native person who lived through many of the events described in the book. But it is even more valuable to libertarians and reactionaries for the obvious parallels between Russian history and the current state of affairs in the West, as well as for the warnings concerning the improper dismantling of government monopolies, as happened during the transition from the Soviet Union to modern Russia.

To conclude, the unique explanations of historical events and the focus on the role of the media in steering the ship of state make this book an invaluable addition to the collection of any activist, analyst, historian, strategist, or student.

Rating: 5/5

On Market Failure

The idea of market failure is a widely believed misconception which has found widespread use in statist propaganda for the purpose of justifying government intervention in the private sector. Though the term itself has only been in use since 1958, the concept can be traced back to Henry Sidgwick. It is used to describe a situation in which the allocation of goods and services is Pareto inefficient. This occurs when the rational self-interest of individuals is at odds with the optimal outcome for a collective. Such a situation is frequently blamed on conflicts of interest, factor immobility, information asymmetry, monopolies, negative externalities, public goods, and/or time-inconsistent preferences. Among these, monopolies, negative externalities, and public goods receive the most attention from mainstream economists.

But let us pause to consider what a market is. A market is a structure that allows buyers and sellers to exchange goods, services, and information. The participants in the market for a particular commodity consist of everyone who influences the price of that commodity. To say that a market has failed is to say that this process of assembling the information about a commodity which is reflected in its price and its change over time has failed. But the causes listed above are either inconsistent with a free market or unresolvable by interventions which bind the market. Let us explore this in detail.

Monopolies

While monopolies are frequently blamed for market failures, a monopoly in a particular market is typically the result of government intervention which has raised barriers to entry in that market. Through a vicious cycle of regulatory capture, larger businesses can put smaller competitors out of business by bribing politicians and regulators to favor the former and harm the latter. This continues until a market is effectively monopolized. Therefore, this type of monopoly is actually a government failure rather than a market failure.

Another type of monopoly can occur when there are natural barriers to entry, such as the need to build vast amounts of infrastructure in order to provide a good or service. This can give the first entrant into a market an insurmountable advantage. Consumers may then complain that this monopolist is abusing them rather than show gratitude that they are getting a service which was formerly nonexistent. But if the monopolist were really overcharging, then it would become feasible for another provider to either challenge the monopoly directly or provide an alternative service. This type of monopoly is actually a market signal that a particular good or service would be better provided by another means, and entrepreneurs should look for those means.

Third, a monopoly can arise in a free market if one business satisfies all consumers of a good or service to such an extent that no one cares to compete against them. This kind of monopoly is not a market failure, but an astonishing market success.

This leaves only the ‘public goods’ argument, which merits its own section.

Public Goods

Public goods and services are those whose consumption cannot be limited to paying customers. It is frequently argued that this produces waste in the form of unnecessary duplication and excess costs born by those who are not free riders. There is also the matter that non-excludable and rivalrous resources in a commons may be depleted without intervention. The latter can only be fully resolved by eliminating the commons, as restoring exclusive control to the resource is the only method of eliminating the perverse incentives created by a commons. The concerns over free riding and unnecessary duplication ignore incentives, prove too much, and commit the broken window fallacy.

If we wish to have a rational discussion, it is essential to define terms. A problem is an undesirable situation which can be remedied. This is because a situation which is not undesirable presents no problem to solve, and an undesirable situation which has no remedy is just a fact which must be tolerated. The free rider “problem” is a situation of the latter type, as it is impractical to make sure that everyone pays exactly what they should pay for the amount of public goods that they consume. That government monopolies destroy competition, and thus the market price system, makes the free rider “problem” impossible to solve, as the information needed to determine how much each person should pay for the amount of public goods that they consume is destroyed beyond repair.

If taken to its logical conclusion, the idea that no one should be able to consume more than or pay for less than their fair share of a public good means that the state should be eliminated, as the very presence of a state means that some people are consuming more than and paying for less than their fair share of the total wealth in the economy, as states are funded by coercive means which violate private property rights. Those who receive government welfare payments, bailouts, grants, or any other form of government funding are free riding upon the backs of taxpayers and anyone else who uses currency printed by a government’s central bank. The latter group of people are forced riders who are required to pay for public goods from which they receive insufficient benefit. Charity would also be unjustifiable if the concept of the free rider problem is taken to its logical conclusion, as those who receive charity are not paying the full cost for what they are using.

But suppose we ignore this as well. If we accept for the sake of argument that there are public goods and that no one should be able to consume more than or pay for less than their fair share of a public good, then the result will be a massive distortion of the economy, as both the state and private charity must go. While the demise of statism is nothing to lament, the absence of any form of private charity would lead to the very sort of Hobbesian war that statists fear and think that they are preventing. It must also be noted that the money for payments for public goods which are now being made was once being put toward another purpose. Whether that purpose was spending on other goods and services or investment (which is really just another form of spending), the diversion of spending away from these purposes and toward public goods will eliminate some other economic activities that were occurring.

Nearly all competitive production involves supposedly wasteful duplication, in that each provider must have the infrastructure necessary to produce that which is being provided. But if the duplication is truly wasteful, the market signals this by rendering the wasteful duplication unprofitable. Government intervention interferes with such signals, and government control over an industry completely eliminates them, leading to far worse government failures than any failure of the market.

Externalities

A problem related to public goods is the problem of externalities, in which costs or benefits affect a party who did not choose to incur those costs or benefits. When firms do not pay the full cost of production, each unit costs less to produce than it should, resulting in overproduction.

The most frequent examples given are pollution, traffic congestion, and overuse of natural resources, but all of these contain externalities because the market has been prevented by governments from internalizing the costs. Air and water pollution are externalities because government intervention on behalf of polluters has eliminated the common law system of private property rights with regard to pollution. Before the Industrial Revolution, pollution was correctly viewed as an act of aggression against people and their property. Those victimized could sue for damages and obtain injunctions against further pollution. Polluters and victims can also bargain to reach an optimal level of both production and pollution. Additionally, the victims would be justified in using violence in self-defense against polluters, though this is an historical rarity. But government monopolization of environmental regulation has prevented these market solutions from being implemented. Therefore, pollution is a government failure rather than a market failure.

Traffic congestion is another tragedy of the commons that causes externalities in the form of pollution, wasted fuel, and lost time. But this is another case in which governments have monopolized a good and produced it out of accordance with market demand. Without competing private firms to build different traffic systems in search of more efficient ones and without private property rights determining location and control over the transportation system, we are left with a non-excludable good that is incentivized toward overuse. Attempted solutions of congestion pricing, mass transit, and tolls mitigate some effects, but not to the extent that private service providers might implement such methods. Again, we have government failure at work.

A third example of externalities occurs with overuse of natural resources, such as fish and lumber. But once more, we see government intervention against private property mechanisms creating problems. Because state personnel in modern democracies do not personally benefit from maintaining the value of state-controlled property and work almost solely with the usufruct thereof, they are incentivized to engage in bribery and corruption. When states sell only the resource rights but not the territory itself, they get a renewable source of income. But firms that harvest renewable resources can abuse this system, stripping the resource bare then vanishing when it is time to replenish. These ‘fly-by-night’ lumber companies, fishers, and other such exploiters lead to the fast demise of resources which were harvested and preserved for centuries prior to state intervention. In short, government fails yet again.

Before moving on, a quick word about positive externalities is in order. This is another way of talking about the free rider problem, so the same criticisms discussed above apply. But we should also consider the benefits of free riders. Although some people will argue that free riders are responsible for higher costs, they are actually signaling that a good or service is overpriced. While degenerate freeloaders do exist, most free riders who are aware of their free riding are willing to pay for what they are receiving but believe that said goods or services are overpriced. In the state-enforced absence of another provider, they choose to “pirate” the public goods rather than pay the cost which they believe to be too expensive. If there are rational, knowledgeable people in charge of a public good that has many free riders, then they will respond by lowering the cost to convince more people to contribute, which can actually raise the total contribution.

The above result is rare, of course, as rational, knowledgeable people tend to be productive rather than become part of the state apparatus. The more useful role of free riders is to crash government programs which cannot be ended by normal political means. Most government programs help a few people by a large magnitude while harming a much larger number of people by a much smaller amount. This means that an irate and tireless minority will work to keep their sacred cow from being gored, while the majority is not being harmed enough to take action to end the harm. Thus, there is nothing more permanent than a temporary government program, and it is politically impossible to abolish entitlement and welfare programs. While the strategy of overloading such programs was first proposed by leftists who wished to replace them with far more expansive redistributions of wealth, it could also be used by libertarian-minded people who wish to replace such programs with nothing.

Other Culprits

The less-discussed causes of market failure are conflicts of interest, factor immobility, information asymmetry, and time-inconsistent preferences. This is mostly because government intervention is more widely known to either cause these problems or fail to solve them. Conflicts of interest typically occur when an agent has a self-interest which is at odds with the principal that the agent is supposed to serve. For example, a lawyer may advise his client to enter protracted legal proceedings not because it is best for the client, but because it will generate more income for the lawyer. A politician may vote for a law not because it is in the best interest of the people in her district, but because she was bribed by lobbyists who support the law. The only solution to a conflict of interest is to recuse oneself from the conflict, and government offers no answer, especially since it inherently operates on conflict of interest.

Factor immobility occurs when factors of production, such as land, capital, and labor, cannot easily move between one area of the economy and another. This sometimes occurs due to malinvestment caused by government distortions of the economy; in other cases, it results from technological advancement that puts an industry into obsolescence. In any event, government regulations frequently make it more difficult to change occupations and maneuver capital than it would be in a free market. Interventions to help workers in a declining field typically fall victim to the knowledge problem; it cannot accurately retrain workers or educate future workers because it cannot know what the economy will need by the time the retraining or education is complete.

Information asymmetry occurs when some parties in a transaction has more and/or better information than others. This creates a power disparity which is sometimes called a market failure in the worst cases. Common sub-types of information asymmetry include adverse selection and moral hazard. Adverse selection occurs when one party lacks information while negotiating a contract, while moral hazard involves a lack of information about performance or an inability to obtain appropriate relief for a breach of contract. These cases are made worse by government laws, as laws can lead to both adverse selection and moral hazard. For example, an insurance firm that is legally disallowed from discriminating against high-risk customers is itself put at a higher risk through no fault or will of its own, being unable to turn away those who cost the most to insure or cancel insurance policies for reckless behavior by the insured. Fortunately, there are market methods for resolving informational asymmetries, such as rating agencies.

Time-inconsistent preferences occur when people make decisions which are inconsistent with expected utility. For example, one might choose to have ten ounces of gold today rather than eleven ounces tomorrow. Time preferences are expressed economically through interest rates, in that interest rates are the premium placed upon having something now rather than waiting for it. Governments interfere with interest rates through central bank monetary policies, leading to alterations of time preference that can be inconsistent. This is still another example of government failure rather than market failure.

Resource Failure

Another possibility for market failure which is rarely discussed is that of resource failure. If an economy becomes dependent upon a certain non-renewable resource, that resource becomes scarce, and there is no viable alternative, the result can be devastating not only to markets, but to peoples’ lives as a whole. For example, if peak oil occurs and there is no alternative energy source available to meet the energy demands fulfilled by fossil fuels, a market failure will occur due to resource failure. Another historical example is the destruction of trees on Easter Island. Resource failure is generally not amenable to government policy, and may be exacerbated by it if subsidies alter the market to keep it from finding the best solution to a resource shortage.

Complainer Failure

The last type of failure is not a market failure at all, but a failure by a critic to understand the nature of the market. Consumer demand does not drive the economy; capital investment does. The over-reliance on gross domestic product (GDP) as a measure of economic output has fooled many people into believing otherwise, but GDP neglects intermediate production at the commodity, manufacturing, and wholesale stages of production. As such, consumer demand and spending are an effect of a healthy economy and not the cause.

With this in mind, the idea that the market has somehow failed when it does not produce everything that a particular person might want and deliver it exactly where they want it for a cost that the person finds agreeable is ridiculous. A person levying this criticism should be advised to check their hubris. If a certain good or service is not produced in a free market, it is because such production is not sufficiently worthwhile for anyone to make a living through doing so. The fact that everyone gets by without that good or service indicates that no failure has taken place. Those who desire that good or service so much should make an effort to provide it so that they can have it.

Standards

The entire idea of market failures is based on Pareto efficiency. But there is no reason why we must choose Pareto efficiency as the measure of market success. One could just as well define market efficiency as the degree to which it permits its participants to achieve their individual goals. (Note that these are equivalent if the conditions of the first welfare theorem are met.) Another possible standard is that of productive efficiency, which is optimized when no additional production can occur without increasing the amount of resources, time, and/or labor involved in production. An economy with maximum productive efficiency cannot produce more of one good without producing less of another good.

Conclusion

In every case, that which appears to be a market failure is actually a failure of government policy, natural resource management, or economic understanding. We may therefore reject the very idea of market failure as yet another form of statist propaganda.

Make America Miss Again: The 2016 Republican National Convention

On July 18-21, the Republican Party held its national presidential nominating convention in Cleveland. Over a thousand delegates from all 50 states attended the convention, along with dozens of guest speakers. Each day had a different theme, based on Republican presidential nominee Donald Trump’s campaign slogan “Make America Great Again.” These were “Make America Safe Again,” “Make America Work Again,” “Make America First Again,” and “Make America One Again.” Let us examine each of these themes, how they were presented, and what is wrong with the approach of Trump and the Republicans.

Safe Again

The theme of the first night was “Make America Safe Again.” According to the GOP convention site,

“From attacks on our own soil and overseas to the tragedy in Benghazi, the policies of Barack Obama and Hillary Clinton have left us vulnerable. Our immigration system is broken, leaving our country open to security threats and the negative consequences of illegal immigration. A Donald Trump administration will listen to and learn from our nation’s heroes who have put themselves in harm’s way and pursue a national security strategy and foreign policy that will strengthen our military and make America safe again.”

But it is the United States government that does the most to make Americans unsafe, and the Trump agenda does little to address this problem. To the extent that crime has decreased since its peak in 1991, it correlates more strongly with increased firearm ownership among the citizenry than with anything the government has done.

Under a Trump regime, there will still be a multitude of laws which criminalize behaviors that do not aggress against any person or property. The police who enforce those laws will continue to make Americans unsafe. Currently, Americans are 58 times more likely to be killed by a police officer than by a terrorist, and this statistic is unlikely to improve unless more terrorism occurs during a Trump administration.

Unfortunately, that could be the case. Trump’s plan for dealing with ISIS (whatever it might be) is likely to motivate many more people to join terrorist organizations and kill Americans. When civilians are killed in drone bombings, as over 55 were in the week leading up to the convention, their surviving family members will want revenge. However horrible ISIS is, they will view it as the lesser evil if Americans killed their family members and ISIS did not. They will probably never find the drone pilots to kill them, as would be just, so they will try to kill American civilians, and some of them will succeed.

Trump’s military policy is to “build a military that’s gonna be much stronger than it is right now. It’s gonna be so strong, nobody’s gonna mess with us.” But the American military budget is five times larger than that of its next competitor (China) and as much as the next 11 countries combined. This drives up the national debt, which many experts consider to be the most serious long-term threat to national security.

Of course, the lineup of speakers failed to recognize any of this, instead focusing on the standard Republican fare of Hillary Clinton’s failure in Benghazi, the need for border security, and the hostile climate toward police. This may lead Trump to victory, but those who fail to understand the roots of problems have no hope of solving them. Then again, solving them may not be the point.

Work Again

The theme of the second night was “Make America Work Again.” According to the GOP convention site,

“The Obama years have delivered anemic economic growth, the lowest labor-force participation rate in 38 years, and job-killing regulations and legislation like Obamacare. These policies are crushing middle-class families, and a Hillary Clinton presidency would merely be an Obama third term that would deliver the same poor results. Donald Trump is a successful businessman with a solid record of creating jobs and the experience we need to get America’s economy up and running … and get Americans working again.”

Unfortunately, the speeches that night had almost nothing to do with the theme. There was criticism of the Clintons, vague talk of Trump “supporting businesses of all sizes” (whatever that means), and base assertions that Republicans care about jobs and the economy. To quote Peter Suderman, “None of these things are plans in the sense that offer or even suggest a set of specific, plausible, debatable steps that a president might take. That’s what a plan is. A plan is not the end result you hope to achieve; it’s a description of the particulars of how you intend to produce that result.”

What we know of Trump’s economic policy is not much better. His tariff proposals would not protect American jobs, but would make goods and services more expensive for the American population, as all such measures do. The tariffs against American goods that other countries would impose in response would harm American exports and destroy American jobs. His plan to oppose H1-B visas will only raise the cost of hiring people, which will result in less jobs. His support for intellectual property will maintain artificial economic inefficiencies and continue disrespect for real property rights. Labeling China a “currency manipulator,” as Trump intends to do, will strain relations while being enormously hypocritical, given the Federal Reserve’s record of currency debasement.

First Again

The theme of the third night was “Make America First Again.” According to the GOP convention site,

“America has always been an exceptional nation. Our Founding Fathers created a system of government that has protected our liberty, allowed American ingenuity to flourish, and lifted people out of poverty by creating the conditions for opportunity and prosperity. Unfortunately, years of bad policies and poor leadership have weakened our position in the world. Under a Trump administration, America will once again be a beacon of progress and opportunity.”

But there is a dark side to American exceptionalism. Too frequently, it is taken to mean that the United States government has carte blanche to commit atrocities which would land leaders of other countries in front of a war crimes tribunal. As for the Constitution, if it has truly protected liberty and allowed for human flourishing, then why does America lead the world in prison population? Why are Americans facing stagnant earnings? It is fair to point to bad policies and poor leadership, but Trump, like so many other politicians and businesspeople, fails to understand the root of the problem. As long as there is a government monopoly on currency and law, this power will be abused by those who are most capable of abusing it for their benefit.

Most of the speakers failed to speak of making America first again in a sense that was separate from the themes of other days of the convention, and some did not even have the word “first” in their speeches. Only astronaut Eileen Collins spoke of a particular example of restoring American supremacy, but the future of space exploration belongs to the private sector, not to nation-states.

Despite all of this, America is first, and therefore cannot be made first again. But this is not the real problem. America is the prettiest horse in a glue factory of global statism, and Trump has no plan to solve this problem.

One Again

The theme of the final night was “Make America One Again.” According to the GOP convention site,

“America faces serious challenges at home and threats from abroad. In order to turn our challenges into opportunities and keep America secure, we need leadership that will focus on what unites us, not what divides us. Donald Trump will move our country beyond the divisive identity politics that have been holding us back by restoring leadership, building trust, and focusing on our shared love of country and our common goal of making America great again.”

This is exactly the wrong approach. America is more divided than it has been in over a century, and these divisions are over differences which cannot be resolved by compromise and unification. This is because there is and will be no common purpose among Americans; various groups are acting toward cross purposes. The only ways that unity can be brought about are for the United States to balkanize or for one side to violently suppress the other, whether by political means or civil war. No political figure, and especially not anyone as polarizing as Donald Trump, will unify such a divided population, and that which cannot be done should not be attempted.

Great Again

The overall theme of the Trump campaign is “Make America Great Again.” But its approach is misguided at every turn, either failing to recognize the true nature of problems or addressing them in ways which will only make them worse. As this is the latest in a long line of such campaigns by all major political parties, a more appropriate slogan would be “Make America Miss Again.”

Cut Puerto Rico Loose

On May 2, the Puerto Rican government missed an interest payment on bonds it has issued to an extent of $422 million. Worries of default on the territory’s general obligation bonds are continually rising, as it appears that a $2 billion payment due on July 1 will also go unpaid.

Of course, the usual suspects are calling for intervention to “save” the island from its financial woes. Some Democrats are openly clinging to Keynesian ideas of bailouts for troubled financial instruments, despite the abject failure of such measures to repair the mainland U.S. economy since 2008. Meanwhile, House Speaker Paul Ryan has made the statement that “[o]ur primary responsibility is to protect the American taxpayer and to help bring order to the chaos that will befall Puerto Rico if the status quo continues going in the direction it’s going,” which is contradictory because attempting to rescue Puerto Rico will require victimizing not only the American taxpayer, but everyone who holds U.S. dollars.

That such a bailout would be funded by money gained by the state through extortion and currency debasement is terrible enough, but rescuing Puerto Ricans from the just consequences of their actions also creates a moral hazard. If Puerto Rico, then why not Detroit? Chicago? California, even? If $72 billion in debt plus $44 billion in unfunded liabilities for a outlying territory, then why not more for the U.S. mainland? Rewarding and subsidizing bad behavior only encourages more of it, not only from some irresponsible actors, but from all of them.

It must also be noted that in the current political climate, Republicans will be demonized by Democrats and the lapdog media regardless of what happens, and the Republican rank-and-file will be given the shaft. If there is no bailout, then Democrats will accuse Republicans of being too stingy to help people in need, especially ethnic minorities. If there is a bailout and trouble continues, which it will under such circumstances, then Democrats will blame Republicans for not using enough stimulus and/or for allocating the funds poorly. If one will face accusations regardless of one’s actions, then one might as well get one’s money’s worth and do the right thing. And what is the right thing?

Do not only abstain from bailouts; cut Puerto Rico loose.

Let us face facts; Puerto Rico has never really been a part of America, not in terms of economics, culture, language, or identity. In fact, it was not a part of America at all until 1898, when the United States gained control of it from Spain (along with Guam and the Philippines) under the Treaty of Paris, which ended the Spanish-American War. For four centuries prior since being claimed by Columbus in 1493, Puerto Rico had been a Spanish colony. The people there used the Spanish language, but developed their own sense of culture and national identity. (This commonly occurs upon islands, as the ocean makes for a clear barrier between in-group and out-group.) That they may call themselves U.S. citizens is only a matter of law.

The economic well-being of Puerto Rico is not on par with the rest of the United States. If it were an independent nation, it would rank between 60th and 62nd in GDP, with a similar economic output to Angola, Morocco, and Slovakia, none of which are exactly paragons of economic development. If it were a U.S. state, it would rank 37th out of 51. The difference is far more pronounced when considering other measurements. In terms of public debt to GDP, Puerto Rico has a debt of 66 percent of GDP, while no U.S. state exceeds 25 percent. The per capita public debt of Puerto Rico is $19,486.60, which exceeds that of every U.S. state but is lower than that of the District of Columbia. The per capita income in Puerto Rico is $11,241, placing it just above half of the worst U.S. state (Mississippi, $21,036) and far below the best (D.C., $45,877; Connecticut, $39,373).

While cutting Puerto Rico loose is a matter of rational self-interest for mainland Americans, it is also a way to end their victimization at the hands of central bankers and the investors who react to their pernicious policies. While a free market would have much higher interest rates and no currency debasement, central banks like the Federal Reserve have kept interest rates artificially low and have greatly expanded the monetary supply. Savers who are used to getting a reasonable rate of return in a savings account thus have to seek riskier alternatives. Those who have enough capital to access hedge funds, high-risk sovereign debt becomes an attractive option. Those who are poorer either sit on fiat currency as it loses value or venture into precious metals and cryptocurrencies, which can pose even more risk and volatility. While Puerto Rico would likely form a central bank and issue its own fiat currency if it were cut loose, this would keep the Federal Reserve from imposing an economic system which encourages booms that favor foreign investors at the cost of busts that burden Puerto Ricans. A problem of this sort has already been seen in Greece, and the mistakes made by the European Central Bank should not be repeated.

The Federal Reserve Turns 100: A Timeline Of Economic Mismanagement

On Dec. 23, 1913, Congress passed the Federal Reserve Act, which created a central banking system in the United States, of which all nationally chartered banks were forced to become members. (State banks had a choice, but nonmember banks had to keep deposit accounts with member banks, and so were under control of the Federal Reserve as well.) The Federal Reserve Note, the current legal tender, was also created at this time. It has now been a full century since this institution was created, so let us reflect upon its various (mis)deeds. This a timeline of some of the major events involving the Federal Reserve over the past century:

1913: The Federal Reserve is created.

1914: Benjamin Strong becomes the first Governor of the Federal Reserve Bank of New York, which was the most powerful position in the Federal Reserve until the Banking Acts of 1933 and 1935. Charles S. Hamlin becomes the first Chairman of the Federal Reserve.

1916: Prices have increased over 10 percent since 1913. William P. G. Harding becomes Chairman of the Federal Reserve.

1918: World War I drives prices higher. Prices have increased over 50 percent since 1913.

c. 1919: The money supply has doubled since 1913. This is an inflation rate of 100 percent in a six-year period by the correct definition of inflation.

1920: Prices have doubled since 1913. This is an inflation rate of 100 percent in a seven-year period by the commonly used (but incorrect) definition of inflation. This, along with the realignment to a peacetime economy following World War I, helps to cause the Depression of 1920-21.

1921: Following the Depression of 1920-21, the Fed continues inflationary policies to pay off war debts and help the Bank of England maintain a phony gold standard. This consequences of this were partly to blame for the Great Depression.

1922: Prices fall, but have still increased 70 percent since 1913. Prices remain near this level for the rest of the decade. Daniel Crissinger becomes Chairman of the Federal Reserve.

1927: Roy A. Young becomes Chairman of the Federal Reserve.

1928: Benjamin Strong dies in office. George L. Harrison becomes President of the Federal Reserve Bank of New York.

c. 1929: The money supply has tripled since 1913.

1930: Eugene Meyer becomes Chairman of the Federal Reserve.

1930-33: Prices fall again, and continue falling until reaching a low of 31 percent above 1913 levels in 1933. Prices remain near this level for the rest of the decade.

1933: Eugene R. Black becomes Chairman of the Federal Reserve. President Franklin Roosevelt orders that gold owned by American citizens be confiscated and replaced with Federal Reserve Notes.

1933-35: The Banking Acts create the Federal Deposit Insurance Commission, insuring individual deposits and thereby creating a moral hazard for banks, which no longer needed to be as careful with their assets.

1934: Marriner S. Eccles becomes Chairman of the Federal Reserve.

1938: The Federal Reserve panics at the potential for inflation, and doubles the minimum reserve requirements. This sends the economy into a tailspin of credit liquidation.

c. 1941: The money supply has quadrupled since 1913.

1941-45: World War II drives prices higher, from 41.4 percent above 1913 levels in 1941 to 81.8 percent above 1913 levels in 1945.

c. 1943: The money supply has quintupled since 1913.

1947: Prices are again more than double those of 1913.

1948: Thomas B. McCabe becomes Chairman of the Federal Reserve.

1951: William McChesney Martin becomes Chairman of the Federal Reserve.

c. 1952: The money supply has increased ten-fold since 1913.

1960: The money supply has increased twenty-fold since 1913.

1961: Prices have tripled since 1913.

1966: The money supply has increased thirty-fold since 1913.

1970: Arthur F. Burns becomes Chairman of the Federal Reserve. The money supply has increased forty-fold since 1913.

1971: Prices have quadrupled since 1913. President Nixon ends the Bretton Woods system, closing the gold window. From this point onward, the Federal Reserve is able to create currency at a much greater pace, leading to much faster inflation and price increases.

1972: The money supply has increased fifty-fold since 1913.

1975: Prices have quintupled since 1913.

1978: G. William Miller becomes Chairman of the Federal Reserve.

1979: Paul Volcker becomes Chairman of the Federal Reserve.

1980: The Depository Institutions Deregulation and Monetary Control Act gives the Federal Reserve more control over non-member banks. The money supply has increased one hundred-fold since 1913.

1983: Prices have increased ten-fold since 1913.

1987: Alan Greenspan becomes Chairman of the Federal Reserve.

1990: The money supply has increased two hundred-fold since 1913.

1995: Prices have increased fifteen-fold since 1913.

2000: The money supply has increased three hundred-fold since 1913.

2004: The Federal Reserve lowers its interest rate target, leading to malinvestments in housing that create a bubble. The money supply has increased four hundred-fold since 1913.

2006: Ben Bernanke becomes Chairman of the Federal Reserve. Prices have increased twenty-fold since 1913. The housing bubble peaks.

2008: The money supply has increased five hundred-fold since 1913. The housing bubble bursts. The Federal Reserve begins quantitative easing in an attempt to mitigate the financial crisis of 2007-08.

2009-2011: Bloomberg L.P. sues the Board of Governors of the Federal Reserve System for disclosure of information about banks and other financial institutions that had borrowed from the Federal Reserve discount window during the United States housing bubble and ensuing financial crisis. The Fed was forced to release the information, which showed that the Fed had made as much as $1.2 trillion available to banks and other companies in the form of emergency loans between 2007 and 2010.

2013: Over the past century, the US dollar has lost 95.6 percent of its purchasing power. On average, an item that cost $100 in 1913 costs $2,354.23 at present. Also, while there were approximately $16 billion in circulation in 1913, this has expanded to $10.9718 trillion, an increase of over 68,000 percent.