[This article originally appeared on the mises.ca blog on January 16, 2013]
Yahoo! Canada reports something that comes as no surprise at all to Austro-libertarians:
More Canadians say they simply can’t afford to invest, making it tougher to build a retirement nest eggs [sic.], according to a poll released on Tuesday by Scotiabank.
In the bank’s annual investment poll, 64 per cent of Canadians said
affordability continues to be a high barrier to investing more — a trend
that has been growing over the past couple of years — as the March 1 registered retirement savings plan (RRSP) deadline looms, up from 59 per cent in 2011.
As usual the problem, and thus the solution, is sought after in all
the wrong places. The suggestion is that investments are too expensive
in absolute, rather than relative terms:
“The key is to get a solid financial plan in place to
help overcome affordability issues,” says Mike Henry, Scotiabank’s
senior vice president and head of retail payments, deposits and lending.
“Austrian” insights suggest otherwise: taxes in all their various
forms are too high, which results in an inability to save. Investment
would not be too expensive if people had the money for it. Here’s what
Henry Hazlitt had to say about the power of taxation concerning
production and investment:
There is a still further factor which makes it improbable
that the wealth created by government spending will fully compensate
for the wealth destroyed by the taxes imposed to pay for that spending.
It is not a simple question, as so often supposed, of taking something
out of the nation’s right-hand pocket to put it into its left-hand
pocket. … This is to talk as if the country were the same sort of unit
of pooled resources as a huge corporation, and as if all that were
involved were a mere bookkeeping transaction. The government spenders
forget that they are taking the money from A in order to pay it to B. Or
rather, they know this very well; but try to dilate upon all the
benefits of the process to B, and the wonderful things he will have
which he would not have had if the money had not been transferred to
him, they forget the effects of the transaction on A. B is seen; A is
forgotten. (Economics In One Lesson, pp. 24-25)
Who is “A” and who is “B”? “A” is the producer—the earner; while “B”
is the consumer: here we have a re-distribution of incomes. “A” is the
person who is being disabled to save his own earnings in order to
invest. But it’s worse than that. The recipient of government’s spending
of “A’s” money, “B,” does not save what he receives either, for the
simple reason that there is not enough to pay left over after his
immediate consumption. Furthermore, “B” is given a signal that he need
not worry about saving and investment (i.e. the future), since there
will always be more of “A’s” money forthcoming.
In our modern world there is never the same percentage of
income tax levied on everybody. The great burden of income taxes is
imposed on a minor percentage of the nation’s income; and these income
taxes have to be supplemented by taxes of other kinds. These taxes
inevitably affect the actions and incentives of those from whom they are
taken. When a corporation loses a hundred cents of every dollar it
loses, and is permitted to keep only 60 cents of every dollar it gains,
and when it cannot offset its years of losses against its years of
gains, or when it cannot do so adequately, its policies are affected. It
does not expand its operations, or it expands only those attended with a
minimum risk. People who recognize this situation are deterred from
starting new enterprises. Thus old employers do not give more
employment, or as much more as they might have, and others decide not to
become employers at all. Improved machinery and better-equipped
factories come into existence much more slowly than they otherwise
would. The result in the long run is that consumers are prevented from
getting better and cheaper products, and that real wages are held down. (Economics In One Lesson, pp. 25-26)
And low real wages make investment too expensive.
[This article originally appeared on the mises.ca blog on January 13, 2013]
For all their love of technology and science, people (mostly those
comprising the middle class) have morbid fears that someday technology
will make them obsolete and thus, jobless. It is one of those economic
paradoxes which prevail in mainstream economics, such as the notion that
currency debasement and the destructive power of war lead to
prosperity. In the same fashion, technology—the very thing that gave
rise to the middle class through inventions such as the assembly line—is
seen as the eventual tool of its demise. Understandably enough, the
image of smart machines and robots manning every job imaginable can be a
scary prospect to the average person who sees himself outcompeted by
tireless, inert chunks of steel. There is no room for the non-capitalist
in a world where he cannot rent his services for a wage. To make things
worse for the average person, mainstream economists tend to support
this view.
Since the onset of the Great Depression cranks in what then became
and remained the orthodox view of this science have spoken of a “mature
economy,” and blamed the speed of technological progress for most
downturns and recessions, which inevitably lead to spikes in
unemployment. A recent example is given us by Paul Krugman, citing a certain Robert Gordon of Northwestern University, who
created a stir by arguing that economic growth is likely to slow sharply — indeed, that the age of growth that began in the 18th
century may well be drawing to an end. … Mr. Gordon points out that
long-term economic growth hasn’t been a steady process; it has been
driven by several discrete “industrial revolutions,” each based on a
particular set of technologies. The first industrial revolution, based
largely on the steam engine, drove growth in the late-18th and early-19th
centuries. The second, made possible, in large part, by the application
of science to technologies such as electrification, internal combustion
and chemical engineering, began circa 1870 and drove growth into the
1960s. The third, centered around information technology, defines our
current era.
There is much wrong with the orthodox view, starting from the fact
that the mainstream view tends to see recessions as a result of
unemployment, when in reality it is the other way around. Likewise, and
“Austrian” economists keep repeating this, technological progress is not
to be feared but to be embraced, for it brings efficiency and releases
labor and capital to be employed in other, less developed fields. In
doing so, technological progress brings prosperity—not just
subsistence—to an increasing number of people. However, there is truth
in the notion that there will be no room left for the non-capitalist in
the completely or mostly computerized world toward which technological
progress invariably tends.
Let us illustrate the Keynesian view on technological progress by quoting the most prominent of all Keynesians of our day.
The long-term projections produced by official agencies,
like the Congressional Budget Office, generally make two big
assumptions. One is that economic growth over the next few decades will
resemble growth over the past few decades. … On the other side,
however, these projections generally assume that income inequality,
which soared over the past three decades, will increase only modestly
looking forward. On the other hand, if income inequality continues
to soar, we’re looking at a dystopian, class-warfare future — not the
kind of thing government agencies want to contemplate. … So machines may
soon be ready to perform many tasks that currently require large
amounts of human labor. This will mean rapid productivity growth and,
therefore, high overall economic growth. But — and this is the crucial
question — who will benefit from that growth? Unfortunately,
it’s all too easy to make the case that most Americans will be left
behind, because smart machines will end up devaluing the contribution of
workers, including highly skilled workers whose skills suddenly become
redundant. [Emphasis added]
That technological progress is necessary for economic progress is
evident wherever one turns: a forklift manned by a single person loads a
truck in a quarter hour, where it may take a dozen people an hour to do
the same job; computers allow accountants to enter values into matrices
and get results within seconds, where it may take them the better part
of the day to complete these tasks manually; motorized vehicles get
people from place to place, not only faster, but also allow those
previously unable to make long trips by foot or on horseback to
comfortably complete these journeys. Technology also allows for more
egalitarianism in the workplace: where in the past only strong men at
the peak of their physical fitness could, say, dig ditches, today a
physically unfit man or woman long past their prime can operate a
bulldozer and outperform Adonis-like men by the scores. One can go on
listing examples indefinitely.
Yet, while fully embracing these benefits, politicians, mainstream
economists and other cranks turn around and blame the sources of these
benefits for the plight of the unemployed. To the politician and the
Keynesian economist jobs are a means in and of themselves, not a means
to an end. According to them technology has already “destroyed”
countless jobs, many of which the government has had to reproduce in the
public sector; and the move to full robotization is sure to create a
post apocalyptic world where only a handful of individuals—the
wealthy—will have everything while the working classes,
nothing. Continuing with this projection, income inequality will only
increase, rather than decrease. However, if this were true, there would
be no working classes altogether. They would be eradicated; extinct like
the dodo, for if left jobless and without property, how are these
people supposed to feed themselves? Thus, in the final analysis, rather
than bringing further income inequality, the future dystopian world of
full computerization is sure to bring no income inequality i.e. to completely eradicate the wealth “gap” that leftists worry so much about.
That technological progress does not itself represent an obstacle to
human welfare is self evident. Yet, by saying that, we are not
addressing the issue of income inequality raised by Professor Krugman,
nor do we solve the problem posed by a world of constantly decreasing
workplaces. Certainly staying the course of currency debasement and the
confiscation of income and inheritance, presently taken by nearly every
government in the world, is more likely to lead to Krugman’s dystopian
future than to any other alternative. Let us discuss these issues in
turn and present some alternative possibilities.
To be sure, because people’s abilities, needs and wants differ from
person to person, incomes will never be totally equal in a free society.
All things equal a janitor employed by Princeton University will never
be able to make an income equal to that of a professor hired by the same
university, simply because the services of the janitor are less
valuable and can be performed by more or less any person. A professor
has specific skills that not every person possesses. Would Professor
Krugman not object to equalizing his own salary with that of a janitor
by having their annual incomes combined and divided by two? One is
inclined to believe that the Professor would not be motivated to perform
all the duties his job requires (teaching, grading, upgrading his
knowledge, adding to his credentials, etc.) if he were able to make the
same income by simply sweeping floors. At the same time there is nothing
that the janitor could add to the value of his product, even if his
income doubled. His marginal value productivity remains the same.
Inequality in incomes gives impetus to people to seek out better jobs,
which in turn means self improvement, as well as more and better goods
and services on the market. Thus, we see that income equality is a
utopian idea no sound economic policy can aspire to achieve. Yet, by
reaching this conclusion we do not address the worry of the future fully
computerized, mostly jobless society which Professor Krugman has us
worried about.
We stated above that in the world of full (or almost full)
automation, toward which the progress of technology tends, there will be
less and less room for the non-capitalist. Most futurists tend to
depict the society of the future as completely communistic, but
“Austrians” have the insight that economic calculation is impossible in a socialist commonwealth. Thus, a communistic society will tend to move backward technologically, as the history of Soviet “War Communism”
(1918-1921) has demonstrated. And since full automation does not
necessarily mean entry into an era of post-scarcity, economic
calculation will still be essential even in the highly automated world
that we are imagining will one day become reality. Thus, the question
that needs to be answered is: How is the average person who is not
inclined to entrepreneurship to become a capitalist?
In discussions on currency debasement through inflation, Professor Mises pointed out
that in the modern economy the bulk of lenders does not consist of the
wealthy, but of the middle classes. In discussions on entrepreneurship,
Mises pointed out that:
The moneylender is always an entrepreneur. Every grant of
credit is a speculative entrepreneurial venture, the success or failure
of which is uncertain. The lender is always faced with the possibility
that he may lose a part or the whole of the principal lent. His
appraisal of this danger determines his conduct in bargaining with the
prospective debtor about the terms of the contract. (Human Action, p. 536)
Thus, currency debasement, as it harms savers and lenders, combined
with taxation ends up harming the (working) middle classes at the
expense of borrowers—which in our time mostly consist of the banking
sector and the government. Likewise, progressive taxation works
predominantly to prevent persons who currently own little capital to
accumulate more. Indeed, progressive income taxation is perhaps the
biggest obstacle a person needs to overcome if he is to move up along
the wealth ladder. These policies result in low and middle class
individuals being prevented from accumulating enough savings to turn
into meaningful investment, and push income and wealth gaps wider rather
than closer.
Keynesian doctrine, to which Krugman subscribes, recommends borrowing
and spending, which one presumes is to lead to the above discussed
socialization of the means of production. That is to say, that as job
disappear, governments begin to confiscate more and more of the
privately held enterprises that are profitable; or allow these
enterprises to remain privately owned, but drastically increase the rate
of taxation upon the producers. But here we are met with more or less
the same problem as in a proper socialist commonwealth.
In contrast, the “Austrian” prescription is simple: full
privatization of the means of production by saving and investment.
Average persons who lack entrepreneurial acumen still have the
opportunity to become capitalists by investing their savings through the
purchase of shares in ongoing or startup businesses. Presently many do,
and as jobs become scarcer for humans, the most obvious way for people
to earn incomes appears to be through the incomes derived from the work
of machines. In fact, this is already how many people derive part or all
of their incomes. For instance the owner of a trucking company derives
income from the work performed by the driver, and the work performed by
the truck; likewise the owner-operator of a digital print-shop derives
income from the work performed by the printer.
Furthermore, the stock markets play a key role in the transformation
of non-capitalists into capitalists. Here is an opportunity for all to
become owners of the means of production. In doing so, the problem of
economic calculation that exists under socialism is to be evaded. While
every investment is a speculation, the nature of the stock market is
misrepresented when it is referred to as a gambling institution. Writing
about the nature of stock markets, Mises explained how investors direct
companies toward profitability:
Even financial writers fail to realize that stock
exchange transactions produce neither profits nor losses, but are only
the consummation of profits and losses arising in trading and
manufacturing. These profits and losses, the outgrowth of the buying
public’s approval or disapproval of the investments effected in the
past, are made visible by the stock market. The turnover on the stock
market does not affect the public. It is, on the contrary, the public’s
reaction to the mode in which investors arranged production activities
that determines the price structure of the securities market. It is
ultimately the consumers’ attitude that makes some stocks rise, others
drop. Those not saving and investing neither profit nor lose on account
of fluctuations in stock exchange quotations. The trade on the
securities market merely decides which investors shall earn profits and
which shall suffer losses. (Human Action, p. 517)
Among other things, the world of tomorrow will require deregulation
of business, and the stock markets in particular. New stock markets will
need to emerge and entry in them will need to be free from government
interference. Yet, increasing government regulation of the stock
markets, which decreases the number of participants and increases the
cost of doing business through these institutions, make it more
difficult for persons to enter them. This way middle class
non-capitalists are prevented from taking the necessary steps that the
going trend of technological progress requires them to take: to become
capitalists.
Poor insights into economic truths have prevented Man from maximizing
the potential of his technological state. Technology has, much like the
market system (capitalism), been unjustly blamed for the outcomes
brought upon by government intervention, and economic cranks like
Krugman are only perpetuating these misconceptions. Time and time again
the free market in a system of private property of the means of
production has proven to be not the best, but the only means
toward progress and sustainable prosperity. So it has been, and so it
shall be for as long as there is a state of scarcity.
[This article originally appeared on the mises.ca blog, on January 6, 2013]
When one speaks of a concept it is important that it is properly qualified so as to
be correctly understood. Failure to accomplish that makes impossible
for either the problem to be identified or a desired solution to be
found. Perhaps this is why politicians have a tendency to speak of
ill-defined and oft muddled concepts, like “social justice,” “a living
wage” or “fair share.” These concepts are impossible to define in a way
consistent with how they are represented, since their proponents
represent them as definite, rather than abstract matters. In our time
the demand for “the rich” to pay their “fair share” trough higher taxes
has become a standard war cry broadcast from every public and crony
source of media. Yet, there is no objective means of defining either
what constitutes “the rich” or “fair share.” Politicians and demagogues
alike may debate these issues for as long or as short as they may
desire, but whatever level they agree on is sure to be arbitrary, save
for the only objective conclusion that such concepts are impossible to
qualify.
Given a communistic ownership of schools, roads, streets, parks,
healthcare institutions, libraries, schools and universities, how is one
to be able to calculate each person’s use—“fair share”—of each? What
share of a road belongs to a particular taxpayer? What usage is “fair
share”? How many books in any given library belong to a specific person
and which specific books? Who owns the walls and who owns the library’s
carpets? Does the person paying more in taxes own more of the roads,
libraries or schools than the person who pays less? What of the person
who pays no tax at all? What of the person who desires to use his claim
on a gymnasium, and of nothing else? Does the state university graduate
owe a particular service to the taxpayer that subsidized or paid for the
operation of the university? A typical example of who “fair share”
proponents see the world is given to us by US Sen. Elizabeth Warren:
There is nobody in this country who got rich on his own.
Nobody. You built a factory out there? Good for you. But I want to be
clear: you moved your goods to market on the roads the rest of us paid
for; you hired workers the rest of us paid to educate; you were safe in
your factory because of police forces and fire forces that the rest of
us paid for.
As communistic concepts go, the idea of the “fair share” is simply a
reiteration of the “from each according to his abilities, to each
according to his needs” idea. The first question that poses itself is
who is “the rest of us,” and how much did each of “the rest of us”
contribute to the end of providing the goods and services Warren talks
about? Furthermore, how are we to know that “the rest of us” get a
market return on their investment in the public roads, schools, police
and firefighting forces? In presenting the issue like that, we discover
that we are unable to perform the critical task of economic calculation.
We will not even try to right everything that is wrong with Mrs.
Warren’s statement and reasoning, just some of it. (Here we will ignore
that fact that the majority of taxes in the US and Canada are paid by a
very small percentage of the population.) According to Warren’s logic, a
shovel making entrepreneur who never attended a university, and built
up his business through his own work, acumen and sacrifice, saving and
wise investment, still reaps the benefits of the university he never
attended, by virtue of the fact that someone who did can now be employed
by the shovel maker as an accountant. While true that the shovel maker
reaps the benefits of the accountant’s services, if he is hiring
the accountant, it must follow that the entrepreneur is paying for
those services. Once the shovel maker puts the university graduate under
his employ, the first pays the second for the services he performs for
him.
Despite their outward dissimilarity in how they accumulated their
abilities, the university graduate is no different from the shovel maker
who learned his trade outside the educational system. The university
graduate went to school for four years and accumulated knowledge. The
shovel maker paid for his training either through the process of
apprenticeship or through trial and error, or perhaps even attended a
shovel making school. Either way, the shovel maker gave up some of his
own savings or earnings in order to find more efficient ways of
producing a more marketable product.
If the graduate was paid to be educated by virtue of taxpayer
subsidies, and then paid to dispense his knowledge, he is investing
nothing and gaining everything. Who owes what to whom here? Is the
shovel maker—a taxpayer—part of “the rest of us” or is it the tax
consuming university graduate? If the goods and services listed by
Warren are paid for by taxes, then contributing to the tax revenues of a
jurisdiction makes one a member of “the rest of us”—the body of people
that paid for the goods and services in question. Yet, still we cannot
calculate to what extent the shovel maker’s taxes paid for the
accountant’s education, and what portion of the shovel maker’s taxes
contributed to road construction.
What is the “fair share” that the university graduate owes to the
shovel maker? Here we need to extend the scope, and ask “What is the
‘fair share’ that the shovel maker owes to the baker for the
construction of the roads?”; “Why not have shovel maker pay the baker
for the use of the road?”; “What is the ‘fair share’ that an obese
alcoholic owes to a health-nut?” and so on. While it is possible to
calculate the university graduate’s marginal value product in his
function as an accountant employed by the shovel maker, it is not
possible to calculate how much this shovel maker contributed to the training and education of this
particular university graduate. The same principle can be applied to
roads, libraries, police and fire departments and any other “public”
good or service. It follows that the “fair share” doctrine is an
indefinable political tool intended to be used as needed, when needed,
by office seekers. It is not a policy to be sought in order to bring
equality under the law or economic prosperity, as it is a concept that
runs against the principle of private property.
[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.
[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.
[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.
[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.
