Austro-Libertarianism – Fighting for the Truth

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In the battle of ideologies, Austro-Libertarianism (that is, “Austrian” economics and libertarian political philosophy), in spite of (or, sometimes, perhaps because of) its logical consistency and rigorous passion for truth and justice, is lumbered with several burdens that are not always shared with opposing philosophies. Some of these – such as the fact that libertarianism is not a complete moral philosophy and can look, at best, cold and emotionless, or, at worst, a recipe for rampant selfishness and egotism – we have examined elsewhere. Let us explore a few more of them and suggest reasons for how they can be overcome, or at least mitigated as much as possible.

The Collectivist Mentality

Perhaps the biggest problem we face is that the fundamental tenets of the modern, democratic state are not viewed as being open to question. It is seen to be paradigmatic that democracy is the best system of government, that voting means freedom, that politicians serve their people and “the nation”. Whatever the current moral or political debate it is always seen as being a debate that should take place within the system rather that as an attempt to revolt against it. Indeed, in the history of political philosophy, consideration of alternative methods of rule has never been at the low that it is now whereas the possibility of no rule at all (anarchism) is completely off the radar. All alternatives to social democratic government are believed to be just baffling or bewildering, a mentality is reinforced and engrained by two aspects.

First, questions are always posed in the form of the collective and people are encouraged to debate only by thinking of the needs of the whole rather than of the individual parts that make up that whole. “Should Britain do X?” “Should we have nationalised railways?” “What should be done about our health service?” By not even allowing the possibility of individual tastes and desires to find expression, people are always geared towards the notion that there must, for every problem and issue, be a single solution that everyone must be made to endure. Although this is endemic throughout all political debates it can be seen in force in the current possibility (at the time of writing) that the United States will engage in military action against the Syrian government in response to the alleged use of chemical weaponry. “What should we do?” “The United States has a moral obligation…” “Our country will not waiver in its resolve” etc.

In what way can Austro-Libertarians face this challenge? The problem is that it is tempting to accept the terms of the argument and dive head first into discussing only collectives. In response to, for example, the question “should we have a nationalised health service?” a libertarian may find it difficult to prevent himself from crying “no!” and reeling off all manner of facts and  figures to show why a system of private healthcare would be far superior. Libertarians, however, must avoid this temptation entirely because it accepts, in principle, the notion that everyone must accept the same solution. It is also the expected answer from one’s ideological opponents and they are likely to be prepared with an array of counterarguments to nullify or at least blunt one’s own. Rather, an intelligent libertarian should attempt to change the terms of the debate and break out of the collective mentality altogether and focus on individuals. So in answer to the question concerning healthcare, one might retort the following:

“I have no problem whatsoever with the Government providing your healthcare through the National Health Service or whatever you want to call it. I don’t want to stop you from doing what you think is best for your needs with your money. But what right do you have to force me to do the same? I want to look after my healthcare needs in the way that I want with my own money. Do whatever you want with yours, just leave me out of it!”

This is a response that will almost certainly catch someone on the back foot. Having expected an argument about what is best for everyone and there being no possibility of “their” solution taking hold unless they win, they now, suddenly, have to face the fact that actually, they are most welcome to go ahead with what they want with the resources that they can muster. They just have to leave everyone who does not want to be a part of it alone. The terms of the debate have therefore switched from arguing about the merits of their system to arguing about why they should have the right to force everyone to become a part of it. That, they might find, is far harder for them to justify, especially once it is revealed that such a system as they advocate can only take place through the methods of violent enforcement. Liberals (in the modern sense of the word), lefties and collectivists do not like to think of themselves as being violent people and revealing them for what they are might be something of a shock.

Who Will Build the Roads?!

The second problem is related to the first and is manifest in the following types of argument. “How will we defend ourselves?” “Who will take care of disabled people?” “Won’t poor people die without nationalised healthcare?”  All forms of this argument may be summarised as the “Who will Build the Roads?” problem, where government has carried out a function for so long that people cannot imagine how else it would be done.

The obvious answer is, first, to point out how government has never invented or run anything that was not first done so by free individuals (except, perhaps, for nuclear weaponry – developing the machinery of mass killing is something that seem to come naturally to government). Knowledge of a few examples, such as how turnpikes were funded and constructed, and the history of the railways (and their subsequent deterioration under nationalisation) would be beneficial. But so too also is pointing out the fact that the opponent’s argument boils down to little more than this: “I don’t know how else X could be done. Therefore everyone else must be violently enforced to do it my way”. In other words, one should perhaps retort by questioning why that person’s lack of imagination means that everyone else must be subjected to violent enforcement. The whole point of the free market is that it unleashes the creative power of individuals and no one knows precisely what this creative power will produce and in what form. Government, on the other hand, causes nothing but stagnation in everything it runs. Schools, for example, are still teaching in the same way that they have done for nearly two centuries – a teacher in front of a class full of students, a method that seems to be rapidly failing as numeracy and literacy rates decline. Why is education stuck in a time warp whereas the free market around it is innovating and improving all of the time?

Nevertheless this may be a battle easily lost. There is a curious tendency in debates of this type for people to press one continually about how each and every minute issue would be resolved in a free society. Even if you bat away each one for six with success, as soon as there is something that you cannot explain, something to which you cannot illustrate a free market solution in any concrete fashion, however trivial and insignificant, you are expected to surrender and admit that government is necessary. Even if it is not possible to explain how a free society could possibly tackle one, single alleged problem, why is this one, minor “defect” claimed as a sweeping victory for government? Such a view is the result of the wilful (as opposed to merely passive) ignorance and closed-mindedness of one’s opponent and that is perhaps the hardest thing of all to overcome.

Market Chaos and the Fight for Resources

The next problem is the belief that individualism and freedom can only lead to chaos and collapse, a war of all against all in which everyone is motivated only by their greed in the fight for the scarce resources available. Surely there must be someone with their hands on the steering wheel to guide and take control, to steer everyone in the same direction, to ensure that free markets do not become over-zealous and drive us all to ruin? After all, everyone knows that the free market caused the Great Depression, right?

Apart from the usual explanations of how it was, in fact, government that causes economic crises and how it is government that causes the chaos of allocation through its inability to calculate, the more important and hard hitting retort to this accusation is to point out that freedom does not mean a lack of control at all. It simply means that individuals have control over their own lives as opposed to some central bureaucracy. Contrary to the opinions of even some free market proponents, there is nothing “spontaneous” or “disorderly” about freedom1. Rather every human action unfolds as the result of a purpose and desire and one is permitted to achieve these desires with one’s own person and property, and the person and property of those whom you can solicit to join, voluntarily, your enterprise. In this way the ends of everyone can be satisfied as far as they possibly can with the scarce resources available. Government, on the other hand, must always result in the substitution of one person’s or set of people’s purposes for everyone else’s, enforced by violence. Indeed, where someone says that government is needed to “steer us all in the same direction”, the very problem is what should that direction be? Nobody ever has precisely the same vision of how enforced collectivism should be implemented, nor of the goals that it should achieve. Ideological battles and physical wars have seldom been between liberty and collectivism but rather between different brands of collectivism. Fascists and communists, for instance, were pitted against each other in World War II even though they are both brands of totalitarian government. As Mises put it, an advocate of collectivism “always has in view his own brand of socialism” (Omnipotent Government, p. 253). It is government and collectivism, then, with its desire to forcibly direct everyone else’s person and property towards ends that they do not desire that causes chaos, conflict, and fighting. Further, if the market is motivated by greed, then what could be greedier than not only wanting to achieve your ends with your own property but with everyone else’s as well? And if everyone else refuses to play ball then you will fight them and force them to comply! At least a greedy free marketer has to stick to his own turf and needn’t have anything to do with you.

Economic Law and the Laws of Natural Sciences

Another problem is people’s perception of economic law as opposed to the laws of the natural sciences. Many of the latter are either immediately apparent, such as the law of gravity, or are accorded a high degree of respect when scientific research reveals them. Few feel that they have the ability to question the results that scientists produce, particular as we seem to live in a positivistic and evidence-obsessed culture. Economic law, however, is never accorded the same respect and for some reason it has always been believed, from eras of kings and conquerors through to prime ministers and presidents, that government can repeal and banish it through a simple decree.

If government attempted to legislate against the law of gravity – for instance, by demanding, that every object must be 2 feet from the ground – people would have little hesitation is declaring the politicians to be stark raving mad. Yet if the government attempts to alleviate shortages or unaffordability by enacting price controls, even though economists have, for generations, explained the necessary effects of such a measure, it is still believed that such an attempt is legitimate. The laws of economics are as scientific and true as the laws of the natural sciences. Only the precise conditions that bring them into play – that is the valuations of the individual humans and the uncertainty of future, natural events – are scientifically indeterminable. But so long as certain conditions are met, economic law cannot be counteracted. A reason for ignorance of this fact is that the ultimate causes of an economic distortion – human valuations and interference by government control – are difficult to link through to the result, except by a chain of deductive reasoning. Where prices rise for example, no one necessarily witnesses the increase in demand relative to supply (and no one witnesses the increase in the quantity of money that is brought about by government-controlled central and fractional reserve banking). All that it is seen is the numbers on the price tags getting higher, a fact that can easily be blamed on the greed of the merchant or trader. If subsequent price controls cause a shortage, again, the actual cause is not perceived. All that is seen is those same greedy merchants refusing to stock their shelves because now the price doesn’t allow them to “extract” a “huge profit”.

Part of this problem is also owing to a misunderstanding of the subject matter. The natural sciences deal with inanimate objects, i.e. their laws concern matter that feels no desires or purposes and is incapable of expressing choice. Hence the laws of the these sciences are seen to be immovable and true for all of time. Even if good or bad results follow from these laws one has to work with or around them rather than simply ignoring them. No one can, for example, simply dismiss the law of gravity or ignore air resistance if one wishes to fly. A bridge can only be built by understanding geometry and how loads affect various structures. Economics, however, concerns human choice and desire, something that may not only be impulsive and of the moment, but also has results – beneficial or bad – that are motivated and subject to influence and change. It is therefore perceived that economic law, dealing only with the supposedly wishy-washy vagaries of human desire rather than the concrete and immovable facts of the universe, can be overcome – by force if necessary. What is not realised is that economics does not deal with the substance of choices and resulting actions but with their form. Economics takes peoples choices and actions as a given, examining what must be true as a result in spite of their specific content. Its laws are universally valid even though certain choices may be necessary to demonstrate their effects (no could witness the interplay of supply and demand, for example, unless people were actually willing to trade).

Perhaps the epitome of this misunderstanding is that people even go as far as seeming to relax their awareness of the condition of scarcity. Government, in particular, is deemed to be an endless fountain of plenty that should forever be funding more or doing more to cure X, Y and Z. In citing various facts and statistics that demonstrate deficiencies and deplorable situations – “30% of people can’t afford to heat their homes!” “40% of people spend more than half their income on food!” “Child poverty afflicts a third of all families!” – all that our outraged social pioneers accomplish is pointing out the fact that we do not live in the Garden of Eden. Aside from not even entertaining the fact that freedom and lack of government is the path to prosperity, these busybodies have no proposal or specific method for determining precisely which needs are more pressing and must be resolved and which must be left to languish, however deplorable. All we get is that “something must be done!” a cry that will forever be heard until we live in the land of Cockaigne. An additional, exasperating cause of this is the incentive to engage in rent seeking behaviour. When government is sitting on a big pile of cash that could be spent on pretty much anything it wants, it becomes more economically viable for people to stop producing and to start demanding a share of the existing productivity. It is therefore not surprising that a whole host of problems and ills come crawling out of the woodwork when they can be solved, conveniently enough, by their sponsors and promoters receiving government money.

It is very difficult to overcome this mentality but there are some simple things that one can do to countenance this type of ignorance. If someone has difficulty in comprehending the validity of economic law, a basic way of shining some light on the truth is to point out the motivations of other parties in a situation – to put the person in the shoes of someone else. If, for example, the debate concerns price controls, persuade the person to appreciate the point of view of the seller as opposed to that of the buyer. What if he was in that situation and was suddenly told that he can’t sell an item for more than, say £10 each yet his costs are £15? In short, ask him, would you continue to sell in that situation? Secondly, where someone proposes a government measure to alleviate an alleged ill, ask for justification of why that problem deserves funding compared to others (having a few other of these problems at one’s finger tips may assist in this regard). As he is unlikely to be able to offer a definitive method of prioritising government spending, the answer will almost certainly dissolve into “raise taxes on the rich!” That will open the door to a wider discussion of the efficacy of government vs. the free market in creating wealth and vanishing problems such as poverty.

Truth and Lies

Perhaps the greatest intellectual difficulty that Austro-Libertarians face, however, is not the existing mentality of the people or their biases towards collectivist solutions. Rather, it is the fact that we are not always up against people who are interested in the truth. Government, relying on violence rather than entrepreneurial talent in order to attain its revenue, provides an easy and luxuriant income to hoards of individuals who would never have a hope of attaining that income on the free market. This is not to suggest, of course, that everyone who receives government funding is stupid and useless. In most cases it is simply the fact that their talents would not be in high demand on the free market. All human beings seek to further their ends and to make their lives more comfortable and rewarding through the means that are available. Economics frequently talks about how humans use objects as means to achieve their purposes, but so too can other humans be used as means. After all, why bother doing something for yourself if you can just order someone else to do what you want? Power, and the exercise of it, is therefore an extremely seductive potion, one that, once drunk, is very difficult to relinquish the effects of. But government has never survived on its own by simply crying “We are better for you!” “We are morally right!” etc. Rather, it has had to buy in other sectors of the population at large in order to retain its veneer of legitimacy. There are two of these that we shall mention here.

First, intellectuals are a prime category of those persons who are unlikely to obtain the income that they do on the free market. It is only through government funding and largesse that their theses and research papers would ever have a hope of being written. There is also, perhaps, the snobbish aspect that intellectual endeavour is somehow “above” the market and represents higher truth or something better than grubby trading (the same mentality one can often find pervading that other sink pit of government money, the arts). But that aside, when, for example, the majority of macroeconomic research is funded by the Federal Reserve, what likelihood is there that the budding and bright PhDs who can only find employment in one of these research programmes are going to churn out conclusions that are critical of central banking? Or when hoards of scientists are swept up by the Intergovernmental Panel on Climate Change (IPCC) what chances are there that their conclusions will not invoke the need for more government control? This essay is not the place, of course, to determine the merits of specific scientific research. Rather, the point is that one has to be extremely suspicious of Government-funded programmes that conveniently either justify or warrant an increase in the size of government. But it is also true that some intellectuals themselves may wish to disingenuously cloak the truth in favour of a cherished political agenda – they simply believe that big government is a good thing. In any case, bringing on board seemingly impartial and objective intellectual justification for government is a massive boon.

Secondly, one might say that the population itself has been bought off. Democratic governments effectively bribe the citizenry with their own (or, rather, other people’s) money, not only by promising wonderful schools, hospitals, transport networks etc., but also by directly showering handouts from (and creating dependence upon) the ballooning welfare state, all conveniently paid for by taxing “the rich”. Even if one manages to resist the siren song of the former, it is very hard to denounce one’s receipt of a stream of free money. Given that there are so many people who are reliant upon government today it is difficult to envisage how one may even go about the practical operation of dismantling it, let alone attempting to convince people of the justification of such a move.

One cannot necessarily condemn individuals we have been discussing as being totally evil and immoral. If the livelihood of oneself and one’s family is reliant on, say, a tax credit or if one is in a government-funded job then it is understandable, if not forgivable, that people will tow the government line. But that only means that the exceptions, the ones who do not follow the Pied Piper’s tune, shine ever more brightly into the ether and it remains the fact that the justification of government is fundamentally nothing more than a charlatan operation. The supreme irony has to be that people are paying for the justification of their own enslavement.

It is very difficult to challenge this problem in the search for the truth. One could resort to challenging the credentials of one’s ideological opponents, but this can lead one down a dangerous path, resulting in ad hominem attacks and accusations of sour grapes. One should probably only restrict such observations to the most general terms, as we have done here, or at least ensuring that they only pepper solid arguments and counter-arguments that concern the specific issues. Instead, one can only countenance illusions and wizardry with one’s own solid passion for truth and justice, a reputation that one might have to earn through patient adherence to it. Lies and falsehoods will eventually be revealed for what they are. We, as Austro-Libertarians, know that government cannot ever achieve its promises, we know that it is a foregone certainty that it can never control the entire economy without collapsing, we know that it is immoral, violent and destructive. Everything that government does simply sows the seeds of its own doom. Perhaps we are starting to see the beginning of this at the time of writing, as Western populations, having been lied to once over the Iraq war, having seen the mess created in Afghanistan, and having grown ever more distrustful of the so-called “War on Terror” in general, are showing strong resistance to endorsing the US government’s desired attack on the Syrian regime that we mentioned above. Crucially, people are convinced that governments are lying about its supposed justification – “trust us” and “we know there is evidence” is no longer working. It may be only be a matter of time before this sentiment is linked towards the continued failure of government to find a way out of its self-induced economic malaise since 2008 and all of government’s chickens come home to roost. Who then, when all of the liars, conjurers and charmers have vanished will be left to pick up the pieces and who will people turn to for a way forward? Only those who all along remained steadfast to the truth and to what was right – the Austro-Libertarians.

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1As we have said elsewhere the notion of the market as a “spontaneous order” is metaphorical in only the very strictest sense.

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One Law for All

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One of the obfuscating features of sociological discourse, whether this is in academic tomes or in journalistic articles, is the tendency to describe their subject matter in terms of vast, overreaching abstractions. “The market” does X, “the government” does Y, “companies” do Z and so on. Such categorisations are not, of course, unimportant; the use of shorthand is needed to quickly and clearly identify particular groups of individuals who each bear a common feature; however, that is precisely what is lost – that all of them are nothing more than nouns for “groups of individuals” – when use of these abstractions is taken too far. Such use becomes particularly meaningless when one starts to ascribe to these groups particular characteristics that are independent of those of the individual participants, as if the group itself is some kind of living, thinking entity. So we are always told that “markets” are “wild”, “capricious,” “erratic”, “reckless”, “selfish” and imbibed with, what is quickly becoming a clichéd term, “irrational exuberance”. “The government”, on the other hand, is always “wise”, “prudent”, “far sighted”, “selfless” and “serving”. But both of these groups are still populated by the same type of human – living, breathing, thinking, desiring, choosing and acting. Only an examination of the precise motivations and the outlets for their expression that individual humans gain from becoming a member of one of these groups can one hope to understand their true nature.

One of the most serious misunderstandings to which this type of thinking – in terms of bland abstractions – leads is the idea that “government” is somehow endowed with a different set of moral rules from every other group. We all know that theft is wrong, whatever the circumstance. Whoever you are in life, rich, poor, fat, thin, smart or stupid, every person can only gain the property of another by offering him something that he values in voluntary exchange; in short, he must offer him a valuable service. Taking property that belongs to another person is almost universally condemned as immoral. Members of the “government” however do not have to follow this rule, at least when acting in their “official” capacity. These people not have to offer anyone a valuable service in return for its revenue, they can simply take what they need to fund their ventures, i.e. whatever they want rather than what the person from whom they are taking the money wants. No private citizen is morally permitted to kill another humans being, whether this is for either personal or political gain. In the first instance he would be called a “murderer” and in the latter a “terrorist” (another very opaque abstraction). Yet those who populate the government, when they launch their foreign wars of imperialism, when they kill thousands of innocent civilians in drone strikes, when they blockade “rogue” states and starve its children to death, are permitted to do this with seemingly little question. Whether it is a good idea for the government to do these things is, of course, hotly debated but the moral right of the government to carry out these acts if it so decides is something that receives far less attention.

To further obfuscate the criminal nature of government we apply different names to everything that it does from that which private criminals do. So whereas private citizens “steal” and “rob” in order to gain “booty” (or the more formal “stolen goods”), the government “taxes” in order to gain “revenue”. Whereas private citizens are, as we have said, “murderers” or “terrorists”, the government is a “peacekeeper” or “spreader of democracy”. Yet what essentially is the difference between the clearly immoral acts that are committed by private citizens and the supposedly “moral” acts that are committed by members of the government? If you are an innocent civilian does it really make much difference to you whether you are killed in an armed robbery or whether you hit by a drone? Both groups – the private citizenry and the government – are populated not by devils and angels respectively but by humans endowed with the same qualities of rationality, intelligence and emotional disposition. All actions are initiated by one of these individuals or by individuals who choose to act in concert. An action that is therefore immoral for a private citizen is, therefore, immoral for a government citizen. Theft is the deliberate appropriation of property belonging to another without that person’s consent. How are “taxes” to be distinguished from this? Taxes are deliberately taken; the property belongs to another; and it is certainly taken without that person’s consent. For if taxes are truly voluntary then refusal to pay them would not land one in jail. Launching any kind of offensive, foreign war (that is already paid for with tax loot) that kills innocent civilians is indistinguishable from murder. Why does the fact that those who commit these atrocities in the government’s name, wear government-issued costumes, have a clear hierarchical structure, and wave and salute flags with pomp and circumstance, let them off the hook? The SS had all of these things – why are they considered a criminal organisation yet modern armies, navies and air forces are not? It appears that this question is hardly unique to our time, as St Augustine penetratingly reveals:

Justice being taken away, then, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of a prince, it is knit together by the pact of the confederacy; the booty is divided by the law agreed on. If, by the admittance of abandoned men, this evil increases to such a degree that it holds places, fixes abodes, takes possession of cities, and subdues peoples, it assumes the more plainly the name of a kingdom, because the reality is now manifestly conferred on it, not by the removal of covetousness, but by the addition of impunity. Indeed, that was an apt and true reply which was given to Alexander the Great by a pirate who had been seized. For when that king had asked the man what he meant by keeping hostile possession of the sea, he answered with bold pride, “What you mean by seizing the whole earth; but because I do it with a petty ship, I am called a robber, while you who does it with a great fleet are styled emperor”.1

The idea that all of these immoral, government acts are legitimated by democracy is no justification. For what is true for the one is, in general, true for the many. If no one person can, alone, steal or murder then it does not follow that a group of people may, together, steal or murder. Further, if I have no right to steal or murder then neither can my so-called “representative” derive this right from my endorsement of his candidacy in an election.

If all of this, the whole division of morality in society, this separation into two distinct moral castes, wasn’t bad enough, it is made far worse by its sickening decoration and honour with the rhetoric of “public service” and “selflessness”. Theft and murder makes little difference to the victim whether it’s done by a saint or sinner, by a Samaritan or sadist. The whole cloud of altruistic verbage is designed to, again, obscure the fact that government is populated by exactly the same type of human being as the rest of society – they will attempt to further their own ends with the means available to them, and if immoral means are legitimated then they will most certainly take advantage of them. Even if we assume that they genuinely seek “good” ends and are thoroughly convinced of the “morality” of their position, it has often been said that the road to hell is paved with good intentions; indeed, the Soviet Union, the political system that butchered tens of millions, was created and fostered by those who believed that what they were doing was right. But this is before you get into the very convincing argument that government – the sphere where it is permissible to behave immorally – attracts the very people who relish to behave in such a manner for its own sake.

Libertarians believe in a basic morality that is uniform to all people – that all people, King or subject, employer or employee, rich or poor, fat or thin, are subject to the same cardinal moral rule, namely that you can do whatever you want with your own person and property so long as it does not inflict violence on the person or property of anyone else. No exceptions. The actions of all human beings need to be examined in regard to this moral truth and no excuses are derived from being a member of a certain caste. The basic fact that individual humans, their motivations, choices and ends are central to everything that happens in this world, cannot be hidden by abstractions, sociological inventions, metaphysical nonsense, traditions, ranks, ceremonies, patriotic songs, flags and so on. Libertarians need to do the best they can to unmask the truth behind these illusions.

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1St Augustine, City of God, Book IV, Chapter 4.

Conspiracy Theories

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The slur “conspiracy theorist” is like an ejector button. It seemingly has the power to jettison from respectability its hapless and often unsuspecting victim, never to be listened to or taken seriously again. In some regards, as will be seen below, this is justified but it is also, and more seriously, the case that “conspiracy theorist” is a convenient label used to dispose of anyone who challenges official wisdom.

Specifically, “conspiracy theorists” are theorists of history, providing a narrative of and explanation for past events. What they all have in common is that their resulting explanations differ from the “accepted” or “official” version that people believe or are supposed to believe, selecting and interpreting their facts and evidence in light of a specific theory that the alleged “conspiracy theorist” holds1. In short, it is nothing more than “revisionist history”, but the nomenclature of this discipline as dealing with “conspiracies” is used as a veneer to denote a cover-up or a secret, something that is not supposed to be known, that there are sinister forces at work secretly manoeuvring to exploit the hapless know-nothings. People are often willing to believe that the Establishment2 does things that harm the very people it is supposed to serve (or at least live in peaceful co-existence with) but this is normally only due to the specific actions or policies that were adopted at the time. Far fewer are willing to consider that the system, adorned with all the comfortable rhetoric of “democracy”, “representation”, “accountability” and so on, is per se harmful and exploitative, the very conclusion that must be drawn from most of that which “conspiracy theorists” claim. Hence it becomes easy to dismiss revisionists as cantankerous crackpots and their verbage as panic-stricken paranoia.

In the first place let us state clearly and emphatically that no one person, whether they be a democratically elected Government, a university department, a particular scholar, biographer, or whoever has the monopoly on the interpretation of history. Simply because somebody challenges accepted wisdom does not mean that he or she should be dismissed out of hand or that old and accepted paradigms should remain rigidly enforced3. Indeed it should be unnecessary to labour the point given that contrarianism has so often been the green shoot of truth, discovery and invention and that daily all entrepreneurs, for example must, be practising contrarians by seeing and understanding things which other people do not do so as of yet. However when the logical result of a specifically historical theory is to undermine the existing structure of society itself there is an understandable reluctance to engage with it. This does not mean, of course, that all theories need to be taken seriously. A theory suggesting that flying pigs murdered Julius Caesar, or that Marie Antoinette could draw thunderclouds with a clap of her hands should, for instance, rightly be ridiculed. For theories of history cannot violate established laws of the natural sciences or of the social sciences such as praxeology (although the attempted violation of economic law is a favourite pastime of Governments and their court intellectuals). If they do then the revolution properly takes place within those sciences and not within history. If pigs were discovered to fly, for instance, an historical theory concerning their cause of the Caesar’s assassination would have to come after this was established scientifically. But where a theory is in harmony with established laws then one should not shy away from the full extent of its logic.

However, having defended the right of anyone to present a revisionist theory of history, it is frequently the cases that these theorists do not set themselves up to be taken particularly seriously. The basic problem is that “conspiracy theories” too often use the same tools as the establishment in their narratives. Accepted or conventional narratives are notorious for using abstractions that fail to examine the actions and motivations of the specific individuals who were responsible for the historical events. With the War between the States, for example, the historical narrative is that “The South” seceded from “The United States” to preserve “slavery” and the resulting war brought “freedom” and “union“; “Britain” declared war on “Nazi Germany” to defend “Poland“; “The United States” was forced into the “Cold War” and to create a “Military-Industrial Complex” to defend “the Western World” from “the Communist threat“; The “US Government” launched the “War on Terror” to defend us from “terrorists” who want to destroy “us“. By grouping people and events into large, homogenous classes that can be easily categorised as “good” (if they are on “our” side) or “evil” (if they are on the “other” side) one eradicates from examination any question of individual behaviour and motives. Yet history is nothing but a string of individual actions presaged by their motives and if any leeway in developing alternative explanations is to be gained then these must be the ripest fruits for examination. Unfortunately “conspiracy theorists” do not tend to do this and instead themselves ascribe all of the worlds evils to large, homogenous classes. So you have feminists explaining history as being primarily concerned with the domination of “men” over “women”; Marxists as the struggle between exploitative and an exploited classes; still others ascribing causative events to “Jews”, “Freemasons”, “capitalists”, or believers in a “New World Order”. A subset of this failure is a concentration on the mechanics or the method ahead of the motive, often to a rather futile extent. For example, however many studies are done on the audio, visual and witness evidence, however many elaborate recreations of the shooting(s) are carried out, no one is ever going to establish once and for all that Lee Harvey Oswald was not a lone gunman in Dealey Plaza on November 22nd 1963. Nor is watching endless loops of the World Trade Center collapsing going to absolutely establish whether the twin towers were detonated internally. This does not mean that the “how” of history is unimportant as it is, of course, important to show the ways in which motivated individuals brought their desires to fruition. But this discipline is simply a disembodied wraith when unconnected to any “why”, especially when it is inconclusive.

There is, however, one proud tradition that does not succumb to this failing, a tradition that systematically scrutinises the motivations and actions of the participating individuals in historical events with a rigorous degree of scholarship. The Austro-Libertarian school of thought, although relegated to the fringes of academic circles, has good reason for being able to do this. The field of praxeology, the study of the logical consequences that unfold from human action, endow these scholars with the appropriate tools to not only explain individual motivations and actions but specifically to explain why people are likely to behave the way they do when they gain membership of a particular homogenous class. Rather than dealing with countries, states, groups, peoples etc. Austro-Libertarian history deals with the particular interests that particular people are able to have and, in many cases, are able to satisfy by virtue of the positions that they occupy within these classes. By accepting that all people, whether they are private citizens, emperors, presidents, generals, company CEOs or whatever, are subject to the same praxeological laws, by knowing the precise benefits and limitations which certain persons in history faced, not to mention a strong passion for justice grounded on the important Libertarian principle that all individuals are subject to the same moral law, Libertarian historians can construct a much richer and more convincing tapestry of history than any of the officially accepted narratives or other revisionist disciplines. Central to all of this is the theory of the State, that as an entity it alone enjoys the use of violence and possesses the ultimate decision making authority over a given territory. As it is a praxeological necessity that all humans maximise their benefits and minimise their costs the charge that individuals will use the framework of the state to enrich themselves at the expense of others becomes not only convincing but practically a scientific requirement. If one should ever doubt this then Rothbard’s Wall Street, Banks and American Foreign Policy reads almost like a directory of the interests and motivations of the key political players and financiers of US foreign policy from the beginning of the progressive era to the Reagan Administration. Or how about Hans Hermann Hoppe’s examination of the democratic ruler vs the monarchical4? How democracy, relegating leaders to mere caretakers rather than owners of the realm must, by praxeological necessity, lead to a widespread ravaging of resources, increased suppression of the populace and the debt-fuelled growth of the welfare-warfare state. And how, by coating the State with a veneer of legitimacy, it can expand to heights that monarchs of ages past could only have dreamt of – the dubious achievement of a worldwide paper money entirely issued and controlled by Government institutions is something kings never brought about yet democracy, a rarity before 1900, was able to make it a reality by 1971. Still others such as Tom Woods, Thomas DiLorenzo, and Ralph Raico have tackled big taboos in American and world history, DiLorenzo’s work on Abraham Lincoln in particular bringing a much needed sledgehammer to a mountain of largely mythical, established wisdom.

So if you want real history, real explanations of past events, the movers, the makers, the shakers, the wheelers, the dealers, supported by the rigorous science of praxeology and a deep-felt understanding of justice, then look no further than the great historians of the Austro-Libertarian tradition.

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1For a detailed explanation on how history is necessarily an interpretation of events in light of theories, see the excellent treatise by Ludwig von Mises, Theory and History.

2We shall use this as a catch-all word to describe the subjects of “conspiracy theories”, ranging from Governments, multi-national corporations and the corporate state, the military, intelligence agencies, secret societies, etc.

3Apparently this problem also exists in the natural sciences even capturing seemingly reluctant revolutionaries – for example the co-discover of oxygen, Joseph Priestly, categorised his own discovery as “dephlogisticated air” owing his allegiance to the prevailing phlogiston theory. Thomas S Kuhn, The Structure of Scientific Revolutions, pp 53-6, quoted in Murray N Rothbard, Ludwig von Mises and the Paradigm of our Age, Ch. 14 in Rothbard, Egalitarianism as a Revolt Against Nature and other essays.

4Hans Hermann Hoppe, Democracy – The God that Failed.

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Capitalism – The Law of the Jungle?

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It is frequently asserted that a system of free market capitalism reduces everyone to the level of animals, subject to the “law of the jungle”. Similar emotive epithets are those such as capitalism being “dog eat dog” or “winner takes all”. Nothing could be further from the truth.

Under a capitalist system all property is privately owned. Therefore, all exchanges are voluntary and not coerced (except, obviously, for acknowledged criminal acts of theft and violence). But for a voluntary exchange to occur then both parties must expect to benefit from the exchange. The exchange has therefore been productive as it has left both parties with something better than what they had before. If they did not expect to be better off then neither would have made the exchange.

Contrast this, however, with Government intervention. Such interventions, such as taxation, are ­non-voluntary, i.e. the taxed individual has no choice as to whether the exchange occurs. But if he would not have made the exchange voluntarily then it follows that he does not regard the post-exchange results as being to his benefit in comparison. Hence while the recipient – Government, or whoever Government distributes the money to – benefits, the forced giver manifestly does not. And as it is not possible to measure utilities between individuals we cannot say that the recipient gains “more” than the tax-payer loses.

Indeed the very essence of capitalism and its ability to lift whole populations out of the slum of poverty is because people produce goods that other people want which they then trade for what they themselves want in return. There is production of new goods that are voluntarily traded to make everyone’s lives better off. It is a plus-sum operation. Taxation and other forms of coerced exchange, however, are fights over existing goods – goods that already have been produced but the Government wades in and decides that someone other than the productive party should have them. This is manifestly a zero-sum game, one party reaping what another loses. And what could be closer to the law of the jungle than this? Animals in the jungle are not productive, they fight with other animals for the restricted goods that nature has offered them so that they may survive. What one animal gains another animal loses. “Dog eat dog” is therefore a more appropriate description of political fights for taxpayers’ money rather than for free exchange.

Finally, “winner takes all” would be a more apt description for democracy than for capitalism. With private property and free exchange the minority does not have to be restricted to the products and services that the majority wants. Most people might decide to shop at the mall but that does not force others to do so and does not stop the latter from spending their pounds or dollars at a boutique. In a Government election, however, the minority – the losers – have to put up with the successful candidate even though they didn’t want him and might find his policies odious. Such a system benefits only the majority – the winners, who take all – at the expense of the hapless losers.

Indeed such epithets as these we have been discussing are usually applied to capitalism by those who do not believe that they have benefited enough from free exchange and to remedy this they want to start taking what other people have, usually in the name of “fairness” and “equality”. Such charlatans should be exposed for what they are honestly trying to do – reduce human civilisation to a very real law of the jungle.

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Gun Control following Newtown

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The recent shootings in Newtown, Connecticut, has sparked a renewal of the debate on gun ownership by private individuals. A central issue within the debate is whether such ownership leads to more or less violent crime and/or, more specifically, gun crime. For example the Brady Campaign reports that in a single year the number of murders caused by private gun ownership was 39 in England and Wales (where gun control is apparently strict) and a whopping 9 484 in the Untied States. Even adjusting the figures for population size doesn’t make an overwhelming difference. The problem, though, is that the murder rate in England and Wales (or of the UK as a whole) has reportedly been lower than it is in the United States for at least two centuries; for much of that time laws on gun ownership in the United Kingdom were negligibly different from those in the United States. Witness also the controversy surrounding John Lott’s research on the subject.

It is not the purpose of this short essay to examine which claims on which side of the debate are true and which are not. But it does raise the question of whether murder rates, or more specifically, gun violence and violent crime in particular, are lower because of gun control laws or in spite of them. This demonstrates that evidence is only conclusive when it is carried out in a controlled environment, something which is simply not possible in human society. Before zealots on either side of the debate drown themselves in an orgy of evidence we should realise that such findings are, at best, illustrative of a theory rather than proof of it.

A purely theoretical treatment of the issue, however, poses great problems for any gun control advocacy, whether it be for certain types of firearm or guns outright. If there are to be Government-enforced restrictions on the private ownership of firearms then this must be premised on the notion that individual human beings cannot be trusted to own guns responsibly, or, more accurately, that voluntary action between buyers and sellers of firearms (say, for example, patronising only those outlets that behave according to an established code of sales conduct) is insufficient to prevent firearms from falling into the wrong hands. If voluntary action is insufficient it therefore requires force. And where is this force going to come from if not from the barrel of a gun? Here enters the tacit assumption that is present in all gun control advocacy – that it is OK for the Government and its agencies (such as the police) to own and carry firearms. But if we don’t trust the rest of the population with gun ownership then why should we trust these people? They are human beings just like anyone else so why should they be more responsible? What is to stop these people from committing criminally culpable behaviour with firearms? May be the answer is that the Government consists of wise overlords who are elected by the people to ensure that all firearm owners behave responsibly. But this argument is simply contradictory. The general public is not permitted to own firearms because its members cannot be trusted with them nor are they to be trusted through their voluntary buying and selling on the marketplace to restrict who can get hold of a gun; but somehow they are able to choose the people who will behave responsibly with guns and who will also behave responsibly in using these guns in choosing and enforcing who should and who should not also get them amongst the general public. Rather than breeding responsibility isn’t such a situation more likely to induce voters to choose representatives who wield guns to their (the voters’) own advantage? The whole argument, in short, is “we, the masses, are not to be trusted with guns but will permit our representatives to use guns to enforce who we think should have guns and under which circumstances”. So would they not also use them to enforce anything else that the “untrustworthy” voters want?

Indeed, that is precisely what happens in a democracy. People vote for the politicians who promise them the most bounty (“tax”) from other people’s productivity. This tax is collected at the point of a gun – don’t pay it or try to defend yourself from having to do so and the Government arrogates to itself the right to take what it wants by force – and how much easier it is to collect it when the taxed are not armed (perhaps this explains the origin of and the meaning behind the second amendment to the United States Constitution?).

May be a more fruitful empirical study would be one that compares the size of states with the extent of their gun laws.

Social Democracy

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The author responded to a lengthy article, posted online, that advocated strongly social democracy. Unfortunately the original link has broken but the text below quotes the article in its entirety, interjected by responses.

“Democracy is a form of government in which all citizens take part. It is government of the people, by the people, and for the people. Socialism is where we all put our resources together and work for the common good of us all and not just for our own benefit. In this sense, we are sharing the wealth within society.”

Socialism is the abolition of private property in the means of production, i.e. no individual owns the physical entity of or is entitled to the capital value of any capital or producer good. Once this has been accomplished there remains the problem of how to direct these resources to the most highly valued ends. Contrary to the tacit assumption of many socialist thinkers there is no separate, conscious entity who feels and knows what the “common good” is; there are only individual humans who each value different ends independently; they may agree, in some cases, on what are valuable ends but they still hold these values as individuals and they are liable to change. Further, there will be disagreement on how these ends are to be achieved and precisely which of the scarce means are to be allocated to them. So how is a) the most valuable ends and b) the most suitable means for those ends to be determined under Socialism? How is disagreement on these matters to be reconciled?

All valuable ends are confronted by the same problem – scarcity of the means of production. Hence the economic problem is how to direct scarce means to the most highly valued ends. You can advocate that this can be done either through socialised property or private property but you cannot argue in favour of both together – they are entirely different solutions to the same problem. If you start from the premise that “certain industries” may be socialised you are already advocating that at least some of the factors of production should be allocated to these industries, but this can only be arbitrary. How do you know? And if you know how do you know which factors should be allocated and in which proportion? How do you compare one set of allocations with another set?

A system of private property in the means of production answers this through pricing, profit and loss. For private property gives way to exchange which creates supply and demand which produces prices which produces profit and loss. Hence costs and revenue can be reduced to a single common denominator, the unit of exchange (money), that allows resource allocation to be compared across the entire economy.

In the absence of private property, however, there can be no exchange. There are therefore no prices in the factor of production and no profit and loss. How are the factors of production to be compared? How is the electorate or its democratically elected caretakers of the means of production to compare the cost of 5 tonnes of steel, 3 tonnes of wood, 40 labour hours, 500 sheets of paper, 6 billboards of advertising, 30 hours of telephone calls if it cannot reduce these inputs to a common denominator?

“Of course when people hear that term, “Share the wealth” they start screaming, “OMG you want to rob from the rich and give it all to the poor!”  But that is NOT what Democratic Socialism means. To a Democratic Socialist, sharing the wealth means pooling tax money together to design social programs that benefit ALL citizens of that country, city, state, etc.”

If a person is wealthy in a pure private property society (where trade is entirely voluntary) it is because he has produced a comparatively high quantity of goods that other individuals are willing to purchase. A poorer person has produced comparatively less. The wealth of the rich can only grow if they abstain from consumption of their income and invest it in order to increase the number of goods they can produce. Most of the wealth of the rich consists of, or is derived from, real valuable assets – factories, commodities, plant, shops and inventories. They continue to be rich because these assets are productive – other people are willing to exchange them for another valued good, i.e. money. If they cease to be productive their capital value will decline and so will the wealth of the owner.

If the amount of pooled wealth available for government programs is to increase these real resources have to be liquidated from their current uses and the workers have to be laid off and transferred to Government employment. For every resource that is consumed in a government program that is one resource less that can be used for something else. By which method do you calculate whether the resources are being put to their most valuable ends in the hands of private entrepreneurs or in government programs?

“The fire and police departments are both excellent examples of Democratic Socialism in America.  Rather than leaving each individual responsible for protecting their own home from fire, everyone pools their money together, through taxes, to maintain a fire and police department. It’s operated under a non-profit status, and yes, your tax dollars pay for putting out other people’s fires. It would almost seem absurd to think of some corporation profiting from putting out fires. But it’s more efficient and far less expensive to have government run fire departments funded by tax dollars.”

This is no different from insurance. Individuals pool their premiums together with a private provider in order to provide the resources for extinguishing fires in an emergency and/or compensating the unfortunate victims of fire damage. The only difference is that each individual can choose whether to pool his premiums with one particular provider or not (or at all). The insurer therefore has to act in a way that will retain its customer base, one of which is to keep premiums lower than those of its competitors. The primary method of accomplishing this is to minimise the amount that has to be paid out in compensation and the only way to do this is to prevent and control fires as much as possible. The insurer may, therefore, specify that your home be fitted with some basic fire-fighting equipment such as fire extinguishers or fire blankets and that all of your equipment is electrically tested, for example. If the cost of this is less than the saving you make on a lower premium then you are likely to do this. They may charge higher premiums in cases where flammable substances are stored on a property, or refuse to insure you altogether because the risk would be too great, thus discouraging the accumulation of dangerous materials. The result of this is that each person pays according to the amount of risk he is willing to bear and everyone, consumer and insurer, is equally interested in taking steps to minimise the number of fires as much as possible.

If a fire does start, however, the longer they burn the more the insurer has to pay in compensation to a covered individual. They are therefore likely to respond with the utmost urgency with their own, privately owned, fire fighting equipment or privately contracted fire fighting supplier in order to minimise the amount of damage.

All of these incentives are lost when fire-fighting is managed by the Government. The Government does not need to be concerned about losing your premium to a competitor – you have to pay it in taxes or it will incarcerate you regardless. Hence it is less bothered about minimising the amount of damage. Fewer homes will therefore be installed with preventive equipment and less electrical testing will take place. There will therefore be more fires. Further the tax paid towards fire-fighting services is not adjusted to your individual level of risk; rather it is determined by your income. There is therefore less incentive to avoid the accumulation of risks that contribute towards fire. Every preventative measure you take is an extra cost but there is now no added benefit – you still have to pay the tax and you are still entitled to the same service as everyone else. The result will be less prevention and more fires, more destruction of property and consequently less overall societal wealth.

And finally, once a fire starts, the Government is not going to lose any money if your house burns. Even if it has to pay you compensation the Government will not go out of business if it has to pay too much, unlike a private firm. The Government-employed fire-fighters know that, regardless of what happens to your house, they will, in principle, still be employed and paid tomorrow regardless of the cost to the Government of compensating you for your house. This is not to suggest that Government fire-fighting will always be slow, shoddy and negligent. But given these facts what is the likelihood that a Government fire service will respond more efficiently to a case of fire than a private fire service?

This is a typical case of Government having carried out a particular function for so long that everyone forgets what it looks like when it is carried out privately. Yet the above should demonstrate how it would most likely be done and to a higher degree of efficiency than by the Government.

“Similarly, public education is another social program in the USA. It benefits all of us to have a taxpayer supported, publicly run education system. Unfortunately, in America, the public education system ends with high school.  Most of Europe now provides low cost or free college education for their citizens. This is because their citizens understand that an educated society is a safer, more productive and more prosperous society. Living in such a society, everyone benefits from public education.”

No one denies that education is a beneficial and indeed a good and beautiful thing. But for every resource spent on education there is one less resource to be spent on something else. How do you know that education is the most productive use for these resources?

We could devote the entire productivity of the world to a huge and glorious education system where everyone pops out as smart as Einstein. But there would be no cars, no shops, no food, no computers, no houses, no offices, no factories etc. because all resources are devoted to the education system.

The problem faced by an economic system is not to determine what is valuable in the abstract – it is how to direct the scarce means to their most highly valued ends before all others.

“When an American graduates from college, they usually hold burdensome debt in the form of student loans that may take 10 to even 30 years to pay off. Instead of being able to start a business or invest in their career, the college graduate has to send off monthly payments for years on end. On the other hand, a new college graduate from a European country begins without the burdensome debt that an American is forced to take on. The young man or woman is freer to start up businesses, take an economic risk on a new venture, or invest more money in the economy, instead of spending their money paying off student loans to for-profit financial institutions.  Of course this does not benefit wealthy corporations, but it does greatly benefit everyone in that society.”

But the cost has to be paid by someone. If the graduate has to pay for his own education then yes he has less money to “start up businesses, take an economic risk on a new venture, or invest more money in the economy”. But if everyone else has to pay for his education through taxes then everyone else has that little bit less to do all of those wonderful things. The graduate has only gained what everyone else has lost.

“EXAMPLE  American style capitalistic program for college: If you pay (average) $20,000 annually for four years of college, that will total $80,000 + interest for student loans. The interest you would owe could easily total or exceed the $80,000 you originally borrowed, which means your degree could cost in excess of $100,000.”

If the cost of $80 000 tuition is paid back by the graduate without the interest of, say, $20 000 then that is $20 000 less that can be loaned to another student. There will therefore be fewer funds available to loan to more students for their education. Fewer students will therefore be educated. That is presumably not the intended outcome of this author. Governments, of course, could simply raise taxes to make up the shortfall. But again, all this will mean is that what the graduate has gained the taxpayer has lost.

“EXAMPLE  European style social program for college: Your college classes are paid for through government taxes.  When you graduate from that college and begin your career, you also start paying an extra tax for fellow citizens to attend college. Question – You might be thinking how is that fair? If you’re no longer attending college, why would you want to help everyone else pay for their college degree? Answer – Every working citizen pays a tax that is equivalent to say, $20 monthly.  If you work for 40 years and then retire, you will have paid $9,600 into the Social college program.  So you could say that your degree ends up costing only $9,600. When everyone pools their money together and the program is non-profit, the price goes down tremendously. This allows you to keep more of your hard earned cash!”

The cost of $20 monthly is arbitrary and no proof of this being the real cost under such a system is offered. The conclusion that “the price goes down tremendously” is, therefore, a non-sequitur. If anything, the cost of education is likely to go up as relieving every individual of the cost of his tuition will cause an increase in demand which causes prices to rise.

This is the reason, in the UK, for the recent “outrages” over higher education tuition fees. Government sanctioned loans systems artificially stimulate demand while the Government also caps the number of students, hence leading to a reduction in supply. Increasing demand and suppressed supply equals spiralling costs.

It is therefore Government interference with the higher education system and not private finance that makes bearing the costs of higher education so intolerable to graduates.

“Health care is another example: If your employer does not provide health insurance, you must purchase a policy independently.  The cost will be thousands of dollars annually, in addition to deductible and co-pays. In Holland, an individual will pay around $35 monthly, period.  Everyone pays into the system and this helps reduce the price for everyone, so they get to keep more of their hard earned cash.”

Healthcare premiums are so expensive in the US precisely because of Government interference in the insurance industry (and the only reason that insurance is the preferred method of funding healthcare is an anomaly that originates in The Great Depression). If Governments legislate so as to compel a provider to insure risks which are perceived by the latter as higher and more costly then the latter is forced to take on the burden of paying more than it would like when these risky events transpire (an almost guaranteed certainty if the insured event is something over which the policyholder has control. This is simply compensating individuals for their deliberate actions). Costs, therefore, rise.

Socialised healthcare under Medicare and Medicaid under which the healthcare consumption of an individual is divorced from its cost to the individual, the ease of malpractice suits, and lengthy and bureaucratic drug approval processes mandated by the FDA all contribute to the rise in healthcare costs in the US. None of these are phenomena of the free market.

Holland also operates on an insurance-led basis. One should investigate whether the lower cost allegedly associated with this is because of less and not more Government involvement.

“In the United States we are told and frequently reminded that anything run by the government is bad and that everything should be operated by for-profit companies.”

This is a list of Federal Government departments and agencies. Just a brief glance will reveal Government involvement in commerce, transport, housing, education, broadcasting, agriculture, labour, security, energy, healthcare, environment and engineering. Even if America is “frequently reminded” by somebody “that anything run by the Government is bad” no person can look sensibly at this list and conclude that Government does not already control or regulate vast areas of the US economy.

“Of course, with for-profit entities the cost to the consumer is much higher because they have corporate executives who expect compensation packages of tens of millions of dollars and shareholders who expect to be paid dividends, and so on.”

Executive compensation cannot determine market prices of consumer goods. Every good purchased by you is evaluated on its merits alone, not on the costs that went into producing it. If you deem the merchant’s asking price to be less valuable to you than the utility you will gain from the good then you will make the purchase. Otherwise, you will not make the purchase. It is therefore because an entity’s goods are so highly valued and consequently sell so well that companies are willing to pay more to hire the best employees. Not so if their sales are less successful.

Profit (and loss) is revenue minus costs. In order to make a profit you must increase your revenue as much as possible but what is forgotten is that you must reduce your costs also. Employee compensation is a cost and the higher it is in relation to revenue the lower the profit of the entity will be; the lower the profit, the less it will be able to invest in growth and the sooner it is more likely to stumble in meeting the needs of consumers which is the first step to insolvency.

In 2011, total executive compensation at Tesco plc was £21.7m against a turnover £60.9bn, approximately 0.0356%. Even if executive compensation did drive up consumer prices one has to wonder how such a small percentage could make much of a difference.

Finally, regarding very large corporations one might wish to investigate the effects of monopoly and regulatory privilege granted by Government and the effects of Government–granted limited liability in generating a preference for the large, publically-traded entity before implying that these beasts are creations of the pure pricing, profit and loss system.

“This (and more) pushes up the price of everything, with much more money going to the already rich and powerful, which in turn, leaves the middle class with less spending money and creates greater class separation. This economic framework makes it much more difficult for average Joes to ‘lift themselves up by their bootstraps’ and raise themselves to a higher economic standing.”

You cannot leave the general population with less spending money and push up the price of everything simultaneously. If the population was left with less money then it would have less with which to bid for goods and services. The latter would therefore remain unsold until prices were dropped. If prices were dropped, profits for vendors would drop. If profits drop then costs have to be cut. One of those costs is executive compensation.

If a firm, however, is able to continue to raise its prices without affecting sales and this increases profit margins beyond that experienced in other industries, resources are diverted away from the less profitable industries and into the profitable both by the existing entity and by new competition. Supply is therefore increased and prices consequently decrease.

It is therefore very difficult for an entity to raise its prices to increase profits without a) choking off sales or b) attracting competing investment.

The most effective way for the latter to be avoided is for the entity to induce the Government to regulate the industry. Compulsory licensing, planning permission, Government imposed trading standards, health and safety standards, employment regulation, etc. all serve to deter competition. For every extra regulation that must be complied with is an extra cost that a new competitor must meet and, by virtue of its status as a start-up, must consist of a larger portion of its costs that those of an incumbent provider. There is therefore a tendency for larger firms to become entrenched and for the “Average Joes” to be unable to “lift themselves by their bootstraps” – all because of Government intervention.

“So next time you hear the word “socialism” and “spreading the wealth” in the same breath, understand that this is a serious misconception.”

That is precisely what the effect of socialism is. In a capitalist society wealth accumulates to each person according to his productivity. If another system is adopted then the wealth must be distributed in a different way with a different result; otherwise implementing socialism would be pointless. Hence socialist writers devoted part of their theory to the problem of distribution of goods in a socialist society, i.e. to “spreading the wealth”.

“Social programs require tax money and your taxes may be higher.”

Correct.

“But as you can see everyone benefits because other costs go down and, in the long run, you get to keep more of your hard earned cash!”

What has been demonstrated, in fact, is that costs rise under socialism. If an individual does not have to pay for his consumption, all else being equal he consumes more. Hence demand rises and so do costs.

“Democratic Socialism does NOT mean taking from the rich and giving to the poor.”

It means taking from the productive to fund the unproductive. This can be the only logical outcome of a system other than private property, where the fruit of production accrues to the producer.

“It works to benefit everyone so the rich can no longer take advantage of the poor and middle class.”

It benefits the unproductive ahead of the productive. The unproductive are able to take advantage of the productive. Productivity therefore becomes less valuable and decreases whereas un-productivity becomes more attractive. Societal wealth therefore declines.

POSTSCRIPT: The main error of the author of the original article (apart from providing blatant examples of Bastiat’s famous “broken window” fallacy) is the belief that a market economy provides benefits only for some whereas “democratic socialism” provides benefits for all. Precisely the opposite is true. Under the free market all exchanges are voluntary. If A exchanges a good with B then it must be because they each value what they receive more highly than what they give up. Both therefore benefit from the transaction and we can say that social utility is increased. A system of “democratic socialism” however would necessarily involve violently enforced transactions (taxes). If an individual has to be coerced into a transaction then it necessarily means that he values abstaining from the transaction more than entering it (otherwise he would have entered it voluntarily). The recipients of Government spending may gain (as does the Government itself) but here, in contrast to a market economy, some have gained at the expense of others. As we cannot make interpersonal utility comparisons (i.e. we cannot “measure” utility) it is impossible to say that the gain to one is greater than the loss to another. But even if this wasn’t true the fact remains that the coerced individuals would have gained greater utility from not being taxed and to them the transaction is very much a loss; hence a system of “democratic socialism” does not provide “benefits for all”.

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