Book Review: The Euro

The Euro is a book about the shortcomings of the eurozone currency project by American economist Joseph Stiglitz. The book makes a case against many of the policies pursued by European leaders thus far and recommends several alternatives, including further integration, a flexible euro, and the exit of one or more members. The book is divided into twelve chapters which explore different aspects of the problem and possible solutions.

A short preface details Stiglitz’s view of the economic problems of Europe as being largely attributable to the creation of a single currency zone without the creation of other institutions that are found in other such places elsewhere in the world. He compares the euro to the gold standard, repeating the flawed mainstream view that deflation is bad. His Keynesian approach to economics and thoroughly statist worldview is apparent from the beginning. That being said, Stiglitz appears to want to solve problems and correctly identifies some people and institutions as being uninterested in doing so.

The opening section begins with a chapter that expands upon the preface and outlines the rest of the book. There is little here that is not covered in greater detail later, so let us move on. In Chapter 2, Stiglitz argues that the poor results of the euro should have been expected because economic integration of this sort cannot come before political integration. Here, he contends that military might no longer shapes outcomes as it once did, but this is dubious because nothing short of a nuclear exchange that no one wants could have stopped the United States from conquering and colonizing Iraq if that had been the intention and American leadership had used its full power. So too for Russia in Ukraine and Crimea. His responses to other arguments for a single currency make more sense. He states the fallacious mainstream position on public goods, claiming without logic or evidence that it is impossible for markets to provide basic research and common utilities. This amounts to a confusion of collective action with state action. Even so, Stiglitz does recognize that localization is better than central planning from afar, though his disdain for German policies makes him inconsistent on this point. He then turns to economic integration, discussing the importance of German history with hyperinflation and its prominent role in modern Europe for understanding the European Central Bank. Next, Stiglitz writes about effect that a shared currency has on economic integration, which is mixed. Like many Keynesians, he accuses the market of failure when this is actually impossible; such events are actually failures of government, resources, or individual people. He also regards economics as scientific, even though the scientific method cannot be applied to subjects in which counterfactuals are so important but also unobservable. As usual, the word ‘neoliberal’ says more about the person using it than anything else. He concludes by arguing that there is a democratic deficit in Europe, even though he argues elsewhere in the book against incentive structures which are necessarily part of any democracy.

Europe’s lackluster economic performance since the 2008 crisis is the subject of the third chapter. Stiglitz begins by claiming that Keynesianism is a success because it has lengthened business cycles and shortened downturns, but it has also made the downturns that do occur so much worse that markets were better off before such interventionism. Much of the chapter consists of empirical data for Europe since 2007. When discussing unemployment, he seems not to recognize that unemployment benefits subsidize a negative behavior and will thus produce more of that behavior. Stiglitz relies upon the Gini coefficient when discussing inequality, which is a faulty metric because it measures pre-tax income rather than after-tax consumption. This causes it to exaggerate the amount of income inequality. His detailing of the long-term adverse effects of recession in terms of destroyed human capital is largely correct, but he again recommends interventionism that tends to worsen such problems. He also takes the position that the state should protect those at the economic bottom, though almost every economist would avoid social Darwinism on this front. Stiglitz then commits a fixed pie fallacy by arguing that trade surpluses necessarily cause trade deficits elsewhere, when the reality is quite different. He concludes by correctly noting that the counterfactuals help critics of the euro, and that there is no better explanation for many of Europe’s troubles than sharing a common currency across uncommon societies and economies.

The second section argues that the euro suffers from a flawed initial design. In Chapter 4, the requirements for a single currency region to be successful are considered. Here, Stiglitz uplifts full employment and market stability as goals while denouncing those who favor economic freedom as a “lunatic fringe.” This leads him to contemplate a false dilemma between national control of money and supranational control. He blames market fundamentalism (which he calls neoliberalism) for the crisis of 2008, despite the fact that markets were altered by central bankers in such a way as to cause the crash, which he all but says elsewhere. In explaining the differences between the United States and the eurozone, Stiglitz highlights the freer movement of Americans, the identity of Americans at the national level rather than the state level (at least in modern times), and the federal nature of monetary and fiscal stimulus. He is correct to say that there must either be “more Europe” or “less Europe,” but sides with the former. He describes the Keynesian theory of business cycles, but makes no mention of the Austrian theory. Stiglitz then repeats the tired fallacy that austerity caused the Great Depression and the current malaise, rather than central bank shenanigans and tariff policies. His blame for the gold standard is similarly misguided. He somewhat fixes an error from the previous chapter by clarifying that trade imbalances are not a problem if currency exchange rates can change to compensate for them. He straw-mans the laissez-faire position on unemployment by saying that it views unemployment due to market adjustments as good rather than as simply necessary. Stiglitz then gets a few points correct: low wages undermine worker morale and productivity, falling wages may not amount to falling prices if firms are worried about their solvency, and monetary stimulus has a breaking point at which interest rates cannot be lowered further. But he again blames the private sector for being excessive when it is only reacting to perverse incentives created by governments and central banks. There is little to fault in Stiglitz’s explanation of why currency areas are prone to crisis except for the preceding error, but it never occurs to him to simply not have such an area. The chapter ends by repeating many of the fallacious arguments from the previous chapter concerning trade surpluses and deficits.

The fifth chapter considers the economic divergence of the eurozone countries. Stiglitz argues in favor of institutional frameworks to prevent the need for bailouts, as well as funds to make depositors whole and provide bailouts. This ignores the moral hazard created by such a regime that causes bankers to take excessive risks, as well as the powerful incentives that an absence of protection would have on depositors to act responsibly and hold bankers accountable. His view of regulation is starry-eyed, missing the entire concept of regulatory capture. This is especially striking, given his focus on institutional capture in the following chapter. Stiglitz rightly complains of capitalized gains and socialized losses among bankers. In his consideration of other sources of divergence, he again fails to consider the possibility of turning over infrastructure to private development, instead proposing expansion of the European Investment Bank, which is certain to become another statist boondoggle. His view of knowledge markets is flawed in the same manner as his view of economies; it fails to account for the distortions that statism necessarily causes which lead to various types of failure. He concludes the chapter by showing how policies in the eurozone have caused greater instability, but cannot seem to avoid blaming the private sector for responding to the incentives imposed upon it.

In Chapter 6, Stiglitz examines the European Central Bank. He begins by saying that open markets and free competition can efficiently allocate resources only in the presence of adequate government regulation. This is a contradiction because an absence of government regulation defines an open market with free competition. His arguments concerning the inflation-only mandate of the ECB and the problems it causes would be much stronger if the Austrian business cycle theory were anywhere to be found in the book. His description of events in Chile under Pinochet does not agree with the long-term result of economic prosperity relative to the rest of South America and neglects how much worse conditions would have been under Salvador Allende. His claim that markets are supposed to be efficient and stable are a straw man; instability in the form of creative destruction and inefficiency by some metrics rather than others are inherent in a market economy. Stiglitz correctly writes that monetary policy is always a political question, pitting creditors against debtors for control of the central bank. But he leaves unclear how democracy is supposed to hold central bankers accountable. He also must not know any libertarians, or he would know that some people have proposed taking away spending power from governments to ensure that they do not misbehave. The chapter ends with a history of fashionable central bank policies over time and what was wrong with them from a Keynesian perspective.

The next two chapters delve into the Greek situation in particular, as Greece has suffered a more severe economic crisis than any other eurozone country. The seventh chapter explores the effect that the Troika’s policies had on countries in crisis. Stiglitz accuses some European leaders of acting in bad faith by purposefully attempting to punish governments with different political views from their own, which may be accurate. He continues his misguided attack on austerity, though it has more merit against what Europeans have actually done than against real austerity. He correctly explains the problem with primary surpluses, but then commits the broken window fallacy by embracing Keynesian multipliers. Stiglitz accurately diagnoses the problems of increasing taxes, but seeks to aid governments in collecting them rather than encourage economic freedom and stronger property rights. He describes his ideal system of property taxation in the same tone that a proud and unrepentant thief might use to boast of his crimes. Although he is correct to say that particular moves toward privatization and economic freedom may produce adverse results in particular contexts, this is a justification not for state intervention, but for undoing even more statism so as to remove the problematic context. Stiglitz notes that the hegemony of American military power has put Europe into a Pax Romana problem in which it cannot fend for itself against a real threat, but advises that this problem be worsened in the name of fiscal restraint. He compares reductions in pensions to wage theft when the two are clearly different. It is the responsibility of workers to figure out that they are being offered terms which may be impossible for the employer to meet in the future and practice caveat emptor. As for bank bailouts and debt restructuring, Stiglitz describes the situation well except for his faulty view of austerity.

Chapter 8 delves into structural reforms in Greece that made matters worse. Again, Stiglitz’s views of austerity and democracy corrupt an otherwise sound analysis of trivial and counterproductive actions taken by the Troika. He claims without proof that industrial policies are required to advance countries that are lagging behind in technological development, neglecting that markets are not doing this because they are either disallowed from doing so or are assuming that the state will do this for them. He criticizes intergenerational transmission of advantage and seeks to use the state against it, when it should be championed as both eugenic and important for maintaining a natural aristocracy. Stiglitz argues for a price on carbon emissions and claims that the private sector will not address climate change, when again the state has kept this from happening. He finishes by discussing counterfactuals, which is interesting given his empiricist thinking on economics.

The final four chapters deal with various proposals going forward. In the ninth chapter, Stiglitz offers his advice for fixing the eurozone. As before, he embraces what Henry Hazlitt called “the fetish of full employment” as the goal of his policy proposals. Much of the content of the chapter rehashes proposals from previous chapters. He seeks to create common deposit insurance and common resolution while abolishing place-based debt within the EU. This will create moral hazards and work against people who wish to escape debt slavery inflicted upon them by their ancestors. He calls for wages to be raised in countries with surpluses, which will lead to unemployment in those countries as workers whose labor is not worth higher wages are laid off. He fundamentally misunderstands precious metals, failing to understand their role as a store of value and medium of exchange, even if no longer officially used in such capacities. Stiglitz seeks to make the financial sector and other corporations serve society, but fails to recognize that the organs of a statist social order inherently and irrevocably serve themselves at the expense of the society. The shortsightedness of markets of which he complains is actually caused by the institutions that he seeks to use to solve the problem. One of the few sound recommendations made in this chapter is the creation of a super-Chapter 11 bankruptcy procedure to quickly restructure debt. He goes on to propose that EU taxes be based on citizenship, and that some of the proceeds be used for foreign aid or resettlement of migrants, further impoverishing and culturally endangering Europeans.

Chapter 10 examines the possibility of what Stiglitz calls “an amicable divorce,” in which countries exit the eurozone. He considers the example of Grexit, or Greece returning to its own currency that he calls the Greek-euro but would probably be called the drachma, as it was before the euro. He proposes that Greece create a new electronic currency to ease concerns over producing coins and banknotes, stop tax avoidance, bring everyone into the financial system, and facilitate the ability of central banks to create credit. Stiglitz fails to consider that people are likely to reject such a system in favor of cryptocurrencies, which have all of the benefits of such a system without most of the drawbacks, and that such a system could offer states tyrannical control over their citizens. His view of credit indicates magical thinking, although this is quite common in modern financial circles. He again blames the private sector for problems caused by politicians and central bankers, while ignoring peer-to-peer lending as a substitute for modern credit systems. Stiglitz describes a potential system of credit auctions which could be abused with much the same ease as the current system. He admits and supports what should be abhorrent to any decent person: that fiat currencies are ultimately given value by extortion in the form of taxation. Stiglitz correctly says that a new Greek currency would enable them to devalue it to correct trade imbalances, but his proposed system of trade tokens for the same purpose would be redundant. He equates deflation with a deficiency of aggregate demand, neglecting the possibilities of an abundance of supply or improvements in efficiency and/or quality. His description of currency change as a debt restructuring is insightful. To end the chapter, Stiglitz considers the alternative of Germany leaving the eurozone, though it is unlikely that they would give up their current position of power so willingly. This segues into the topic of the next chapter, which is a flexible euro consisting of several subdivisions.

Stiglitz uses Finland as a counterexample against those who claim that profligacy in southern Europe is to blame, rather than the structure of the eurozone. Most of his argument here is correct, except for his view of austerity. His proposal in this chapter is to have several eurozones with fluctuating exchange rates, which could be brought closer together over time as political integration occurs, eventually resulting in economic integration. The details are borrowed from the previous two chapters. Though more likely to succeed than the proposals in those chapters, it is also the least likely to be adopted. Stiglitz correctly recognizes that having a single currency area is an interference in the market in and of itself, monopolizing exchange and interest rates in the area, but cannot seem to fathom that his flexible euro proposal also does this on a smaller scale. He claims that it can be better not to simply rely on prices for the allocation of resources, but does not explain how to solve the local knowledge problem or the economic calculation problem in a superior manner. He also says that history shows free banking to be a disaster, when the truth is quite the opposite.

The final chapter sees Stiglitz review many themes from previous chapters, but he also covers topics which are barely mentioned elsewhere. He denounces anti-immigrant groups in Europe, which are only trying to resist demographic replacement by a ruling class that they did not ask to replace them. So much for the “democratic accountability” that Stiglitz extols in the same breath. He blames right-wing economic ideology for rising inequality in the United States beginning with the Reagan administration, but incomes really began to diverge ten years earlier, when Nixon ended the gold standard. Stiglitz expresses a desire to preserve the Enlightenment values of Europe, but cannot comprehend how letting in migrants with distinctly anti-Enlightenment values will jeopardize that mission. On the issue of trade policy, he understands that free trade is not always best for all parties involved, as it can destroy important societal arrangements that prevent conflict. But then Stiglitz incredulously asks how one could have expected that Europe’s leaders would create such economic dysfunction, with massive unemployment and lack of economic security. The answer is that a proper amount of cynicism would require such an expectation.

Overall, the best thing that can be said for the book is that it is not an effort made in bad faith. Stiglitz correctly identifies many of the problems with the current state of affairs in Europe and seems to want to help, but his proposed solutions are thoroughly misguided. Despite his palpable disdain for Milton Friedman and other Chicago School monetarists, he suffers from one of the worst of their faults: a desire to solve the immediate problems set before him combined with a lack of broader perspective. This leads him to propose a banking system which could be used to terrible effect against political dissidents, tax collection schemes that would indicate criminal intent in any non-statist context, and forced political integration by means of stealth and subterfuge. He also seems to believe that everything would be fine if only state power were used by the right people to implement the right policies. It never occurs to him that the power itself might be the problem. The Euro is an interesting case study in leftist economic thought, but those looking for real solutions to Europe’s economic woes should keep looking.

Rating: 2.5/5

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.

The Political Autism of Anti-Protectionism

There is a certain species of policy analysis which exhibits many of the symptoms which are commonly found among high-functioning autistic people. Among these symptoms are an inability to understand context, a troubling need for routines, an obsession with particular topics, difficulty with abstract thinking, difficulty in understanding other perspectives, a lack of empathy, an inability to process social cues, repetitive use of set phrases, and an inability to identify or think about groups or shared interests. Analysis that suffers from some (or even all) of these shortcomings can be found all over the political spectrum, but it seems to come disproportionately from libertarian thinkers.

The rise of Donald Trump has brought a protectionist view of trade policy back to the forefront for the first time in decades. Naturally, this gives libertarians pause, as protectionism violates individual liberties, is economically inefficient, and gives more money and power to the state. In a textbook-style vacuum, free trade is both more libertarian and more beneficial than protectionism. But to stop there and fail to address the relevant current conditions would be politically autistic by way of context denial. Thus, it is necessary to examine how protectionist policies can make sense in certain contexts, as well as the problems with supporting a policy of free trade in all circumstances.

On January 26, White House Press Secretary Sean Spicer floated the idea of a 20 percent import tariff on goods coming from Mexico as a means of funding a border wall. This prompted outrage from the establishment media, along with claims and analysis showing that Americans would pay the tariff rather than Mexico because Mexican products would be more expensive for American consumers as a result. This would be true if all else were equal, but this is not the case.

The Context

Mexico already has import tariffs which can be as high as 140.4 percent and average 13.97 percent. For Mexico to tariff US goods while the US does not tariff Mexican goods puts American companies at a disadvantage. While the libertarian may note that smuggling to evade the tariff would be a morally acceptable response, this is not feasible on the level necessary to conduct a national economy. Revolution to abolish the governments that impose the tariffs would also be morally acceptable, but this is likewise unfeasible, at least for the immediate future. Eliminating government interference in the economy that makes it harder to do business domestically is another option which is better than protective tariffs, but doing so to the extent and with the quickness which would be necessary is unlikely. The next best option, then, is for the US government to respond with an equivalent counter-tariff to attempt to even out the discrepancies caused by another state’s tariffs, with an aim toward negotiating abolition of the tariff on both sides.1 Given that 81.2 percent of Mexican exports for a worth of $309.2 billion go to the United States and 15.7 percent of US exports for $236.4 billion go to Mexico, the threat of a trade war clearly gives leverage to the United States. Peter Navarro, who heads the White House National Trade Council, said as much to CNNMoney:

“The tariff is not an end game, it’s a strategy…to renegotiate trade deals. Tariffs wouldn’t put U.S. jobs at risk.”

It is important to remember that much like nuclear weapons, the primary purpose of tariffs is not to be directly utilized, but to alter the behavior of other states by serving as a deterrent. The threat of a trade war by way of tariffs and counter-tariffs helps to keep the economic peace, just as peace through mutually assured destruction does with nuclear weapons. A response to another nation’s tariff to gain leverage against it is the secondary purpose, as explained earlier. Those who fail to account for this are exhibiting political autism by engaging in context denial.

The Analysis

A 20 percent tariff would discourage Americans from buying Mexican products. This would also raise the cost of goods which are currently provided at the lowest cost by Mexicans. The increase would not necessarily be 20 percent; to illustrate this, let us consider a simple example. Suppose that avocados from Mexico currently cost $1 each, while equivalent avocados grown in California cost $1.10 each. The tariff makes it so that initially, the Mexican avocados increase to $1.20 while the California avocados remain at $1.10. Initially, the American consumer pays 10 percent more but switches to the California source as much as possible. This diversion of funds from Mexico to California allows the Californian producers to make investments to improve their techniques and expand their operations, which will lower the cost of their products over time, potentially even below the $1 level that consumers originally paid to Mexico.

Whether this is a superior outcome for the American consumer depends upon a variety of factors, such as the available farmland in each location, the weather patterns over the next several years, the intelligence of American agriculturalists versus Mexican agriculturalists, and so on. What is known is that as few Americans as possible will be paying the tariff to the US government, and as many as possible will instead pay only part of it to American producers. This will not create net jobs, but it will have influence over where jobs will be created, which will give some American consumers more money to spend. The inability to think abstractly to get beyond the basic free trade position is an example of political autism.

Rationalism, Not Empiricism

Many economists will attempt to argue for free trade on empirical grounds, but this is a flawed approach. Economics is not a science, but an a priori discipline akin to logic and mathematics. The logical truths of economics can be illustrated by using empirical examples, but the discipline itself is not data-driven.

Most empirical cases for free trade rely upon David Ricardo’s theory of comparative advantage. But comparative advantage makes several starting assumptions which are not always true, such as non-diminishing returns, the presence of multiple trade commodities, inelastic demand, domestically mobile labor, and internationally immobile labor. Although the available evidence suggests that free trade raises living standards, increases purchasing power, and accelerates economic development, these studies suffer from both the cum hoc ergo propter hoc fallacy and the absence of counterfactuals for each case. This is not cause for dismissal, but it is cause for suspicion. A proper case for free trade must rest on logic, not observation.

Although free trade usually provides more net benefit than protectionism in the long run, people do not live in the long run; they live their lives and feel economic pain here and now. Furthermore, a net benefit does not mean that each individual person benefits; only that the sum of all benefits and malefits is greater than zero. It may be the case that a minority sees great gains while a majority suffers somewhat smaller losses, and this would explain why a democratic system would produce protectionist policies. Political autism manifests here in the form of the lack of empathy for those who are harmed by free trade in the short-term, the difficulty of understanding their perspective, and the inability to think properly about individuals versus groups.

Trump And Adaptation

The desire for protective tariffs among Trump supporters fits into a larger picture. Following Trump’s election, many leftists have criticized Trump supporters as being unwilling or unable to adapt to a changing world, and Trumpism as a reaction to that changing world. But an organism faced with a changing environment has three options: fail, adapt itself to the environment, or adapt the environment to itself. Most species are almost exclusively capable of the former two options, but humans are uniquely capable of the latter option. In seeking to reverse unfavorable societal trends, Trump supporters are doing something uniquely human and perfectly understandable. A libertarian may question their methods, but their motives make sense. Those who oppose Trump but express a desire to understand the other side would do well to consider this point.

Conclusion

There are good reasons to oppose protectionism in the abstract, but to simply state these reasons and fail to appreciate the context in which protectionism is advocated is an example of political autism. In theory, there are better courses of action, but these options are not always feasible. The threat of tariffs as a means to deter other states from imposing tariffs is an important tool for deterring trade wars, and a nation that refuses to consider such a deterrent is at a disadvantage against other nations that have no such scruples. The empirical case for free trade, while intriguing, is not true for all people in all circumstances, and does nothing to help those who have lost their livelihoods to foreign competition. In a perfect world, no protectionism would be justifiable, but that is neither this world nor the world of the immediate future.

Footnotes:

  1. Note that the use of barriers to free trade as a negotiating tactic is nothing new in US-Mexico trade relations. When Mexico tried exporting avocados to the US in the 1990s, the US government resisted at first, but gave in when Mexico started erecting barriers to US corn exports. The end result of using counter-barriers against barriers to free trade in this case was freer trade.

The Strategic Libertarian Case For Supporting Hillary Clinton

The 2016 election season has been a contentious and divisive time for libertarians. Some have decided to side with Republican candidate Donald Trump as the lesser of two evils. Others are supporting Libertarian candidate Gary Johnson despite his long odds and shortcomings as a candidate. A few are turning to Constitution Party candidate Darrell Castle, despite his lack of sufficient ballot access to obtain victory. Some who do not understand or care about economic liberty have even suggested Green Party candidate Jill Stein as an option for libertarians. A significant number are disgusted with all of their options and plan to stay home on Election Day. What no one seems to have contemplated is the case for a libertarian to support Democratic candidate Hillary Clinton, so let us explore that case.

Clearly, there is no straightforward, face-value libertarian case for supporting someone with the track record of warmongering, corruption, thievery, and deception that Clinton has in their quest to preside over the most powerful and dangerous state apparatus in human history. But almost all libertarians have decided to stop there in their consideration of Clinton and look to the other candidates. What can be argued that has not been argued thus far is a bootlegger’s case for Clinton, in which she is supported not for the ostensible purposes of granting her the Presidency, but because her administration will cause effects that libertarians can exploit for their purposes. The overarching theme is that the leftward drive of statism in general and democracy in particular cannot be forestalled by the means at hand, so the alternative is to push leftism even faster and farther than leftists had planned in order to hasten its collapse. It is this sort of case which will be made here.

The Goal of Libertarians

It may seem odd at first glance to speak of a unifying goal for all libertarians, as libertarians have all sorts of goals, some of which are at cross purposes with each other. However, the root of the word ‘libertarian’ is ‘liberty’, so it is reasonable to conclude that a libertarian has the practical goal of maximizing the amount of liberty present in one’s environment. Liberty is generally defined as the freedom to do as one wishes as long as one respects the right of other people to do likewise and commits no aggression against them. But liberty is meaningless without private property in which to enjoy it, insecure without rule of law to defend it, precarious without peace and justice to preserve it, and absent without freedom of association. If a state is present, it will fund its activities through taxation and civil asset forfeiture, take private property through eminent domain, and restrict the use of property through intellectual monopoly, zoning, and environmental regulations. Its officials and agents will choose the nature of the law and the enforcement thereof, meaning that they rule the law and not vice versa. Its enforcers will initiate the use of violence against people who are known to disagree with government statutes and acts upon their disagreements, thus presenting a constant threat to peace. Its agents are allowed to do that which is considered criminal for anyone else to do, and the system is set up to keep them from being held to account. It will force people to associate with it regardless of whether they want to use or pay for its services. For these reasons (and many others), the maximization of liberty requires abolition of the state.

Abolition Requires Revolution

Unfortunately, the state will not abolish itself; the control and maintenance of the state apparatus is too valuable to give up for those who benefit from it. Those who bankroll political campaigns receive a far better return on investment than they would receive from any free market use of capital, and if they did not make such donations, their business rivals would. Wielding political power causes the same biochemical responses as drug abuse. There are people who carry weapons in the name of the state for the purpose of enforcing the edicts of politicians because they lack the skills and temperament to be productive members of society. There is a dependent class of people who have become accustomed to existing parasitically upon the productive members of society. All of these people are used to their way of life, and they will not give it up without a fight. Any strategy that does not deal with this fact, as well as the fact that an institution based upon initiatory force will resort to force to counter attempts to remove and/or dismantle it is doomed to failure. There are many other methods that libertarians have proposed and tried to increase the amount of liberty in society, and some have achieved some limited success. But electoral methods, agorism, cryptography, seasteading, civil disobedience, education, and peaceful parenting all fail to address the fundamental problem. Thus, they will fail to defeat the state by themselves at best. At worst, they will ease some of the pain of oppression, which allows people to tolerate more evil before they must take action to end it. Their usefulness, if any, is to push the state toward collapse while growing the population and resources of libertarians to such an extent that revolution becomes feasible.

A Successful Revolution

A revolution to end the state can only be successful if enough people participate. Moving too soon plays into the state’s hands, as it will only give the state more cause to grow and sour the reputation of libertarianism. The personnel and resources necessary to carry out a revolution are not yet assembled, so the task of the libertarian is to figure out how to assemble them. Let us begin by noting what the Declaration of Independence says about the matter:

“Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.”

This is indeed what history shows us; people tend to overthrow governments only if they believe themselves to lack better options. Regardless of whether war, famine, or pestilence visits a population because of their government or in spite of it, a failure of a state to meet the needs of its people in a crisis has precipitated more revolutions than anything else. Although the tyrannies inflicted upon the American people by the federal government are far greater than those which inspired our forefathers to take up arms, the comforts of modernity and the civic religion of democratic statism have made evils more easily sufferable. That which would once have led people to revolt is now merely a minor inconvenience, to be brushed aside and endured because the next sports game is on. Clearly, conditions must get worse in order to make enough people believe that they must rise up against the system rather than keep trying to play the fool’s game of working within it.

Use It to Destroy It

Given that liberty requires anarchy, anarchy requires abolition of the state, abolition of the state requires revolution, revolution requires a sufficient number of participants, the number of potential participants is lacking, people revolt when they believe themselves to be out of other options, and more people will believe themselves to be out of other options if conditions get worse, the next order of business is to see what can be done to make conditions get worse. In a democratic state, the ballot box is the primary means by which decisions are made. Conditions sometimes change slowly in a nation with a deep state of unelected bureaucrats that is largely impervious to the winds of politics, but conditions do deteriorate when bad rulers are elected. While this is always the case, some candidates for office are clearly worse than others. The obvious strategy, then, is to intentionally vote for the worst candidates in an effort to push the current system toward ruin.

Who Is Worst?

With a strategy discovered, the next question concerns application. Which candidate in the 2016 presidential election would do the most to push the current system toward ruin? In other words, who has no intention or motive to make any significant changes to current policy? Who would amplify and accelerate the current course of the federal government?

We may begin by considering only the candidates who have a chance of winning, as a candidate who cannot get into office in the first place will fail a fortiori at making conditions worse while in office. This reduces our options to Clinton, Johnson, Stein, and Trump. All of the other minor-party candidates lack the ballot access to gain the Presidency, even if everyone voted for a particular one of them. Stein may also be dismissed, as polling has shown her to be in fourth place in nearly every national and state poll that has been conducted. (Though if Stein had a chance, this would be a case for supporting her instead of Clinton, as the implementation of her platform would accelerate the national debt, grow the size and scope of government, and push the nation toward economic ruin faster than the platforms of the other candidates.)

Johnson and Trump offer respites from many of the failed policies of recent administrations, though to varying degrees and for different reasons. While both focus on economic matters, Johnson takes a more libertarian approach while Trump is more nationalist. The practical upshot is that a Johnson presidency would be likely to offer much more relief over the short-term but ignore important demographic concerns, while a Trump presidency would offer much less immediate relief but address concerns over demographic shifts which are hostile to liberty. But the strategy being discussed is to vote for the worst, not the best.

A look at Clinton’s platform reveals that she favors higher taxes, more programs for minorities, more taxpayer funding for college tuition, strengthening of entitlement programs, stricter gun control measures, universal healthcare, ending the sequester for both defense and non-defense spending, amnesty for illegal immigrants, more funding for clean energy, a continuation of unproductive anti-terrorism policies, curtailment of civil liberties, and more government intervention in the workplace. She is also far more likely to start new wars than the other candidates, and this would speed along the decline more than any other policy. In other words, she will amplify and accelerate the current course of the federal government much more than Johnson and somewhat more than Trump.

Resolution in Defeat

It is also necessary to consider the impact that the election is likely to have on the supporters of the losing candidates. If Johnson loses, his supporters will likely get the result that they expect, as third-party candidates have almost no chance in a system rigged to produce a two-party system. Although a Johnson victory is technically possible if everything plays out just right, the more realistic question is whether he can get 5 percent of the vote, which would make the Libertarian Party a more significant election machine going forward. As such, voting for Johnson is more of a punt on 2016 with hopes set on 2020. That said, a disastrous result for Johnson will affirm the need for the LP to stop running the milquetoast candidates they have fielded since 2008 and put forward openly radical, even anarchist, voices.

A Clinton loss will have the effect of opening a pressure valve on populist and nationalist resentment, just as the Brexit victory did in the United Kingdom. If liberty is the goal, then a pressure valve to release steam that is needed for a revolutionary explosion is counterproductive. For as long as Trump remains in office, the right would rally behind him, turn a blind eye to many of his negative tendencies, and forget their anti-state sentiments because their man is in charge. While Trump could cause some disillusionment when many of his lofty campaign promises do not come true, many on the right have some understanding that this will be the case and that he must speak bombastically to keep his base energized and motivated. Trump could also do some good in the form of neutralizing the tactics of social justice warriors, but he has already done this and could likely not do much more in this regard. Of course, the political pendulum will swing again, for Trump is not Pinochet and never will be. Trump has given no indication that he would do anything meaningful to abolish democracy or eliminate the programs which create left-wing moral degeneracy. The left would return to its excesses as soon as it regains the Presidency, using state power to press its thumb on the scale even harder to try to ensure that nothing of the sort can happen again.

With the exception of cuckservative neocons who would count Clinton as one of their own, a Trump loss would further inflame the right and grow the reactionary movement. The right would increasingly come to realize that the democratic process as it currently operates is no longer in their interests, just as many Southerners did after the election of 1860. Due to demographic shifts, a Trumpian candidate will likely never have an easier path than in 2016, and the path is quite difficult now. While a Clinton victory is unlikely to result in a revolt before the 2020 election, it could produce other interesting results, such as renewed interest in the idea of nullification, an Article V convention, or even a serious effort by a state to secede.

Objections

Naturally, a plan to deliberately worsen conditions in one’s own nation will invite sharp criticism. Let us consider some of the most likely objections to such a plan. First, there is the objection that this will harm innocent people. This is not necessarily the case, depending upon how one defines innocence. To return to the Declaration of Independence,

“But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.”

In this sense, the American people are in dereliction of their duty to throw off oppressors. While those who say that we get the government we deserve are victim blaming to some extent, they have a point in the sense that revolution is far more practical than most people think, yet the American people have not revolted against the state in a meaningful way since 1794. (The Civil War was a meaningful revolt, but it was not anti-state in nature; the Confederates sought to replace one government with another.) But even if we grant that this will harm innocents, it is not as though innocents will go unharmed otherwise. The state violently victimizes the innocent by its very nature, and other plans for ending the state will not prevent such victimization before the state is abolished. It is thus a question of degree and duration, much like that of ripping off a bandage rather than pulling at it slowly.

Second, there is the possibility that this plan will backfire. We may make conditions worse, but perhaps a sufficient number of people will never decide that they have had enough. This may occur because they blame those who voted us into a crisis and do not wish to fight alongside them, or because they simply lack the fortitude to revolt. This is a legitimate concern, but the possibility that people no longer have the fortitude to forcefully resist the state will be a concern regardless of the method used by libertarians.

Third, Clinton may also make leftists look for more radical methods, as she is likely to further upset the people who supported Bernie Sanders in the Democratic primary. This is actually a feature in a plan to overload and collapse the system, as it pushes the establishment toward ruin even faster. And if the far-left and the far-right come to blows in America, the rightists have a clear advantage in manpower, firepower, and the concern to target one’s enemies without harming bystanders (although neither side is perfect in the latter regard).

Fourth, there is no guarantee that Clinton will be worse than Trump. But there is no guarantee of anything promised by politicians to voters; this is the very design of democratic statism, and one of its intractable problems. Both major-party candidates are known to be serial liars, but based on their track records both inside and outside of politics, it is reasonable to conclude that they will at least attempt to advance the agendas in their platforms.

Conclusion

If one understands that the problems with which the democratic state presents us are intractable in its presence, and that the best use of the ballot box is to vote for the worst candidate in order to hasten the demise of this broken system, then supporting Hillary Clinton for liberty makes a great deal of sense. The common objections to such a plan do not withstand scrutiny, as other methods of action or inaction have the same or worse potential shortcomings. The effects of her defeat would only slow the decline rather than reverse it, and the effects of her victory would galvanize the anti-state movement like no other result that can be achieved in 2016.

On Peter Schiff, minimum wage, offensive terminology, and philosophy

On the Jan. 28 episode of “The Daily Show with Jon Stewart,” correspondent Samantha Bee interviewed businessman and financial commentator Peter Schiff on the subject of the minimum wage. In the interview, Schiff made the controversial statement that the work of a mentally retarded person would be worth only $2 per hour.

The interview provoked a response by Allen Clifton of Forward Progressives. While Schiff’s comments certainly deserve a thoughtful response, this was not quite it. Let us examine this piece philosophically and provide rebuttal where necessary.

“I’m sure many of you have met those people who ‘just don’t get it.’ I had a friend growing up who was born into a wealthy family. I remember a debate I had with her once about who had it harder, rich people or poor people. She said rich people did. Her example was that when her basement flooded the damage amounted to over $100,000 to fix, whereas a poor person who can’t pay for their electric bill only needs a couple hundred dollars.

I remember this debate so vividly because I honestly couldn’t believe the ignorance. She just didn’t get it.

Well, that’s the same feeling I had watching an interview from The Daily Show where the CEO of Euro Pacific Capital, Peter Schiff, discussed his ridiculous beliefs about the minimum wage.”

With only the information given, the girl mentioned above does appear to have an ignorance of economics. But as we will see, Mr. Schiff’s position against the minimum wage is not ignorant, even if he does make a terrible argument in defense of his position.

“His belief is in line with many ‘free market loving’ Republicans who believe that workers should be paid what they’re worth. Which sounds great, until you realize the reality that the “worth” of a worker is determined by the person paying them – a person whose only real concern is growing their wealth, not yours.”

The quotation marks around “free market loving” are fair, as Republicans are statists who do not believe in a truly free market with no government interference. However, the next sentence is false. The truth is that the worth of a worker is not determined solely by the person paying them; it is also determined by the maximum worth of that worker assessed among all possible employers, modified by the costs of travel to a different place of employment, the inconvenience of finding a different employer, the inconvenience of starting one’s own business versus continuing to work for someone else, and so forth.

“By all means if we want to hire tens of millions of independent arbiters to go into every job, assess the work each worker does then assign a fair value to each employee that their employer must pay – then I fully support abolishing the minimum wage. Because I can promise you one thing, most workers would be paid much more than they are now.”

This is not an abolition of the minimum wage at all. It is just a more intrusive means by which the state could interfere with the labor market by mandating a certain wage for a certain amount of labor of a particular type. As for a fair value, it cannot be determined in such a manner. A fair value is a value agreed upon by both buyer and seller without the use of coercion or fraud. An arbiter as described above, who is actually not independent because he or she is employed through the state, will have his or her assessments enforced by coercion applied by agents of the state. Essentially, this would create a planned economy. Take a close look at North Korea or the former Soviet Union to see how well this tends to work.

“Honestly, who really feels that they’re paid what they’re worth?”

Probably no one, from lowliest worker to wealthiest CEO. But feelings are economically irrelevant unless one acts upon them. A person who feels he or she is worth more should demonstrate this by either becoming more productive, finding another employer who will pay more, or starting his or her own business. There are government barriers that make these actions more difficult, and these should be targeted and eliminated.

“Look at teachers. They mold the minds of our future generations, yet their salaries are often below $50,000 per year.”

Under the current system, teachers mostly indoctrinate children with a pro-state view of the world. There is no reason to assume that a state-run public education system is necessary, especially with developments of private alternatives such as the Khan Academy and the theories of unschooling and natural learning. If the system is unnecessary, then the jobs will not exist, so speaking of the salaries for such jobs becomes meaningless.

“Firefighters risk their lives saving others, yet they’ll never be part of the top 1%.”

This is because there is a difference between loss prevention and wealth creation. If acts of loss prevention were to create a “top 1 percent” degree of wealth for those preventing losses, then they would have to cost more than the objects whose loss was prevented. Then it would make no economic sense for there to be activities of loss prevention, such as firefighting.

“So don’t give me this nonsense about ‘workers should be paid what they’re worth.’ Especially when you see the pay of some of these executives making 300-400 times more than the average employee at their company.”

On the contrary, paying workers an amount other than what they are worth is nonsense. Paying workers less than what they are worth makes it unprofitable for a worker to work at a certain job, while paying workers more than what they are worth makes it unprofitable to keep employing them. As for executives, if they make this much more in a free market, it is because their efforts are worth that much to shareholders. Of course, there are government interferences that help to create this disparity in the current market, such as a corporate law system that tends to shield the wealthiest people from competition, criticism, and liability.

“Well, Mr. Schiff took it a step further by basically saying the ‘mentally retarded’ should only be paid about $2 an hour. In other words, if you suffer from some kind of disadvantage in life which has precluded you from obtaining many skills required for better employment opportunities – you should be devalued as a human being.

Oh, but he wrote an ‘explanation.’ Basically he blamed Comedy Central for airing that part of the interview, claiming that the only reason he used the phrase ‘mentally retarded’ is because he couldn’t think of the proper phrase.

Using that logic, it’s perfectly acceptable to say anything derogatory if the socially acceptable term escapes your mind.”

What Mr. Schiff said about “mentally retarded” people is factually incorrect, and he deserves to be criticized for it. There are many people who have mental disabilities who are capable of producing enormous labor value, such as savants.

But let us look at the term “mentally retarded.” While this term has fallen out of favor, it is the subject of a euphemism treadmill. As Nicholas Cummings and Rogers Wright note in Destructive trends in mental health: the well-intentioned path to harm, the terms “mental retardation” and “mentally retarded” were invented in the mid-20th century to replace the previous set of terms, which were deemed to have become offensive, such as “imbecile” and “feeble-minded.” Now these newer terms have come to be widely seen as disparaging and in need of replacement. At some point, it is necessary to recognize that a negative condition is going to be described by negative-sounding terms and stop viewing such things as offensive. Or, to return to Mr. Schiff’s mistake, we could stop defining people by their shortcomings and assuming that those shortcomings must necessarily diminish one’s worth.

“But let’s think about his $2 per hour comment for a moment. That would be $80 per week x 52 weeks = $4,160 per year.

Basically what this man is advocating is that businesses should be allowed to pay workers based on ‘what they’re worth.’ So if they deem a worker to be worth no more than $2 per hour, how’s that worker expected to live on that?

Oh, I know – they can rely on government programs.

Then these people will come out complaining about the millions of people on these government programs, while simultaneously supporting policies which force more people to rely on government programs.”

The worker may not have to live on $2 per hour if he or she can find another employer or become self-employed in order to earn more. But let us consider the next argument; that people will come out complaining about the millions of people on government programs, while simultaneously supporting policies which force more people to rely on government programs. The government programs are the root problem, as companies would not be able to pay such low wages without them. Over the long term, people cannot work for less than what will keep them alive, and this natural minimum would be higher without a social safety net that allows people to survive on lower wages. While this position is frequently caricatured as heartless, it is actually one of the best ways to raise wages throughout the economy.

“Not to mention that by drastically cutting the pay for millions of Americans you’ll hurt demand for products.”

This ignores the fact that lowering pay for workers lowers the operating costs for a company. This means that the company can sell goods and services cheaper, as labor costs are usually the most expensive costs of a company. So while workers would receive less currency for their labors, that currency would have more purchasing power. Note that the opposite effect will occur if the minimum wage is raised, which is why a minimum wage increase will not help the economy.

“And again, don’t give me this nonsense about ‘paying workers what they’re worth.’ The reason why we have a minimum wage in the first place is because businesses weren’t paying workers enough. If they were, there wouldn’t be a minimum wage.”

The first federal minimum wage law was passed in 1938, and they were passed not to protect workers from business owners, but to codify racism and eugenics into law. The major proponents of minimum wage laws were white union workers who did not want to be out-competed by black workers. If there is a mandated wage floor and the white union workers are paid at that level, then no one can legally undercut the racist employers and employees by hiring black workers and paying them less. But if there is no mandated wage floor, then a non-racist employer can hire previously rejected black workers for less money, thereby running a more efficient business and making a racist employer pay a substantial cost for his or her racism. The minimum wage removes the ability of the free market to punish prejudice.

Of course, some on the left who embraced eugenics policies understood how the minimum wage could destroy opportunity and create unemployment for the most vulnerable people, but they thought it to be a positive development. As Thomas Leonard writes in Eugenics and Economics in the Progressive Era, “The progressive economists believed that the job loss induced by minimum wages was a social benefit as it performed the eugenic service ridding the labor force of the unemployable.”

“It’s the same reason why we have child labor laws. If companies hadn’t tried to exploit child labor, we wouldn’t need child labor laws.”

Child labor was also outlawed in 1938, and it was also done not to protect children from exploitative business owners, but to shield established workers from competition. Defining a whole sector of the workforce out of official existence is a handy way to lower the unemployment rate, and it continues to this day in the form of manipulated numbers from the Bureau of Labor Statistics. Barring children from working was not even effectual by this time period; in 1930, only 6.4 percent of male children and 2.9 percent of female children between the ages of 10 and 15 were employed, and of those, 74.5 percent of the boys and 61.5 percent of the girls worked on farms.

Today, such laws mostly have the effect of preventing children who are knowledgeable about technology from being paid for their skills.

“But this belief that by just allowing businesses to ‘regulate themselves’ and all will be right in the world is ridiculous. These businesses operate to make profits, not jobs.”

This is a straw man. Businesses are not regulated solely from within; they are regulated externally by their customers. If the customers of a business believe that the owners and/or employees of the business are doing something reprehensible, then those customers are free to boycott the business, support a competitor, or start a competing business which does not do the reprehensible activity.

“Most employers make their employees well aware of the fact that they’re replaceable. If you don’t like working for them, quit – we can find someone who will.”

The correct response for an employee is to provide value to such a degree as to become irreplaceable.

“Even with regulations, most companies do anything and everything possible to get around them. Why do you think there’s such a big push by many of them to eliminate the minimum wage? It sure as heck isn’t to pay their workers more, it’s so they can pay them less.”

The truth about regulations is that they are written by the wealthiest players in a given industry. The wealthiest players in an industry have every incentive to bribe politicians and regulators to write and enforce regulations in a way which is favorable to them and unfavorable to their competitors. By increasing the cost of doing business through compliance costs, regulations can drive smaller companies out of business, thereby allowing larger companies to increase their market share. This is how large corporations become mega-corporations. Those who fail to understand this process, such as most left-wing statists, then call for more of what caused the problem in the first place.

“Quick question: Without regulation on offshore drilling, do you think we’d have more or fewer environmental disasters like the BP oil spill in the gulf a couple of years ago?

If you really believe we’d have fewer of these instances, you’re crazy.”

As Socrates said, “When the debate is lost, slander becomes the tool of the loser.” But let us actually address the question. While there would probably be more environmental disasters if restrictions on deep-water drilling were lifted, the choice between government regulation of offshore drilling and open access for anyone is a false dichotomy. In a free market in which private property rights are respected, polluters are made to perform restitution for damages they cause, and there are multiple mechanisms to prevent polluters from setting up shop in the first place. The area in which the Deepwater Horizon disaster occurred should have rightfully been owned by the fishermen who labored in the area, as property is justly acquired through the homesteading principle by mixing one’s labor with natural resources. Under such a system, the fishermen could simply refuse to grant permission to oil drillers, and could hire private military companies to defend the area if the oil drillers sought to trespass and build anyway.

“The same goes for the minimum wage. If we ended it, these companies would abuse a society that didn’t have protections for its workers.”

A society cannot be abused, because there is no such thing as a society. Each individual person exists; a collective is just an idea with no independent form in physical reality. The idea of the minimum wage as a protection of workers has been refuted above, and the idea that it is the only protection for workers is refuted by the presence of unions and workplace safety standards, among other measures.

“Instead of having $2 an hour sweatshops like they have all over developing Asian countries, we’d have them here.”

$2 an hour has more purchasing power in developing Asian countries than it has here, so this is comparing apples to oranges.

“This whole argument is absolutely absurd. And Mr. Schiff’s ignorance about it was appalling.”

Indeed it is. It is clear that while Mr. Schiff made a terrible argument against the minimum wage, the case against the minimum wage is solid. To claim otherwise on the basis of a bad argument is to commit the argumentum ad logicam fallacy.