My daughter is bouncing up and down with excitement.  This afternoon she lost another baby tooth (her third to date) and she knows that the tooth fairy will visit her tonight and leave her some money.  I remember the feeling.  As a kid, whenever I lost a tooth I could look forward to finding a shiny new quarter under my pillow the next morning.  

Times have changed. 

These days the tooth fairy is a dollar skeptic.  I know this because instead of putting a quarter under the pillow, the tooth fairy now leaves an American Eagle for each tooth lost.  By the time my daughter’s adult teeth have all come in, she’ll be sitting on two pounds of silver (and unlike her father, she won’t be able to blow all her tooth fairy loot on Donkey Kong).

Perhaps the tooth fairy has been reading the recent financial news.  The Independent reports that Japan, France, Russia, China, and the Gulf Arab states have realized that the American dollar really is backed by the full faith and credit of the US government, and they’d prefer a reliable guarantee instead.  The US government’s debt is expected to reach 100% of GDP within the next two years, and “Helicopter” Ben Bernanke has created trillions of new dollars in the past year alone.  Given the astronomical amounts of money some of these foreign central banks have loaned the Feds to cover their wild-eyed bipartisan spending spree, one can understand why they might not appreciate being paid back with a rapidly depreciating currency like the US greenback.  This may explain in part the recent uptick in the price of gold, which has been mentioned as a possible replacement for the dollar in international transactions. 

It’s as if foreign central banks (and the rest of us, for that matter) are locked in an international game of musical chairs.  When the music stops, the last one holding dollars loses.  It won’t be easy for the countries that are sitting on trillions of US dollar reserves to divest themselves of their holdings without accelerating the currency’s demise, but for my part I hope they figure it out soon – and that they let me know how to do it, too.  I think I hear the music winding down, and I’m all out of baby teeth to leave under the pillow.

(Tooth Fairy painting by Jenedy Paige).

Hugo Chavez has carried out a multi-pronged attack on the liberties of the Venezuelan people ever since he became “president.”  This attack includes (but is not limited to) the nationalization of large swaths of the economy, confiscation of private property, price controls, currency controls and various other restrictions on trade, socialist indoctrination in schools, a court packing scheme, and a relentless effort to silence any and all opposition. 

Earlier this year, the Venezuelan government revoked the licenses of 34 broadcasters that had been critical of the Chavez administration.  Another 240 radio stations and 45 television channels are also on thin ice with the Venezuelan government for alleged violations of the Telecommunications Law, and could well be next on Chavez’s hit list.  The suppression of opposition voices in Venezuela has been so blatant that even the United Nations, an organization which never met a dictator it didn’t like, felt obliged to express some misgivings. 

“I am deeply concerned over the reduction in the number of outlets through which citizens can exercise their right to receive information from diverse sources,” said UNESCO’s Director-General Koichiro Matsuura.  “The people of Venezuela have the right to benefit from a diversity of perspectives in reports and analyses of events that concern them.” 

President Chavez remained unfazed by the obscure UN bureaucrat’s blistering remarks, however, and the Venezuelan government’s long-standing policy of media intimidation continues apace.  In fact, it now seems to be taking on a new dimension.  Whereas in the past Chavez limited his abuse of power to those media outlets that dared criticize government policies, his administration is now threatening to impose fines on television stations simply for broadcasting shows that certain government officials just don’t like.  

What kind of program could be so offensive, so subversive, so bourgeois and counter-revolutionary that it could call down the wrath of the Venezuelan high command?  Family Guy.  That’s right – Family Guy.  Evidently the zany antics and shenanigans of Peter Griffin and his family are so antithetical to Chavez’s “21^st Century Socialism” that they must be expunged from the airwaves of Caracas.  According to the Associated Press, Venezuelan Justice Minister (insert your own joke here) Tareck El Aissami was outraged by a recent episode in which the show’s characters started a campaign to legalize marijuana, and he has indicated that any stations that continue to air the offensive (to him, at least) program will be fined.  

I understand that pointing out the loss of liberty in Venezuela under Hugo Chavez is a lot like pointing out that the sun rose in the east this morning, but some stories are just too good to pass up.  As the AP article mentions, one of the proposed changes to the Telecommunications Law is a requirement that all stations carry Chavez’s speeches.  To that end, kicking Family Guy off the air may just be a necessary first step to free up the additional time slots el Presidente needs.  Given how much Hugo Chavez enjoys hearing himself talk, the requirement to carry all of his speeches could easily fill up the entire day’s programming.  Soon television in Caracas will be like radio in North Korea – all dictators, all the time.  

I used to watch Family Guy quite a bit, but I stopped because it seemed to take them forever to get any new episodes on the air.  But the fact that the Venezuelan dictatorship hates the show may just be reason enough for me to start watching it again.

I just finished reading The Return of the Idiot (El Regreso del Idiota), by Plinio Apuleyo Mendoza, Carlos Alberto Montaner, and Alvaro Vargas Llosa.  This book is the 2007 follow-up to Guide to the Perfect Latin American Idiot (El Manual del Perfecto Idiota Latinoamericano) written six years earlier.  The two volumes examine the reasons for and the results of Latin America’s lurch left over the past several years.  

In Return, the authors distinguish between the “carnivorous” left of Hugo Chavez, Evo Morales, Rafael Correa, Nestor and Cristina Kirchner, Andres Manuel Lopez Obrador, and Ollanta Humala, and the “vegetarian” left of Chile’s Michelle Bachelet and Brazil’s Lula da Silva.  The authors have nothing but contempt for the former group, and point out the disastrous consequences of the carnivorous left’s economic policies in each country.  On the other hand, the authors describe how the governments of the vegetarian left have resisted the urge to run their countries into the ground, adopting broadly pro-market policies that have left their carnivorous counterparts in the dust. 

As I’ve mentioned before, the goings-on in Latin America are of interest to me for both personal and professional reasons.  My wife is from Bolivia, so I have spent a great deal of time in La Paz with the in-laws over the years.  My career has almost always been focused on Latin American operations, so I’ve worked in Mexico, Brazil, and Argentina.  And of course, I have friends from virtually every country south of the Rio Grande, so it pains me to see the countries of the carnivorous left (to use the authors’ terminology) shoot themselves in the foot, reload, and keep firing. 

Though Mendoza, Montaner, and Llosa certainly do a good job at picking apart their political opponents, their critique strikes me as more standard right-wing than libertarian, so there are a number of points in the book with which I disagree.  Nevertheless, I thought it was a good overview of the region’s political landscape.  And throughout The Return of the Idiot I discovered passages that apply just as well to the current political climate of the United States as to any of the Latin American countries surveyed, providing almost as much value for North American readers as for those in Mexico, Central, or South America.  

Since Return has not yet been translated into English (to my knowledge, at least), I thought I’d share a couple of key passages here (the translation is mine, as are any errors associated with it).  The first passage covers the rise and recurrence of populism in Argentina, but the US is certainly no stranger to these same tendencies.  

“Aside from the Kirchner case, the nightmarish recurrence of populist cycles in Argentina demands attention.  Why would a country that has suffered the consequences of populism and to a large degree owes its decline over the course of the 20^th century to this perversion of our political life continually repeat its errors? 

The periodic resurgence of populism has provoked instability and uncertainty each time, making it very difficult for economic agents to plan and invest over the medium and long terms.  Another consequence has been the difficulty in accumulating first-rate human capital.  This is seen not only in terms of education, but also in its effect on republican values, which seem to enjoy less and less consensus among Argentineans – the values through which people understand that tolerance and respect for rules are indispensable for progress and civilization. 

One way of understanding the recurrence of populism has to do with that ‘distributive struggle’ – as it is called in some studies from the Rosario Liberty Foundation, headed by Gerardo Bongiovanni – that is born of the parasitic role played by the country’s special interest groups. 

At the start of the 20^th century, Argentina was one of the twelve leading nations.  By 1985, it was relatively poor, with an average income that equated to something less than 70% of that of the rich countries.  Where did the ‘distributive struggle’ begin that changed the country’s tendency, placing emphasis on the distribution, rather than the creation, of wealth? 

In reality, it started timidly in the 1920s (some would say even before that) and it continued into the 1930s, in part as the result of the movement of the rural population into the cities, which involved the meeting of somewhat different cultures and increased the number of urban actors who were ready to make their political might felt.  With Juan Domingo Peron, who was at once the expression of and the impetus for this phenomenon, populism reached its height in the 1940s and 50s.  This entire period is marked, for example, by salary increases that were greater than the increases in productivity.  More is distributed, but less is produced.  Less and less cake with more and more gluttons.” 

Another passage that stands out describes the Latin American left’s anti-market mentality, but could just as easily describe the Obama administration’s takeover of certain activities that Americans once believed rightly belonged to the private sector (car manufacturing, banking, health care, etc.): 

“The nationalists also propose the ‘nationalization’ of the economy, although, in tune with the euphemistic language of the postmodern left, they assure us that they do not want state control of businesses.  With that, what they mean to say is that it’s enough for the State to declare itself owner of the resources, charge confiscatory taxes, determine prices, and control a percentage of the property of the companies that invest in natural resources, especially those in the mining sector.  The gringos – a practical people, all in all – have a saying: ‘If it walks like a duck and quacks like a duck, it must be a duck.’  The same holds true in the political sphere: if he takes over businesses like a statist, he must be a statist.” 

These and many other passages in The Return of the Idiot make the book worthwhile.  Not only does the reader come away with a better understanding of the political landscape in Latin America today, but US readers also get a cautionary tale for their own country at no additional charge.

National People’s Radio – I’ve been listening to NPR a lot lately, and I realized that they’ve really only got one story.  Someone somewhere depends on some government program, and that government program is underfunded.  That’s it.  That’s the only thing happening in this country on any given day according to NPR.  You’d think that, with a $3.5 trillion budget, a $2 trillion deficit, and an $11 trillion national debt, there would be at least one fully-funded federal program out there somewhere, but it seems that no amount of money will ever be enough for the NPR crowd.  This attitude is not suprising given the fact that a good chunk of funding for NPR member stations also comes from tax money.  “Support for NPR comes from a grant from the Pew Charitable Trust – and from you, the taxpayer, whether you like it or not.  This is NPR.  National Public Radio.” 

Health Insurance vs. Health Care – Has anyone else noticed a shift in the language the media uses to discuss the debate over socialized medicine?  I wrote about Obama’s plans for a government health insurance program last month.  On more than one occasion since then, I’ve heard news stories refer to people who don’t have health insurance as “living without health care.”  These are two very different things.  One may be without health insurance and still be able to get health care – if one is willing and able to pay for it out of pocket, or if charity provides for it.  (And once President Obama has his way, we’ll just all pick each other’s pockets to cover the cost).  A sloppy use of language by the popular media can certainly color the debate in Washington – to the degree that there is a debate in Washington over socialized medicine.  “We have to spend a trillion dollars on a government health insurance plan!”  “A trillion dollars?  Are you crazy?  We shoudn’t spend a penny over $900 billion!” 

Venezuela – Hugo Chavez continues his efforts to see just how bad he can make things in Venezuela.  Oil workers have been told that they have to be socialists if they don’t want to be suspected of “conspiring against the government.”  Guillermo Zuloaga, owner of a television station critical of the Chavez regime, faces a charge of “usury” stemming from a Toyota dealership he also owns, and has been told that he cannot leave the country.  And Venezuelan newspapers can’t get the hard currency they need to buy newsprint.  (The Venezuelan government maintains a currency control mechanism known as CADIVI, which it has used to prevent certain politically disfavored companies from importing needed raw materials and finished goods). 

The newsprint story from Venezuela reminds me of something Murray Rothbard wrote over thirty years ago in his book, For A New Liberty.  “Take, for example, the liberal socialist who advocates government ownership of all the ‘means of production’ while upholding the ‘human’ right of freedom of speech or press. How is this ‘human’ right to be exercised if the individuals constituting the public are denied their right to ownership of property? If, for example, the government owns all the newsprint and all the printing shops, how is the right to a free press to be exercised?”

President Obama met with Pope Benedict XVI last week at the Vatican.  During the meeting, the Pope provided the president with a copy of his new encyclical letter, Caritas In Veritate.  Most of the press coverage has focused on the pro-life elements of the treatise and the obvious disagreements between the Church and President Obama over issues such as abortion and embryonic stem-cell research.  But it should be noted that the Pope’s encyclical dedicates as much (if not more) time to the issues of globalization and the current economic crisis, and in this respect the Pope and the President are like two peas in a pod.  Both demonstrate the same profound ignorance of basic economics, and both prescribe bigger, more powerful government as the cure for what ails us. 

Caritas In Veritate (Charity in Truth) is Pope Benedict’s 2009 sequel to Pope Paul VI’s Populorum Progressio, written in 1967.  Ayn Rand shredded the 1967 original in her essay, “Requiem for Man.”  (This post won’t be nearly as insightful as Rand’s review of Populorum Progressio, but it’s interesting to note that after more than forty years the Church still doesn’t understand the ethical superiority of the free market relative to the political sphere’s command-and-control model).  

The text of Caritas In Veritate is long and rambling, and in many cases self-contradictory.  Often it’s a one-step-forward-two-steps-back affair.  At times the Pope makes some good points about some social ill or other, but then he offers statist solutions that would only aggravate the problem he seeks to remedy.  And throughout the encyclical he overlooks the coercion upon which all state action is based – a troubling oversight from someone who supposedly spends every waking hour wrestling with issues of ethics and morality. 

As the title suggests, the theme of the Pope’s letter is charity.  In the letter, he claims that modern society lacks an overarching sense of charity that would encourage people to think of more than just themselves.  This sense of charity should infuse not only individuals, but also their economic and political institutions.  Pope Benedict sets out his premise in the introduction to the encyclical, which states (in part), 

“Charity in truth, to which Jesus Christ bore witness by his earthly life and especially by his death and resurrection, is the principal driving force behind the authentic development of every person and of all humanity. Love — caritas — is an extraordinary force which leads people to opt for courageous and generous engagement in the field of justice and peace…. 

… Charity is at the heart of the Church’s social doctrine. Every responsibility and every commitment spelt out by that doctrine is derived from charity which, according to the teaching of Jesus, is the synthesis of the entire Law (cf. Mt 22:36- 40). It gives real substance to the personal relationship with God and with neighbour; it is the principle not only of micro-relationships (with friends, with family members or within small groups) but also of macro-relationships (social, economic and political ones). 

I am aware of the ways in which charity has been and continues to be misconstrued and emptied of meaning, with the consequent risk of being misinterpreted, detached from ethical living and, in any event, undervalued. In the social, juridical, cultural, political and economic fields — the contexts, in other words, that are most exposed to this danger — it is easily dismissed as irrelevant for interpreting and giving direction to moral responsibility.” 

And here is where the letter starts to get off track (the introduction).  The Pope is trying to shoehorn the virtue of charity into the sphere of government and politics.  One of the necessary components of charity (and of morality itself) is that it be freely chosen.  One of the necessary components of government action, on the other hand, is coercion.  These two elements – charity and government – are therefore mutually exclusive.  The moral element the Pope wishes to inculcate in society is sacrificed the moment the state is used as the means to that end.  One of the most basic elements of morality is free will.  Once the individual’s ability to choose is removed, as it must be whenever the state is involved, that person’s ability to act as a moral agent is also eliminated.  Once charity is forced upon someone, it can no longer be described as charity.  Even if the state uses the taxes it collects for otherwise noble purposes, such as feeding the poor or clothing the naked, it ceases to be charity and becomes instead wealth redistribution.  Redistribution of wealth is not the same as charity.  The moral dimension that would quality an act as charitable if undertaken voluntarily is destroyed by the use of force. 

At times Caritas In Veritate does pay lip service to the notion of freedom as an essential characteristic of charity.  For example, in the following quote the Pope makes reference to individual rights, saying: 

“Charity is love received and given…Charity goes beyond justice, because to love is to give, to offer what is ‘mine’ to the other; but it never lacks justice, which prompts us to give the other what is ‘his’, what is due to him by reason of his being or his acting.  I cannot ‘give’ what is mine to the other, without first giving him what pertains to him in justice.  If we love others with charity, then first of all we are just towards them.  Not only is justice not extraneous to charity, not only is it not an alternative or parallel path to charity: justice is inseparable from charity, and intrinsic to it.  Justice is the primary way of charity or, in Paul VI’s words, ‘the minimum measure’ of it, an integral part of the love ‘in deed and in truth’ (1 Jn 3:18), to which Saint John exhorts us. On the one hand, charity demands justice: recognition and respect for the legitimate rights of individuals and peoples. It strives to build the earthly city according to law and justice. On the other hand, charity transcends justice and completes it in the logic of giving and forgiving.” 

So far, so good, but again the Pope immediately places this notion of charity that respects individual rights and justice in a political context: 

“Another important consideration is the common good. To love someone is to desire that person’s good and to take effective steps to secure it. Besides the good of the individual, there is a good that is linked to living in society: the common good. It is the good of ‘all of us’, made up of individuals, families and intermediate groups who together constitute society. It is a good that is sought not for its own sake, but for the people who belong to the social community and who can only really and effectively pursue their good within it. To desire the common good and strive towards it is a requirement of justice and charity. To take a stand for the common good is on the one hand to be solicitous for, and on the other hand to avail oneself of, that complex of institutions that give structure to the life of society, juridically, civilly, politically and culturally, making it the pólis, or ‘city’. The more we strive to secure a common good corresponding to the real needs of our neighbours, the more effectively we love them. Every Christian is called to practise this charity, in a manner corresponding to his vocation and according to the degree of influence he wields in the pólis. This is the institutional path — we might also call it the political path — of charity, no less excellent and effective than the kind of charity which encounters the neighbour directly, outside the institutional mediation of the pólis. When animated by charity, commitment to the common good has greater worth than a merely secular and political stand would have.” 

Again, the Pope’s encyclical glosses over the means to the end.  The political path of charity is indeed less excellent and effective than the kind of charity which encounters the neighbor directly outside the institutional mediation of the polis.  From an ethical perspective, the use of force that underlies the political process is far less desirable than voluntary free-market interactions.  From a practical perspective, the state’s insulation from market-driven feedback mechanisms ensures that it will be far less effective in reducing poverty than voluntary, grassroots organizations. 

The encyclical continues with an analysis of the current global financial meltdown that reads as if it had been written by the reporters at NPR: 

“Today, as we take to heart the lessons of the current economic crisis, which sees the State’s public authorities directly involved in correcting errors and malfunctions, it seems more realistic to re-evaluate their role and their powers, which need to be prudently reviewed and remodeled so as to enable them, perhaps through new forms of engagement, to address the challenges of today’s world.” 

“Through the combination of social and economic change, trade union organizations experience greater difficulty in carrying out their task of representing the interests of workers, party because Governments, for reasons of economic utility, often limit the freedom or the negotiating capacity of labour unions.” 

“The right to food, like the right to water, has an important place within the pursuit of other rights, beginning with the fundamental right to life.  It is therefore necessary to cultivate a public conscience that considers food and access to water as universal rights of all human beings, without distinction or discrimination.” 

“Lowering the level of protection accorded to the rights of workers, or abandoning mechanisms of wealth redistribution in order to increase the country’s international competitiveness, hinder the achievement of lasting development.” 

“…It must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution.” 

You get the point.  Read Caritas In Veritate in its entirety if you’re interested in more, or if you’re concerned that these quotes are taken out of context.  I think they give a reasonable encapsulation of the Pope’s viewpoint on economic affairs.  But don’t get me wrong – I don’t want to give the reader the impression that the Pope is just sitting on the sidelines carping about the economy without offering any solutions.  Far from it.  He goes on to provide some practical policy advice as well: 

“In the face of the unrelenting growth of global interdependence, there is a strongly felt need, even in the midst of a global recession, for a reform of the United Nations Organization, and likewise of economic institutions and international finance, so that the concept of the family of nations can acquire real teeth. One also senses the urgent need to find innovative ways of implementing the principle of the responsibility to protect and of giving poorer nations an effective voice in shared decision-making. This seems necessary in order to arrive at a political, juridical and economic order which can increase and give direction to international cooperation for the development of all peoples in solidarity. To manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration: for all this, there is urgent need of a true world political authority, as my predecessor Blessed John XXIII indicated some years ago. Such an authority would need to be regulated by law, to observe consistently the principles of subsidiarity and solidarity, to seek to establish the common good, and to make a commitment to securing authentic integral human development inspired by the values of charity in truth. Furthermore, such an authority would need to be universally recognized and to be vested with the effective power to ensure security for all, regard for justice, and respect for rights. Obviously it would have to have the authority to ensure compliance with its decisions from all parties, and also with the coordinated measures adopted in various international forums. Without this, despite the great progress accomplished in various sectors, international law would risk being conditioned by the balance of power among the strongest nations. The integral development of peoples and international cooperation require the establishment of a greater degree of international ordering, marked by subsidiarity, for the management of globalization. They also require the construction of a social order that at last conforms to the moral order, to the interconnection between moral and social spheres, and to the link between politics and the economic and civil spheres, as envisaged by the Charter of the United Nations.” 

That’s right.  The Pope believes that society’s lack of charity can be solved by giving the UN more coercive power.  Even though the world’s largest governments have routinely failed to deliver their citizens from poverty or to instill a sense of charity in the polis, an even larger government will succeed.  This new, larger, more powerful government will, of course, avoid all of the moral failings that have plagued all other governments since time immemorial (somehow).  The same UN responsible for Oil for Food and peacekeeping missions in the Congo will, in some unspecified manner, straighten up and fly right, thus becoming a paragon of virtue. 

For some reason I’m skeptical that a bunch of corrupt, unelected, and unaccountable UN bureaucrats will use their guns, money, and power to make everyone in the world more charitable.  I rather suspect that they would only use them for their own personal gain.  So instead of imposing further UN-sponsored misery on the world, perhaps we should take a different approach.  Although he seems to be completely unaware of it, Pope Benedict XVI himself alludes to this alternate approach in Caritas In Veritate:

“In Populorum Progressio, Paul VI taught that progress, in its origin and essence, is first and foremost a vocation: ‘in the design of God, every man is called upon to develop and fulfil himself, for every life is a vocation’…A vocation is a call that requires a free and responsible answer. Integral human development presupposes the responsible freedom of the individual and of peoples: no structure can guarantee this development over and above human responsibility. The ‘types of messianism which give promises but create illusions’ always build their case on a denial of the transcendent dimension of development, in the conviction that it lies entirely at their disposal. This false security becomes a weakness, because it involves reducing man to subservience, to a mere means for development, while the humility of those who accept a vocation is transformed into true autonomy, because it sets them free. Paul VI was in no doubt that obstacles and forms of conditioning hold up development, but he was also certain that ‘each one remains, whatever be these influences affecting him, the principal agent of his own success or failure.’ This freedom concerns the type of development we are considering, but it also affects situations of underdevelopment which are not due to chance or historical necessity, but are attributable to human responsibility. This is why ‘the peoples in hunger are making a dramatic appeal to the peoples blessed with abundance’. This too is a vocation, a call addressed by free subjects to other free subjects in favour of an assumption of shared responsibility. Paul VI had a keen sense of the importance of economic structures and institutions, but he had an equally clear sense of their nature as instruments of human freedom. Only when it is free can development be integrally human; only in a climate of responsible freedom can it grow in a satisfactory manner.”

In this passage, the Pope inadvertently provides a very good explanation as to why state involvement is antithetical to real charity, progress, and human development.  State control denies the individual the freedom needed to pursue his or her vocation.  Government maintains the illusion that it is the source of prosperity, which in turn creates a false sense of security that ultimately reduces man to subservience.  In contrast, true charity can only exist within a sphere of freedom.  And it is only through greater freedom that individuals can make the moral choices necessary to deliver real human progress.

Go in peace.

A few weeks ago I drove down to Houston to attend the Mises Circle.  It’s an annual seminar put on by the Mises Institute, and the topic this year was inflation.  It was a really good event, and the audio and video is available on Mises.org for anyone who’s interested. 

One of the speakers was Thomas Woods, a libertarian historian with a solid understanding of Austrian economics.  Prior to giving his main presentation (drawing from his new book, Meltdown), he spoke briefly about an earlier book that he had edited, called We Who Dared to Say No to War, a collection of anti-war writings from throughout American history.  Woods made the point that if you’re an opponent of war and the war machine, then you’re not going to get anywhere unless you go after the money machine.  After Woods concluded his presentation, historian Robert Higgs expanded on the connection between the Fed, inflation, and war. 

There’s no need for me to expound upon the obvious costs of war in human terms, but there are some interesting economic concepts that are perhaps less obvious.  I’ll try to limit myself to these areas.

Two main points should be kept in mind when one considers the economics of war as an enterprise.  The first is that war is only profitable to certain special interests that are tied to the government in some way – basically the military-industrial complex Eisenhower warned of.  To society as a whole, however, war is not profitable in any way, shape, or form – despite any propaganda to the contrary.  War is nothing but the destruction of life, liberty, and property, and it’s the ultimate broken window fallacy to think that war is good for the economy overall.  It’s not.

The second key thing to remember when talking about war – particularly the large scale, modern wars with which we are most familiar – is that it requires the government to seize an enormous amount of resources from the productive economy very quickly.  Government has two basic tools at its disposal to accomplish this – taxation and inflation. 

Taxes have historically gone up in wartime.  The problem with taxation, though, is that there’s a limit to how much the government can drain from people directly in the form of taxes.  We can see an example of this today, though not necessarily (or at least not exclusively) in the context of war.  Taking his cue from President Bush’s free-spending ways, President Obama is now piling on additional trillions in new spending to bail out, rescue, take over, and interfere with various sectors of the economy, thus ensuring that the nation’s economic pain will be deepened and protracted.  And even though “the top two percent” of earners will be duly soaked through ever-higher rates of taxation (with the rest of us to follow shortly), not even President Obama suggests that the federal government can raise enough money from taxes to cover it all.  He knows that there’s no way we could come up with the money directly, nor any way that we would stand for it.  So he’s going to have to print the money he needs.

The same holds true with war.  If each American citizen were to receive a bill for the proportional amount of each of the overseas military adventures our government has led over the years, enthusiasm for those adventures would drop precipitously.  It might even force our government to heed George Washington’s farewell advice, and avoid entangling alliances.  And since there’s no way they’re going to do that, they resort to inflation.

The definition of inflation is an increase in the money supply, and since the government controls the supply of money through the Fed, it follows that government is wholly responsible for inflation.  The reason that inflation is the preferred means to finance wars is that its effects are neither uniform nor immediate.  The first people to get the newly created money get to buy goods and services at the pre-inflation prices.  In the case of war, that’s the government and its selected beneficiaries in the military-industrial complex.  The effect on prices in general doesn’t occur until much later, and by that time the government has already bought the guns and tanks and bombs it wanted.  It’s the suckers down the line like you and me who find that our money just doesn’t go as far as it used to.

I think this issue is important to understand, particularly for those who come from the left.  The so-called Progressives, who often define themselves as being anti-war to varying degrees, would do well to realize that war is only profitable to a few groups who are tied to the government, and even then, it is only profitable to the degree to which those groups can avoid absorbing the costs of war themselves.  Inflation allows government to impose the real cost of war on the people indirectly.  The cheaper government can make war appear, the more war it can afford.  And there’s nothing like a war to increase the scope of government control over a society, so we should always be wary of the government’s incentive to wage war, particularly when combined with an ability to finance it through the central bank’s inflation.

This is why if you really want to constrain the war-making power of the state, you have to constrain the state’s control of the money supply and its ability to inflate.  That means opposing the central bank and the fiat monetary system.  That’s no small feat, and it requires people to dig into the details of some pretty dry topics like monetary policy.

But beyond the sheer dullness of the whole thing, I think the really sticky part for most people will come from the fact that if we restrict the state’s ability to create money and finance wars, we also restrict the state’s ability to create money to finance other things, like socialized medicine, agricultural and corporate subsidies, bank bailouts, government housing plans, and just about everything else that the federal government has exceeded its constitutional authority to do. 

That’s why we libertarians always refer to the “welfare-warfare state” – we understand that these are just two sides of the same coin, and you can’t get rid of one without getting rid of the other.  At the risk of over-generalizing, liberals are generally supportive of the welfare state and oppose the warfare state.  Conservatives support the warfare state, but object to the welfare state.  Since these two areas are really inseparable, the question each camp has to ask is, “What’s it worth?”  Are the things they want the government to provide worth accepting the things they hate?  Another way of asking this would be, “In order to get rid of the thing you hate, would you be willing to let go of the thing you want?”  Personally, I’m more than happy to get rid of both the welfare state and the warfare state, and I think that we would all enjoy a much more peaceful and prosperous society if we did.

And to get back to the original nexus between the war machine and the money machine, this is probably a good moment to remind libertarians to be mindful about how we discuss these economic issues, particularly when talking to people who come more from the left, because there’s always a tendency to mistake the libertarian position on free-market economics with a defense of the status quo.  And part of that is a tendency to look at the military-industrial complex as an element of the free market, when in actuality it’s just a form of corporatism or “participatory fascism,” as Robert Higgs describes it. 

We always need to clarify that our defense of free-market principles is actually a radical departure from the status quo and a fundamental transformation of the economic system we have today.  But the changes we advocate are always in the direction of greater individual liberty, rather than greater state control, which is usually what the left sees as the only alternative to a corporate/fascist system.  We should also recognize that many Progressives do have some valid criticisms and we should acknowledge those, while at the same time explaining how their preferred “solution” of more government control will actually exacerbate the very problems that they seek to address, and make everyone materially worse off. 

One way to do that is to remind people that without the gun of government behind it, the worst thing a corporation can do is try to sell you something – something that you’re free to refuse if you don’t like it.  And no matter what people may think of Wal-Mart, Wal-Mart didn’t kill 100 million people during the last century.  Governments did.  For that reason alone we should be very skeptical about increasing the role of government in our lives.

The Washington Times reports that actor Benicio del Toro left an interview abruptly when questioned about his role in the new Steven Soderbergh film, Che.  Pues, Benicio, conoces el dicho, ¿no?  If you can’t stand the heat, get out of the lead role in a disgusting hagiography of a scumbag mass murderer. 

I heard Benicio del Toro say he wishes people (like me) would watch the movie before coming to any conclusions about it.  I’m sure he does, particularly if his deal includes a percentage of the gross (never settle for a percentage of the net profit – that’s a sucker’s bet).  But for some reason, I just can’t bring myself to sit through a four-and-a-half hour insult to my intelligence and pay for the privilege.  Maybe I’m being unfair.  Maybe Benicio del Toro’s portrayal of Ernesto “Che” Guevara is powerful yet nuanced.  Perhaps his screen presence, guided by Steven Soderbergh’s sublime direction, will convince me to look at Che in a new light, and forget the fact that Guevara personally murdered hundreds of innocent Cubans and condemned the survivors to generations of misery under a communist dictator.  Somehow, though, I doubt it.

I’m quite sure del Toro is genuinely surprised by whatever negative reaction he’s been getting for portraying the left’s poster-boy psychopath.  He’s probably used to hanging out with the likes of Johnny Depp, Carlos Santana, Robert Redford, and all the other Hollywood nimrods who worship el carnicero de La Cabaña.  When pressed by Che skeptics, though, del Toro goes to great lengths to sanitize the historical record, using every cheap euphemism he can think of.

Didn’t Che murder hundreds of political prisoners for fun?  Not according to del Toro.  “They didn’t do it blindly; they had trials.  They found them guilty, and they executed them – that’s capital punishment.”  There may be something to the argument that capital punishment is murder, but this is not the point del Toro is making.  He is not drawing a moral equivalence between the death penalty and murder, he’s drawing a moral equivalence between a fair trial by a jury of one’s peers and a Soviet-style show trial, where a dictator and his gang of thugs execute (as Che himself said) “at the smallest doubt.”

What sent Mr. del Toro heading for the exit in the middle of the interview, however, was the use of the term “concentration camp” to describe the political prison known as La Cabaña.  I’m not sure why this term should be so offensive, as it is the term used by the survivors of that very facility.

Hollywood, however, would prefer we overlook all of these troublesome details and merely focus on the supposed good intentions of Castro and his merry band of murderers.  After all, prior to Castro, Cuba was run by a corrupt dictator.  Now Cuba is still run by a corrupt dictator, but it’s a leftist corrupt dictator, so we’re supposed to believe that this is somehow better.  But even if we were to grant the ridiculous notion that the Cuban revolution was launched with nothing but the best intentions, presumably the rationale behind Castro’s overthrow of the Batista regime was to make life on the island better, not worse.  So how’s that working out?  Under the pre-revolutionary corrupt dictatorship, Cuba was the wealthiest country in Latin America.  Today, it is easily one of the poorest (and when you’re poor in Latin America, you’re really poor). 

But they have good doctors and universal health care, right?  Yes, I suppose that’s technically true.  Of course the hospitals don’t have even the most basic medicines on their shelves, but if they did I’m sure it would be a lovely healthcare experience.  

All in all, I’m just not convinced.  I wouldn’t trade my freedoms for the best doctor in the world, and I can’t bring myself to look at Che Guevara as anything but the villain he was.  And as far as the new Soderbergh flick is concerned, I suspect that the critique Anthony Daniels made of Robert Redford’s Motorcycle Diaries applies to Che as well:

“It is as if someone were to make a film about Adolf Hitler by portraying him as a vegetarian who loved animals and was against unemployment. This would be true, but … rather beside the point.”

Note:  For more information on the Guevara record, check out the following links:

http://www.lewrockwell.com/fontova/fontova63.html

http://reason.tv/video/show/661.html

http://www.facebook.com/group.php?gid=2207390078

I just wrapped up a two-week visit to Helsinki. As I was eating dinner in the hotel restaurant one night, I overheard another American businessman having a conversation with some European counterparts. (Just so you know, it wasn’t so much eavesdropping as it was not being able to drown out a very loud voice in an otherwise quiet restaurant).

The American was discussing the upcoming presidential election, and from what I gathered he was a Democrat. I gathered this from his anti-McCain comments (no argument there), but also by his utter lack of concern over the possibility and/or certainty of higher taxes under an Obama administration. After all, he already pays taxes in the US and Switzerland, so what’s the harm in spending even more? In for a penny, in for a pound, I suppose.

But he had another reason for opposing McCain. He said he didn’t want McCain to win because he didn’t want his daughter to grow up in a country where she wouldn’t be able to have an abortion. And then it got really interesting. He asked rather indignantly, “When did we start telling women what they could do with their own bodies?”

Well, let’s see. There have been laws against prostitution in most societies since at least Biblical times. Women have been told what substances they may or may not ingest ever since the dawn of the progressive era about a hundred years ago. These days cities all across the Land of the Free tell women that they can’t smoke, eat trans-fats, or enjoy goose-liver pate. And despite the recent Heller decision, Washington DC continues to tell women that they’re not allowed to defend their own bodies with a gun.

So it seems to me that “we’ve” been telling women what they may or may not do with their own bodies since at least the dawn of recorded history, and “we’re” still doing it. And in most cases both liberals and conservatives have cheered these government intrusions into the private sphere and demanded more to boot. So I find it amusing that anyone from either camp should now express shock and outrage that the government is telling women what they may or may not do with their bodies.

Not to delve too deeply into the abortion issue, but it seems bizarre that a woman’s “right to choose” should allow her to terminate her unborn child’s life, but does not extend so far as to allow her to eat a Big Mac if she happens to get hungry later. If the liberals really care about defending a woman’s right to make her own decisions about her body, then surely that takes all the other paternalistic programs that they do support right off the table.

So here’s a hint for the pro-choice crowd. If you don’t want the government dictating what a woman can do with her body, then don’t ask the government to dictate what women may do with their bodies. Just a thought…

Barack Obama’s press corps groupies are all atwitter these days as they follow him breathlessly on his around-the-world journey to discover where Iraq is. On the Republican side, talk show hosts like Sean Hannity are working desperately to convince the voters (and themselves) that McCain really is a conservative deep down, where it matters, most of the time, pretty much, anyway. Although they back different horses, both camps agree that this is the most consequential presidential election of our time – or at least the most consequential election since the last one.

As I watch the current media frenzy, I can’t help but be reminded of the movie Ghostbusters. In the final battle, Gozer tells the team to “choose the form of the Destructor.” That is, to determine the form the Sumerian god Zuul will take as he destroys the planet. Terrified, Dan Aykroyd’s character visualizes the most harmless thing he can imagine, the Stay-Puft Marshmallow Man. Sure enough, Zuul appears on the streets of New York as a giant marshmallow, crushing cars and toppling buildings like a fluffy white Godzilla.

That seems to be the extent of our “choice” these days when it comes to Republicans and Democrats. Do we want the Destructor to take the form of Barack Obama or John McCain? Even if the voter believes McCain is a giant Slor and Obama is the soft and cuddly Stay-Puft Marshmallow Man (or vice-versa), the result will be the same – a further erosion of individual liberty and free enterprise in the United States.

Perhaps you think Obama is the better choice because he will get us out of Iraq sooner. That may be true, although what was previously touted as an immediate withdrawal under an Obama presidency morphed to “within sixteen months.” Then it became “as soon as possible.” At this rate, Obama may be the one saying we’ll be in Iraq for another fifty or one hundred years.

But aside from Obama’s ever-slipping timetable for withdrawal, what substantive foreign policy differences does he have with McCain? He has said that he would be more diplomatic and would work with our allies, of course. That will no doubt do wonders for our allies’ self-esteem, like that first Thanksgiving when you were promoted from the kiddie table to sit with the grownups, but it’s not exactly a top-to-bottom critical analysis of US foreign policy. And given the Democrats’ willingness to subjugate the American military to UN command, who’s to say that he wouldn’t march the troops out of Baghdad and straight into Darfur?

Or maybe you think that the fate of the Republic can only be assured with a McCain presidency because he’ll nominate strict constructionists to the Supreme Court. Anything’s possible, I suppose, but consider this – McCain’s great legislative “achievement” is the blatantly unconstitutional attack on free speech known as McCain-Feingold. Why would McCain nominate justices inclined to strike down his pride and joy?

As far as economic policy is concerned, there’s not a dime’s worth of difference between the two. And if they actually follow through on their threats to micro-manage the economy, there won’t be a dime’s worth left in a dime either. Both candidates agree that when the national budget is over $3 trillion per year, the national debt is roughly $10 trillion and climbing, and unfunded liabilities range between $50-$100 trillion, the obvious course of action is to promise more benefits and grow the government even further.

Such is the choice before us – McCain or Obama? Choose the form of the Destructor – Giant Slor or Stay-Puft Marshmallow Man? And don’t bother looking at any third-party candidates that might try to reduce rather than enlarge the scope of government. You wouldn’t want to “waste your vote,” would you?

A “blue-ribbon panel” led by former Secretaries of State James Baker and Warren Christopher has recommended that the War Powers Act be replaced by a more “effective” resolution. According to these Constitutional experts, the problem with the existing War Powers Act is that it has been largely ignored over the years. The way to correct this defect, apparently, is to write a new version that will be un-ignorable. Somehow. Maybe. (The details are still a bit fuzzy).

As CNN reports, ever since Congress first attempted to wash its hands of its responsibility to declare war back in 1973, presidents have flouted the War Powers Act’s requirement to make regular reports to Congress. As Sen. Slade Gorton remarked, “No president has ever made a submission to Congress pursuant to the War Powers Resolution since 1973.” [Emphasis mine]. Why the refusal to inform Congress of the progress of undeclared wars and sundry military engagements? Because presidents have considered the Act to be an unconstitutional restriction on the president’s role as commander-in-chief.

Well, they’re half right anyway. The Act is unconstitutional, but not for the reason various presidents have claimed. The resolution is unconstitutional because it delegates the war-making power vested in Congress by the Constitution to the Executive branch, a clear violation of the separation of powers. As James Madison wrote,

“The Constitution expressly and exclusively vests in the Legislature the power of declaring a state of war [and] the power of raising armies. A delegation of such powers [to the president] would have struck, not only at the fabric of our Constitution, but at the foundation of all well organized and well checked governments. The separation of the power of declaring war from that of conducting it, is wisely contrived to exclude the danger of its being declared for the sake of its being conducted.”

The Founders had reason not to trust the executive branch with the power to declare war. As James Madison wrote in a letter to Thomas Jefferson,

“The constitution supposes, what the History of all Governments demonstrates, that the Executive is the branch of power most interested in war, and most prone to it. It has accordingly with studied care vested the question of war in the Legislature.”

History would seem to confirm Mr. Madison’s dim view of the executive branch in this regard. The last time Congress actually declared war was in 1942. Ever since then, the president has been allowed to commit American troops whenever and wherever he wished. Here is a list of military operations of varying degrees that have been carried out without a declaration of war from Congress (my apologies to any conflicts that may have been excluded from the list):

• Korean War
• Lebanon Crisis of 1958
• Vietnam
• Lebanon (1983)
• Grenada
• Panama
• Somalia
• Haiti
• Kosovo
• Persian Gulf War
• Afghanistan
• Iraq War

But the president is Commander in Chief! He should be able to do whatever he wants with the military! Well, not exactly. When we read the fine print of the Constitution (cleverly hidden in Article II, Section 2), we see that “The President shall be commander in chief of the Army and Navy of the United States, and of the militia of the several states, when called into the actual service of the United States….” Given that the Founders viewed a standing army as a grave threat to liberty, they limited the formation of an army to two years (a constraint that has yet to be eliminated by Constitutional amendment, by the way). If the armed forces were called into the actual service of the United States, it meant that Congress had declared war. It is only at this point that the president becomes commander in chief – it was never meant to be a full-time part of his job description.

But again, we’re talking to a brick wall when we speak of constitutional governance these days. No one cares, as evidenced by the fact that Rep. Ron Paul offered a declaration of war prior to the invasion of Iraq that garnered only three votes. Chairman Henry Hyde opposed the motion, stating,

“There are things in the Constitution that have been overtaken by events, by time. Declaration of war is one of them. There are things no longer relevant to a modern society. Why declare war if you don’t have to? We are saying to the President, use your judgment. So, to demand that we declare war is to strengthen something to death. You have got a hammerlock on this situation, and it is not called for. Inappropriate, anachronistic, it isn’t done anymore.”

(A few years later, Representative Hyde was awarded the Presidential Medal of Freedom).

But despite what most in government obviously believe, there are also some practical benefits that derive from following the Constitution. Had Congress taken up Rep. Paul’s motion and actually declared war prior to the Iraq invasion, the Bush administration would have been spared the trouble of inventing new categories of jurisprudence out of whole cloth. There would have been no need to create an “enemy combatant” category and we could have avoided all the wailing and gnashing of teeth over habeas corpus rights for suspected terrorists. Prisoners captured on the battlefield would have simply been considered prisoners of war. Granted, their interrogators wouldn’t have been able to waterboard them, but I suppose one can’t have everything. Who knows? We might even have avoided the Military Commissions Act, which enables the executive branch to declare anyone an enemy combatant, no matter where they are or what their nationality might be (that means American citizens living in the United States could be accused of being an unlawful enemy combatant, picked up off the street, and imprisoned in a military brig for an indefinite period of time with no recourse to the U.S. legal system).

Of course, the primary reason to follow Constitutional strictures with regard to the war-making power is to make war itself much less common, thereby preserving the liberties of American citizens here at home. Let’s turn to James Madison one last time,

“Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few.”