Sunday, June 30, 2013

The Exit on the Road to Serfdom

One of my favorite quotes from the quotable Thomas Paine is a mere footnote in his treatise, Rights of Man, Part Second, in which he wrote:
It is scarcely possible to touch on any subject, that will not suggest an allusion to some corruption in governments.
Paine was referring to “the splendor of the throne,” which he said “is no other than the corruption of the state.  It is made up of a band of parasites, living in luxurious indolence, out of the public taxes.”  He thought the U.S. federal government, newly created by the Constitution, provided hope against political corruption because of the limitations it imposed on the government.  Paine was in England at the time and had no idea that the new government, whose intellectual leader was Alexander Hamilton, was busy interpreting those limitations out of existence.

Paine also didn’t know the Constitutional Convention of 1787 was in fact a coup d'état.  The participants had been authorized only to amend the Articles of Confederation, but the nationalists, at least, wanted to replace the Articles with a new government that would be more “energetic.”  Knowing that Washington’s presence at the convention would be critical to its success, Henry Knox told the retired general that he would be given the president’s chair, and moreover, that he would not be presiding over some middling conference of officials tinkering with the “present defective confederation,” but instead would lead a prestigious body of men as they created an “energetic and judicious system,” one which would “doubly” entitle him to be called The Father of His Country.

In a previous note Knox had awakened Washington’s interest by lying about the meaning of Shays’s Rebellion.  According to Knox, former Revolutionary War officer Daniel Shays had organized the riffraff of Western Massachusetts to shut down the courts to avoid paying their taxes.  They were levelers, Knox said, who sought to annihilate all debts through “the weakness of government.”  Washington, who owned some 60,000 acres in the Virginia backcountry, thought that such people were “a wretched lot, not to be trusted, and certainly not to be the bone and sinew of a great nation.”

In truth, as historian Leonard L. Richards has shown, Shays’s Rebellion was not an uprising of poor indebted farmers, but a protest against the Massachusetts state government and its attempt to enrich the few at the expense of the many through a regressive tax system. The rebellion began as peaceful petitioning and escalated into violence only after the state repeatedly ignored the petitions.  Though they were described in various disparaging terms, the rebels saw themselves as regulators whose purpose was “the suppressing of tyrannical government in the Massachusetts State.”  They drew their inspiration from the Declaration of Independence that said people should throw off any government that is destructive of their rights.

But the rebellion was finally crushed and has since been interpreted as proof that a stronger central government was necessary.  Following ratification, “We the people” were headed down the long road to serfdom at an accelerated pace.

Is there an exit on that road?

A few thinkers have argued that there is.

In 1849 in Paris, Gustav de Molinari and his laissez-faire colleagues met to discuss Molinari’s new book, Les Soirées de la Rue Saint-Lazare, a series of fictional dialogues between a conservative, a socialist, and himself, whom he referred to as the economist.  Molinari argued that the free market could produce the state’s traditional function of security without monopoly, or as he put it in another essay, “the production of security should . . . remain subject to the law of free competition.”

His friends at the meeting included Charles Coquelin, Frederic Bastiat, and Charles Dunoyer.  None of them accepted his thesis.  In the absence of a monopoly state, Coquelin asserted, competition was “impossible to put into practice or even to conceive of it.”  Bastiat said the only way to guarantee justice and security is with force, and that requires a “supreme power,” not spread over bodies “equal amongst themselves.”  Coquelin later wrote a review of Molinari’s arguments, correctly describing the latter’s position as one in which
the State would be nothing but a kind of insurance company, a rival to many others, and each person would, just as he pleases, freely subscribe to this one or to that one to guarantee himself against the troubles that threaten him, exactly as one would guarantee his house against fire or his ship against shipwreck.
Murray Rothbard describes the Belgian-born Molinari as the most “consistent, longest-lived and most prolific of the French laissez-faire economists.”  He was proposing life without a state, and there were virtually no takers.

Almost simultaneously in England a young Herbert Spencer was advancing a nearly identical thesis in his book, Social Statics.  Spencer argued that government would inevitably become smaller and “decay” as the voluntary institutions of the market replaced it.  As David Hart points out, “it must be assumed that the two thinkers arrived at their positions independently of one another, suggesting that anti-statism is inherent in the logic of the free market.”

A disciple of Spencer’s, Auberon Herbert, agreed with Molinari that the market, unhampered by the state, could satisfy every want that we have, including protection services.  David Hart:
Neither Spencer nor Herbert went as far as Molinari's suggestion that these voluntary defense agencies would be fully professional business organizations whose prices would be determined on the market by competition. They merely limited themselves to criticizing the monopoly of the state and arguing that the individual had the right to organize freely.
However reasonable their views might sound, they never had a wide following.  Molinari believed that the state would die a natural death, that full liberty and a free market were inevitable, yet in the last half of the 19th century he witnessed the rise of statism in all its virulent forms.  David Hart:
Molinari had well understood the fact that these groups which controlled or had access to the state, comprised a class which would not willingly give up the privileges that power bestowed. Unfortunately, he had badly over-estimated the readiness of the exploited classes, the workers, the consumers and the industrialists who did not seek state privileges, to identify government intervention as the enemy of progress.  [emphasis added]
The State: Protector or Predator?

Before dismissing Molinari as a hopeless idealist we should refresh ourselves on what the state actually is.  As Rothbard has written in “The Anatomy of the State,” one can acquire economic goods either by production or predation.  Following the line of thought of German sociologist Franz Oppenheimer, Rothbard says the state, as a monopolist of violence, “is the systematization of the predatory process over a given territory.”  More precisely,
The State provides a legal, orderly, systematic channel for the predation of private property; it renders certain, secure, and relatively "peaceful" the lifeline of the parasitic caste in society.
With this understanding, its hardly surprising that the state’s biggest problem is ideological.  To stay in control, it needs the support of the majority of its subjects, even if such support is only grudging acceptance.  Political leaders alone cannot muster the needed support.  The rulers need intellectuals to persuade the masses that the state is “good, wise and, at least, inevitable, and certainly better than other conceivable alternatives.”  In return for this support, the state sees that its intellectuals are well-taken care of. 

From this it follows that the greatest danger to the state is the person who publicly proclaims the nakedness of the emperor. 

This is our cue.  The state will continue to grow relentlessly if people are convinced that at the very least it is a necessary evil, as Paine once put it.  But the state’s abundant historical record is clear: It isn’t at all necessary.  It is simply evil. 

Friday, June 21, 2013

Snowden vs. Bernanke

From the regime’s viewpoint only, who is the greatest threat, Edward Snowden or Ben Bernanke?

The government’s defenders would likely turn their backs on the question, but they ought to look closely at it.  Here’s their take: Snowden has broken the law and exposed sensitive government snooping operations.  At the very least he should be in prison.  Bernanke is keeping the economy’s engine running with prodigious amounts of digital money, all of it backed by the full faith and credit of the U.S. government, and by most indicators he’s doing a stellar job.  Bernanke is a hero, Snowden is a traitor.  It’s not even an open-and-shut case because it doesn’t deserve to be opened.

But if they did open it, what might they find?  Snowden made headlines with his Glenn Greenwald interview but he’s revealed nothing new.  James Bamford started writing about the NSA’s warrantless eavesdropping back in 1982.  At worst, Snowden is reminding the public of something they should already know.  But that’s it.  If what he’s done has created a crisis, it’s only a crisis of confidence - confidence in the trustworthiness of government.  Congress will continue funding the NSA, and the NSA will continue doing whatever it wants.  Americans thought they had constitutional protection from prying government eyes, but it turns out they don’t.  If they had been paying attention they would’ve known this years ago.  A lot of people are outraged, but this too will blend with countless other government misdeeds and will fall off the radar.

Bernanke, on the other hand, recently tested the waters, perhaps inadvertently, and the result was terrifying to investors.

Gary North described the results in picturesque terms:
Stocks fell, bonds fell, gold fell, oil fell, commodities fell. All over the world, markets tanked.

Why? Because Bernanke hinted that the U.S. economy is recovering, and the Federal Reserve may cut back sooner than expected on its trillion-dollar-a-year pump-priming operation.

Bernanke is the equivalent of the head of the international drug cartel. He is the pusher. He is the man supplying the daily “fix.” Around the world, addicts depend on his supplies of digital “snow.” The fix is in. Bernanke is the fixer.

When the pusher hints that the supply of the investors’ drug of choice — digital money — is likely to be reduced, they panic. The fear of withdrawal discomfort spreads through “the street.”

There was a rush to the exits yesterday [June 20]. People run to cash, especially the dollar, when they think the markets are going to lose their supply of counterfeit money. The world is dependent on the continuing supply of digital money, which is supported by government IOUs.
Bernanke’s hint has exposed a fatal flaw in the alleged economic recovery.  If the influx of fake money is ever slowed or stopped, it’s over.  If the Fed stops printing, investors go back in their shells.  If investors even get a hint of a slowdown, the indicators so supportive of a recovery will reverse, unless Bernanke holds a press conference to stop the bleeding.

It’s highly unlikely that a whistleblower like Snowden can seriously impair the regime’s expansionist aspirations.  Revelations of snooping aren’t monetary issues.  The Fed’s QE programs are.  If they don’t work, the government’s grandiose aspirations, based as they are on confiscated wealth, are seriously threatened.  If the Fed can’t keep manufacturing money at will while keeping the economy at least stable, the regime will be in serious trouble.  The Fed was created by and for the big bankers but it can’t exist without government protection.  In return for this favor the Fed buys government debt, directly or indirectly, to augment its tax revenue.  In recent years the government’s been doing a lot of augmenting - in the range of a trillion dollars per annum.  If this racket proves defective - if the economy can’t shoulder the burden - then government will have to turn to more overt forms of confiscation.  And that, in turn, could threaten the perceived legitimacy of the state.

People think they can live while being spied on in all their communications.  And most of them can.  Many of them think it’s a necessary freedom to surrender if they don’t want to be murdered by terrorists, even if they’re four times more likely to be killed by a lightning bolt, and even if they have no choice about surrendering their freedom.  They’ve been pawns of the government for so long “political freedom” is little more than a collection of nonsense syllables, so they don’t miss it.  They can learn to hate Snowden and love their government herdsmen.

What they can’t live without in a modern economy is sound money.  They don’t know what sound money is, but they do know what they earn and what it costs to live.  If the former is not in a good relationship with the latter they suffer, and they know who to blame for their pain.  Historically, government has gotten away with attacking speculators, hoarders, and of course the free market when their schemes blow up.   Thanks to the internet, Ron Paul, and Austrian economists, their schemes are now more transparent to more people.  The co-conspirators - the Fed and the government - will take the heat when the next crisis arrives.

Bernanke has given the world a sneak preview of the soundness of his counterfeiting program.  Counterfeiting theory says counterfeiting favors the counterfeiters and his pals, which in this case is the banking cartel and the government.  It also says that in the long run it doesn’t favor anyone because the money becomes worthless, but they’ve forgotten this.  If the bureaucrats are in the mood to identify threats to their power, they should forget Snowden and bring Bernanke in for some in-depth questioning - preferably by someone trained in Austrian economics.
     

Saturday, June 8, 2013

The “Case” Against Thomas Paine

Thomas Paine died on the overcast morning of June 8, 1809, in New York City.  Libertarians have long savored his unabashed attacks on government and the many evils of paper money, and the fact that he not only ignited the drive for American independence but kept it alive during its darkest moments.  He played an important role in history, both here and abroad, yet is not given the respect he deserves.

If you extend the list of “Founding Fathers of the United States” far enough you find “Thomas Paine” included on it.  Historians for the most part consider a Founder as one who signed the Declaration of Independence or the Constitution; Paine signed neither, nor was he invited to sign them.  Joseph Lewis published a reasoned and well-documented case that Paine might have authored the first draft of the Declaration. 

If a Founder can be considered someone who helped change the united colonies to the United States, then Paine should be at the top of the list.  It could even be argued that Paine was the founder, and all the others were supporters but only after Paine took the lead.

Of all the nominal Founders, he was perhaps the only one who publicly condemned slavery, cruelty to animals, dueling, and war.  As editor of Pennsylvania Magazine he published “An Occasional Letter on the Female Sex,” one of the first essays for women’s rights in the West.   

If we think of the Founders - Washington, Jefferson, the two Adams, Franklin - what do we have for support?  With the exception of Washington, they all favored independence but none of them attempted to rally support for it among the general population.  Without that support, independence was a futile wish.  Congress chose Washington to lead the troops against the British in 1775, but without a clear aim.  As Pulitzer Prize-winning historian Bernard Bailyn has written,
A group of influential and articulate leaders, especially those from Massachusetts, were convinced that only independence from England could properly serve American needs, and Benjamin Franklin . . . had reached the same conclusion and had found like-minded people in Philadelphia.  But that was not the common opinion of the Congress, and it was not the general view of the population at large.  Not a single colony had instructed its delegates to work for independence . . . All the most powerful unspoken assumptions of the time -- indeed, common sense -- ran counter to the notion of independence. [Bernard Bailyn, Faces of the Revolution, pp. 69-69, emphasis in original]
Paine, unlike most Founders, unlike most people, was not afraid to take great risks. Six months after the publication of Common Sense, in which he referred to the king of England as a "hardened, sullen tempered Pharaoh" and "the Royal Brute of Great Britain," Congress announced the colonies’ independence as thirteen sovereign states.   Later that summer, he joined the Continental army as General Nathaniel Greene’s aide-de-camp.  Paine proved to be a willing but mostly incapable soldier, and senior officers decided he would serve the cause better with his writing.

During the fall of 1776 Washington had suffered defeats in New York and had retreated across New Jersey to the Pennsylvania side of the Delaware River, nine miles north of Trenton.  The British were convinced the war’s end was imminent, and British General William Howe, rather than pursue the rebels and capture Philadelphia, retreated to New York, leaving contingents at various New Jersey outposts, including Trenton.  Howe had a mistress, Mrs. Elizabeth Loring, whom he had brought from Boston to New York, and he favored spending winter with her instead of subduing a ragtag army of farmers.

In mid-December, Paine, carrying a draft of a new essay, trudged 35 miles from the army’s campsite to Philadelphia, finding the city in chaos.  Congress had fled to Baltimore, and Tory Americans were posting welcome signs to General Howe on the windows of their shops, anticipating his arrival.  Paine Biographer Craig Nelson:
News of defeat after defeat had frightened the vast majority of residents into flight, and morale had collapsed. . .  British troops were just across the Delaware River, ready at any moment to march into the city and force the American capital to surrender. . .  It was, Paine said, “the very blackest of times . . . when our affairs were at their lowest ebb and things in the most gloomy state.”

He frantically began writing the first of what would eventually number a series of thirteen pieces, one in honor of each colony.  [In American Crisis - Number One] Paine used every weapon in his propagandist’s arsenal to upend the great advantage Britain held in its favor -- fear.  In the America of 1776, everywhere they looked, Americans saw reasons to be profoundly afraid -- afraid of what the redcoats would do to them, their families, and their property; afraid of losing their British empire and their British citizenship; afraid of what this new homemade government would do, and what it would require.  Paine answered all of these vague and paralyzing terrors in a mere eight pages.  [Craig Nelson, Thomas Paine: Enlightenment, Revolution, and the Birth of Modern Nations, pp. 107-108]
The Philadelphia Journal published the Crisis pamphlet a week before Christmas, with Paine once again waiving any profits from the publication, as he had done with Common Sense.  Printers in other colonies distributed it, and its opening words became immortalized throughout the world: These are the times that try men’s souls.

Prior to crossing the Delaware for a surprise attack on Trenton, Washington had his officers bring the troops together in small squads and ordered them to read Paine’s essay to the men.   Whether enlisted men standing around in sleet and snow, hungry and ill-clad, could be brought to life listening to an officer read a pamphlet, is open to question.  But it did have the effect of lifting citizen spirits when it was published, along with news of Washington’s victory.  It was either John Adams or Joel Barlow who is reputed to have said, “Without the pen of Paine, the sword of Washington would have been wielded in vain.”

The evils of paper money

After the war, Paine sailed to England and continued to write on political and economic issues.  In an essay titled “Prospects on the Rubicon,” Paine saw clearly the defects of paper money.
Every thing shows, that the rage that [overran] America, for paper money or paper currency, has reached to England under another name. There it was called Continental Money, and here it is called Bank Notes. But it signifies not what name it bears, if the capital is not equal to the redemption. . . .

Credit is often no more than an opinion, and the difference between credit and money is that money requires no opinion to support it. . . .

In short, the delusion of paper riches is working as rapidly in England as it did in America. A young and inexperienced Minister, like a young and inexperienced Congress, may suppose that he sees mines of wealth in a printing press, and that a nation cannot be exhausted while there is paper and ink enough to print paper money. Every new emission, until the delusion bursts, will appear to the nation an increase of wealth. Every merchant's coffers will appear a treasury, and he will swell with paper riches till he becomes a bankrupt.
In another essay, in which Paine defended the Bank of North America as a means of curtailing the issuance of paper money, he wrote:

However paper money may suit a borrower, it is unprofitable, if not ruinous in the end, to every other person. The farmer will not take it for produce, and he is right in refusing it. The money he takes for his year's produce must last him the year round; and the experience he has had of the instability of paper money has sufficiently instructed him, that it is not worth a farmer's while to exchange the solid grain and produce of a farm for the paper of an Assembly, whose politics are changing with every new election . . .
Paine’s most complete attack on paper money is to be found in his essay, “DISSERTATIONS on government; the affairs of the bank; and paper money”:
The only proper use for paper, in the room of money, is to write promissory notes and obligations of payment in specie upon. A piece of paper, thus written and signed, is worth the sum it is given for, if the person who gives it is able to pay it; because in this case, the law will oblige him. But if he is worth nothing, the paper note is worth nothing. The value, therefore, of such a note, is not in the note itself, for that is but paper and promise, but in the man who is obliged to redeem it with gold or silver.
Such simple truths, so long-forgotten today.

Unforgivable transgressions

Had Paine died at this point in his life perhaps he would be fondly remembered in official histories.  But he lived to write a blistering criticism of Washington and what to many was a savage attack on the Bible.

While a member of the French legislature during the French Revolution, Paine had fallen victim to Robespierre’s Terror and had been imprisoned to await execution.  He expected Washington, as his long-time friend and now president, to intervene on his behalf through the U.S. envoy to France, Gouverneur Morris.  When this didn’t happen Paine became embittered, and following his release after a ten-month incarceration, he composed an open letter to Washington dated July 30, 1796.  It was published in Philadelphia by Benjamin Franklin’s grandson, Benjamin Franklin Bache, editor of the republican journal Aurora.  Paine biographer John Keane writes:
In his open letter, Paine gave a detailed account of his imprisonment and said that he held Washington personally responsible for the fact that until [the arrival of James Monroe, who replaced Morris as envoy], he had not been considered an American citizen. . . .

Characterizing the president as “treacherous in private friendship . . . and a hypocrite in public life, Paine warned him that “the world will be puzzled to decide whether you are an apostate or an impostor, whether you have abandoned good principles, or whether you ever had any.” [John Keane, Tom Paine: A Political Life, pp. 430-431]
Paine, born in Thetford, England in 1737, answered the charge of not being an American citizen by claiming that, until July 4, 1776, there were no true Americans, only Englishmen or English-Americans.  Furthermore, Paine took an oath of allegiance to the United States on two occasions, once in 1776, and again in 1777.

Nevertheless, Washington’s reputation as “father of his country” was already too well established for his letter to go over well.  Around the same time he published Age of Reason Part II, in which he wrote, referring to the Old Testament:
To believe, therefore, the Bible to be true, we must unbelieve all our belief in the moral justice of God; for wherein could crying or
smiling infants offend? And to read the Bible without horror, we
must undo everything that is tender, sympathizing, and benevolent in the heart of man. Speaking for myself, if I had no other evidence that the Bible is fabulous than the sacrifice I must make to believe it
to be true, that alone would be sufficient to determine my choice.

But in addition to all the moral evidence against the Bible, I
will in the progress of this work produce such other evidence as even a priest cannot deny, and show, from that evidence, that the Bible is not entitled to credit as being the word of God.
In Age of Reason Part I he had written:
Whenever we read the obscene stories, the voluptuous debaucheries, the cruel and torturous executions, the unrelenting vindictiveness, with which more than half the Bible is filled, it would be more consistent that we called it the word of a demon, than the word of God. It is a history of wickedness, that has served to corrupt and brutalize mankind; and, for my part, I sincerely detest it, as I
 detest everything that is cruel.
Though Paine wrote Age of Reason because of his conviction that false systems of religion were encouraging the spread of atheism, he has been often regarded as an atheist ever since.

In describing how Paine has been remembered, biographer Jack Fruchtman, Jr. notes that
On the occasion of the one hundredth anniversary of the Declaration of Independence, the city of Philadelphia refused to allow a bust of Paine to be placed in Independence Hall.  In 1933, a New York radio station first invited, then refused, to allow a City College professor to give a short talk on Paine because the old radical was regarded as “a dangerous subject and not suitable for radio discussion.”  The station later relented. [Jack Fruchtman, Jr., Thomas Paine, Apostle of Freedom, pp. 441-442]
The victors, in writing the histories, tell us who should be remembered and why.  Paine, critic of Washington and the Bible, has been shunned to the back of history’s bus.