Tuesday, January 8, 2013

A Visit From the Ghost of Christmas Future

[This article originally appeared on the blog of mises.ca, on December 29, 2012]

John C. Calhoun divided the citizenry of a country into tax payers and tax consumers. Ludwig con Mises concluded that the anti-capitalist society (socialist and interventionist) is one of everyone against everyone, since as a result of the lack of economic calculation there will always be a shortage of desired goods and services in this type of society. Since in an anti-capitalist society income gets redistributed, then, what one needs to be is a tax consumer.

Over the course of the past year or two, civil unrest has dominated the most indebted countries of the European Union. There, the tax consuming masses have repeatedly walked and vandalized the streets of their cities in order to force politicians to renege austerity measures. While all this was going on, the government of my native Republic of Macedonia kept assuring its own people that their country was far from any crisis. Yet, on Christmas Eve Macedonia joined other European countries when its first budget related protests took place (see photo to the right).

There is a twist to the Macedonian story and one that may be of use to us. The protest itself took place when police officers physically threw out members of the Opposition (a wide coalition led by the Social-democrats) for filibustering the vote on the 2013 Budget. However, as has become practice in Macedonia, every opposition protest has been met with a ruling party sanctioned (and paid-for) counter-protest. The photo shows two sets of demonstrators separated by a police cordon.

After the fall of Communism, Macedonia adopted a very liberal (in the classical sense) Constitution in 1991, which unlike that of, say Canada, sanctifies private property and the market economy. It follows that Macedonia should be in the company of Singapore and Hong Kong in terms of economic freedom and prosperity. It is not. Under Communism there was 100% employment (though as the line goes, nobody worked), so there was no need to keep track of the unemployment figures. Since Constitution, the unemployment rate has consistently hovered around 35%. The reason for this dissonance between theory and reality is the fact that private property has continually been trampled upon and the free market was never allowed to operate. Thus, the vast majority of jobs in Macedonia are provided by the government, while whatever private sector jobs are there, they are provided by crony capitalists. Political connectedness rules the day, because politics rules the economy.

The governments in charge between 1990 and 2006 (which comprise the current Opposition) more or less kept to the same policy of distributing welfare to the unemployed, in the form of food stamps, humanitarian assistance, and the like. The present Government which took power in 2006 has been employing the New Deal (FRD/Hitler) method of expanding the administration, heavy subsidization of agriculture and building monuments and sports arenas. A telling point as to how much the administration has grown in the past 6 years is the fact that there are now bureaucrats for whom there are no offices or bureaus. They are forced to spend their workdays (which mostly consist of glorifying the Government on Facebook and Twitter) in coffee shops and taverns!

Inevitably the government took to growing its money supply to finance all the falsified growth. Local economists inform that the M2 has nearly doubled between August 2006 and December 2012, going from 66 billion to 121 billion denars. The influx of new money provided for a period of false (yet moderate, nonetheless) prosperity. A detailed description of what went on in Macedonia is unnecessary to the present discussion. All we need to know here is that despite having its own currency, Macedonia’s reserve currency is the Euro, and that since its market economy was never allowed to operate, the country relies heavily on imports. Indeed, since the Government subsidizes tobacco farming, a disproportionate number of farmers grow it (and not enough of it either) and not market desired foodstuffs which have to be imported (the Government pays higher-than-market prices for tobacco, so it cannot turn a profit by exporting it); since the Government subsidizes the steel industry, manufacturers in other fields are discouraged to enter simply because they carry the tax load. Thus, the country really relies on foreign loans from the World Bank, the IMF and Eurobonds in order to make due.

As the vicious circle of debt driven inflation goes, you always need more debt. And, since Macedonia is no US of A, it cannot borrow quite as easily as the US does. There are still some rules in place for Macedonia: one being that it cannot receive its latest loan of roughly 250 million Euros without passing next year’s budget. This brings us to the point of our story: the budget related protests and counter-protests as a manifestation of the political means of running an economy over the market approach.

Having smelled a potential electoral win in seeing that the government is broke, the Opposition has moved to block the passing of the 2013 Budget in order to block the latest loan. Here is what might be an episode of a visitation from the Ghost of Christmas Future for us: pensioners, bureaucrats and other state employees gathered to protest the Opposition’s move, while its would-be bureaucrats met them on the other side of the police cordon in a fight of everyone against everyone for the booty of the public purse.

R.I.D.E. as an Ineffective Solution to Drunk Driving

[This post originally appeared on the blog of mises.ca, on December 22, 2012]

The traditional clamor of family gatherings, feasts and gift exchanges that accompany the Holiday Season have of late been augmented by local and regional police squads with the widespread application of R.I.D.E.  The “Reduce Impaired Driving Everywhere” (R.I.D.E.) program, which started in Etobicoke, Ontario in 1977 has grown, as all government programs tend, to mammoth proportions. In short, the program consists of local bulletproof clad police squads armed to their teeth, turning downtown areas and highway on-ramps into war zones with their cherrytops flashing as if the Soviets had just invaded, checking drivers for alcohol induced impairment. While the damages that result from drunk driving can be to private property, the “prevention” of injury to private property that is accomplished by R.I.D.E. is something of an exaggeration. For, it is one thing to prevent an imminent crime, it is completely another to label persons criminals for being in a broad statistical category that has a given statistical chance of committing an injury. In that respect, “drunk drivers” caught at a checkpoint are similar to persons who get arrested for possessing illegal drugs. R.I.D.E.’s aim is to catch “impaired” drivers who are clearly capable of driving safely—for if they were driving dangerously they would be easily noticeable on the road.

Until recently, R.I.D.E. was practiced only on holiday weekends and the Christmas season, and it was somewhat reasonable: check-points were set for outbound traffic in the most heavily trafficked areas. In more recent times, the program has taken a completely idiotic turn, as check points on highway off-ramps have began to spring up on rather random nights; while the legal impairment limit has been reduced to an unreasonably low 0.05. If the objective of the program is to prevent impaired, unsafe driving, it is difficult to see the effectiveness of it when it purports to catch drivers who have already safely driven to and down the highway. Clearly, we cannot take the word of the Police on its face that its’ objective is to protect the public; rather a more sensible explanation for their action is that there is little more than a financial goal behind it, and a dose of behavior control.
Speaking to the St. Catharines Standard, concerning its latest sting O.P.P. Staff Sgt. Jan Idzenga expresses frustration with the public’s defiance of the law: “I don’t know what else we have to do to hammer this message home. I don’t think people understand the consequences.”
The Standard goes on to explain that:
The RIDE (Reduce Impaired Driving Everywhere) program is well-advertised in newspapers, on television and on the radio. Both the OPP and Niagara Regional Police often announce they’re running ride checks in advance. Yet, as Idzenga points out, “they’re still not getting the message.”
Friday night, the NRP checked the drivers of 600 cars at a roadside checkpoint in St. Catharines. Four people were arrested for blowing over the legal limit of a .08% blood alcohol level.
This, according to NRP Sgt. Darrin Forbes is still “pretty high.” In fact, “until we go out and catch no one drinking and driving out there, it will continue to be a concern,” he said. Police departments, of course, have the luxury of setting such lofty and impossible goals, since they have no financial constraints to hold them back. Thus, they don’t need to find effective ways of being useful to the public: they just need to look busy.

For its’ NRP Friday Night RIDE for December 14, the NRP reports that 600 vehicles were stopped, out of which 16 roadside sobriety tests were conducted (officers suspected drunkenness in these cases, or the drivers were naïve enough not to lie), these resulted in three 3-day license suspensions and 4 impaired driving charges. Statistically, 0.26% of those checked were suspicious enough to give sobriety tests to; out of which half proved to be in violation of the law. Yet, as trivial as these numbers seem, drunk drivers can often injure other people, and thus represent a problem to the protection of private property.

That said if safety were the true objective, it can be achieved much more cheaply and effectively than by police-state like measures. Rather than turning downtown areas and highways into war zones, the concerned city leaders ought to provide for the true problem at hand: the difficulty of getting around in cities. It is an undeniable truth that the sprawling nature of Canadian cities is a deliberate design to subsidize the car industry, which according to Keynesian doctrine is indispensible to economic wellbeing. As such, it is nearly impossible to get around by walking from place to place, especially in the late-fall to early-spring time of year.

To the great shock of busybodies, people are not stupid nor do they have desires to put their own lives in danger; they are just left with no choice. Indeed, the city owned transit system shuts down long before the bar curfew. In fact, before most people even make it out to the bars. At the same time the taxi licensing regime in place gives rise to a shortage of private providers of mass transportation. Licensed taxis are hard to come by, since there is a lack of inducement for them to put extra cars on the road (an understandable action on their part, since this capital investment will not be self-liquidating due to the lack of daytime business). Yet, much cheaper and equally reliable “gypsy cab” service providers have been a target of the law enforcement authorities for as long as I have lived in this province (12 years). For this reason, even if they do have cars available, one cannot know, since advertizing for them is a way of self-sabotage. There is on top, the stigmatization of illegal taxis, in that they could be staffed with potential rapists or thieves—borne from the indoctrination that what is not regulated is by default criminal. (To this point when the question is posed “What makes legal taxi drivers safe?” the answer is that “They have been checked.” Checked by whom? Illegal taxi companies have the same objective as legal ones: to turn a profit by providing a service.)

Therefore, if the goal is to improve safety and protect the local population from drunk driving, abolish this trauma inducing ugliness called R.I.D.E., which is easily circumnavigated by bypassing the “usual spots” anyway, and allow for a better late-night transportation system to develop. Rather than paying exorbitant overtime salaries to police officers and tying up their crime solving resources for babysitting activities, make provisions for something to the effect of late night, part-time taxi licenses; and extend the hours of certain city bus routes. Such a solution would not only increase safety, but it will provide additional incomes for people ready to render actual and desired services; while at the same time bar revenues are sure to go up as the necessity of the Designated Driver is rendered no more.

What Is and What Isn’t Privatized Garbage Collection

[This post appeared originally on the blog of mises.ca, on December 4, 2012]

With crony capitalists as its supposed champions, capitalism needs no enemies. They are plenty and easy to find in the political sphere, particularly among what these days passes as the Right. Thus, the job of true capitalists is to out the false friends of laissez-faire by refuting their fallacies. One representative of the false champions of the market economy is now-ousted Toronto Mayor Rob Ford. This fellow ran a campaign on the promise to cut government waste in Canada’s largest city—and won. Yet, this seems to be a promise too easy to make, and break, for two reasons. First, politicians usually buckle under the pressure of an impending election. They fear a loss of popularity which could mean a loss of their comfortable job. Second, a politician may not buckle, yet, he may simply not understand the mechanics of the market economy, or chooses not to.

While irrelevant to our purpose, in Ford’s case, in the opinion of this writer, it seems that the latter reason was the key to his ultimate failure to make a real impact in what is business as usual in Canadian politics. A defining moment in Ford’s early tenure was his battle against the garbage collector’s union. It was a fight that Ford ultimately won—but free market capitalism lost—by managing to outsource a part of the city’s collection services to private companies. It was a move described by both supporters and opponent of Ford’s as the “privatization” of garbage collection. But it wasn’t privatization; the handing over of garbage collection to private contractors was the cartelization of Toronto’s garbage collection. For, the City awarded a turn-key business to a company that had gone through the rigmarole of obtaining countless government licenses to operate in what is generally considered the lowest level of the economic pyramid, i.e. an entry level industry where very little capital investment is necessary if not for legal barriers. This was not an open tender to anyone who wished to put their services on offer; this was a contest with a pre-determined winner, picked out of a small group of entities which have satisfied the expensive demands of the laws they lobbied for. On top of that, the customers were not given a choice as to who they would personally deal with; they were forced into accepting the service provider that the City chose. That is to say, the customers had no choice as to who they pay for the service, regardless of who executes it.
In a piece defending Ford’s approach, the National Post would conclude that:
Critics of privatization have pointed to initial problems with the new collection service as evidence that the trade-off for the potential cost savings will be lower quality service. But by doing so, they have demonstrated precisely why they are wrong.
It is far easier to hold private contractors accountable for their service deficiencies than government departments. Furthermore, private contractors have to perform to the standard spelled out in their contract.
While correct in saying that it is easier to hold private contractors accountable for their services than government departments, this does not apply the same way to cartelized businesses as it does to businesses engaged in laissez-faire competition. Likewise, it does not mean that taxpayers are getting a free market level quality of service (relative to what they are paying). When private contractors which have been awarded government contracts (that is, government monopoly) fail to meet taxpayers’ expectations there is still the bureaucratic process that needs to follow in order for their complaints to be heard, and improvements in the service to be implemented. More so, the individual household has no recourse; it cannot take its business elsewhere. Thus, while it may be easier to hold these private contractors accountable relative to City employees, it is still infinitely harder to hold them as accountable as service providers in a perfectly free market.

The earnest privatization of garbage collection would happen when it is private entities that decide how to dispose of their garbage. If Toronto’s garbage collection was truly privatized, then the City of Toronto would have nothing to do with it. Each individual, household or business would make their own arrangements to dispose of their garbage. Here we anticipate the question, “But if the local government doesn’t take care of it, then who will collect the garbage?” To which the obvious answer is: the homeless, the unemployed or simply anyone who sees an entrepreneurial opportunity for profit. Say’s law holds true: At the present time there are numerous entities that provide garbage disposal services to businesses across Canada; similarly, there are countless persons who routinely go through people’s trash before the garbage collectors make their rounds. There are pallet, cardboard and plastic recycling companies, to name a few—often comprising of single operators, that seek out every single discard they can get their hands on. These companies provide customized services to each of their customers: in some cases receptacles (bins, compactors or trailers) are spotted at customers’ locations; in other instances pick-ups are provided on an as-needed basis (which can range from monthly collection, to several times per week)—and there are no limits as to how much garbage the customer can dispose of per collection. Similarly, there are grease and cooking oil companies that collect what is a nuisance for restaurants. There are tire recyclers, electronics recyclers and there are aluminum recyclers. And with the constant progress of technologies, every day brings new ways to reuse something that was garbage the day before, thereby commodifying yesterday’s trash.

There is no mystery as to why owners of local landfills and commercial garbage companies are often if not the wealthiest in their communities, then certainly among the richest and most powerful. There is proverbial gold in them hills of trash—and local monopolies are granted by authorities over them. This allows the Ministry of Environment licensed “landfills” to obtain a higher-than-market return on investment, since competition is limited or outlawed.  Exact numbers of how much of the garbage that gets generated annually ends up in the landfills, and how much of it gets recycled, are irrelevant to the current discussion. The point is that a great deal of what citizens pay a tax to dispose of, ends up being reused by landfill owners.  However, while in, say, the cardboard recycling industry the collector either performs the service for free or pays the entity disposing of their refuse; in the household garbage collection industry the collector gets paid to receive a commodity which he re-sells. Thus, garbage collectors get paid twice—something that would be impossible under an earnest regime of privatized garbage collection. Unlike landfills which already turn a profit from collection, independent recyclers (privatized garbage collectors) have a greater incentive to make every piece of trash re-sellable. Indeed, most of what ends up in the garbage is reusable, as long as it gets sorted properly: at the very least anything that is organic gets turned into decorative mulch or fertilizer. If the garbage collection market was allowed to function freely, then the likelihood is that as a result of competition among collectors, disposers would be able to make some money out of their garbage. It is the pattern that developed in all the above mentioned recycling industries.

As we can see, the outsourcing some or all of the City’s garbage collection to private cartels is a far cry from the true privatization of this service—something that should be kept in mind every time a politician makes a claim that they will “privatize” one thing or another.

A Lesson From Rob Ford’s Ousting

[This post originally appeared on the blog of mises.ca, on November 28, 2012]

Austro-libertarians, present company included, have a tendency to believe that they understand the political system—the State—better than the average person. This opinion stems from careful study of the theory and history of the State, broken down logically and with consistency that any “Austrian” undertakes in his becoming one. The “average person” doesn’t waste his time reading volumes written 50, 100 or 200 years ago. He has no clue as to who Frederic Claude Bastiat, Alert Jay Nock, or Herbert Spencer are, not to mention Lysander Spooner, Ludwig von Mises, F.A. Harper or Murray N. Rothbard. The writings of these gentlemen have summed up the nature of the State to be that of a monopoly of the physical violence over a given territory. Naturally, since the State is comprised of individuals who fill in various official spots by living off of the taxation of other people’s productive labors, it will tend to maintain the status quo at the very least—and perpetually push for an expansion of its influence as standard practice. Since “mainstream” individuals tend to call for or accept government intervention in the market as the solution to any perceived problem, Austro-libertarians conclude that adherents to the mainstream ideology of interventionism fail to recognize the true nature of the State as described above. Yet, the case could be made for the exact opposite: Austro-libertarians, perhaps out of naiveté, fail to see the practical nature of the State—the indiscriminate practitioner of force that has no qualms about destroying lives, and thus fail to heed the warning that they themselves loud; while mainstreamers recognize the State’s frequent use of its might and are careful not to rattle any cages.
To be sure, the reluctance of the inhabitants of states of the former Soviet bloc to step up and criticize the established system of their countries never surprised me due to the publicly known secret of the diligence of the ideological police. There, advice to not provoke calamity onto oneself through criticism is predictable, if not disheartening. Yet, getting the same or similar advice in a beacon of democracy, such as Canada ought to be outrageous, right? Here freedom (of speech and ideas) reigns supreme, does it not? In our great democratic society, we are told, the commonweal trumps ideology. Therefore, Austro-libertarian criticisms of the political system ought to be celebrated as offerings for a higher quality of life. In practice, not only is Austro-libertarian thought shunned, it appears that those who make even the smallest of efforts to benefit the public through the use of less interventionist policies are now open targets for political assassinations.
It may or may not be the case with other writers in Austro-libertarian and Anarcho-capitalist circles, but this writer has experienced more than one instance of worry expressed by a friend or loved one about the “dangerous” contents of his works published on this website. In a beautiful embodiment of Basitat’s “what is seen and what is not seen” lesson, these people understand that bad things will happen to them if they attempt to change the system; but fail to realize that even worse things happen when they don’t. Sure, they might get admitted to post-graduate studies, or get a job with an established crony corporation, or never provoke a CRA audit upon themselves. But in doing so, they support the theft through regulation, inflation and taxation—the three pillars of interventionism—which ultimately bring about a lower standard of living than otherwise possible for themselves by forcing business to move away, stifling innovation, dictating behavior and destroying capital.

While not “Austrian” in his economics, or libertarian in his politics, Toronto Mayor Rob Ford in his time in office—which seems to have come to an abrupt end half-way in his term due to a judge’s decision—at least was willing to cut down some of the Public Sector in Canada’s largest city. His solution to garbage removal, for instance, though not fully market-based (more on this in my next post), did upset the public union’s monopoly over this essential service, and sent a threatening signal to other unions that their racketeering reign might be coming to a close. Similarly, Ford went after the police and firefighting unions in trying to cut the increases to their annual budgets, and tried to reduce the number of libraries under the city’s proprietorship. Realistically, these attempts at cutting the excesses of Toronto’s government are as miniscule relative to the real solutions needed, as is Ford’s offence compared to the scandals of politicians of all spheres that come to the public light on a daily basis. Yet, if his policies proved successful, then the public acceptance of interventionism—as embodied through unionism, public education, public media, even universal health care—may quickly erode, leaving thousands of “civil servants” without the above market (Discounted Marginal Value Product) incomes they have come accustomed to. This is very dangerous business.

Unsurprisingly then, Rob Ford’s publically expressed desire (whether genuine or not) to cut down on the Public Sector made him the target of every Public Institution under the sky. His time in office was marked by the savage attacks on his personal life by the publicly owned Canadian Broadcasting Corporation, more than anything he did or failed to do. It comes as no surprise then, that he is being ousted out of office as a result of an inquiry conducted by a public official, a so-called Integrity Commissioner, and a judgment reached by a publically appointed judge. In a statement that could not be more wrong, Mr. Ford has declared this outcome to be the result of “left-wing” politics, when really his ousting is the result of interventionist politics. All politicians break the code of integrity in their jurisdiction. “Right wing” Toronto Sun lists a bevy of provincial Liberal indiscretions with public money that trump Ford’s conflict of interest by a thousand times. On the other hand, who can forget federal Conservative Minister Bev Oda’s royal treatments on the public tab. All that either the “left” or the “right” have to say is, “at least we are not as bad as the other guys.” Despite the “right’s” protestations, Ford is as guilty of the crime of abusing power as any of the others. Yet, in no case did a judge oust a single “civil servant” out of their job. Ford brought the shadow of a threat to the interventionist status quo and is now paying the price for it through a career assassination of the first kind.

Ultimately, there is a lesson here to be learned for all those who seek to change the status quo. Mr. Ford is guilty of the transgression he was accused of, regardless of its paltriness. More so, he is guilty of not staying true to the principles he supposedly espouses: those of the impossible dream of responsible government. So, the lesson is that if one decides to go against the grain, he must be in practice what he claims in his rhetoric; otherwise the great machine that is the Establishment (by this I mean not some secret society of ultra-rich people, but the bureaucrats, elected representatives, publicly funded media, union workers, crony capitalists, etc.) will grind you up in a heartbeat. In this respect, Texas Congressman Ron Paul remains the unchallenged standard bearer.
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