During the first hour I’ll be discussing some news more generally, most likely focusing on the current hostage situations in France, one of which involves the jihadists who massacred 12 journalists and cartoonists working for Charlie Hebdo, the French satirical magazine that dared to mock Islam and Mohammad.
Dr. Brian P. Simpson, author of Markets Don’t Fail! (Lexington Books, 2005) and an economist at National University in San Diego, CA, has written a new book on the business cycle and a free monetary and banking system. The book shows how government interference—particularly in the monetary and banking system—causes the business cycle, including the recessions, depressions, and financial crises that are a part of it. The book also shows how establishing a free market in money and banking can virtually eliminate the business cycle.
This book is a major contribution to the monetary, banking, and business cycle literature. It builds on the business cycle theory developed by Ludwig von Mises and Friedrich Hayek. The two-volume book is published by Palgrave Macmillan and is titled Money, Banking, and the Business Cycle, with subtitles of Integrating Theory and Practice for volume one and Remedies and Alternative Theories for volume two. Volume one was published in April. Volume two is due out in July.
Part one of volume one shows how manipulations of the supply of money and credit by the government are the primary cause of the cycle. Part two applies the theory to over 100 years of U.S. history to illustrate the explanatory power of the theory. The author uses extensive quantities of data to make his case, including data for interest rates, the rate of profit in the economy, the money supply, the velocity of money, industrial production, GDP/GNP, gross national revenue (a more comprehensive measure of spending and output than GDP/GNP), and more. He shows how the theory explains the Great Depression, the Great Recession, the recession of the early 1980s, and all episodes of the cycle in the U.S. since 1900. In addition, he goes back to 18th century France and the Mississippi Bubble to demonstrate the explanatory power of the theory.
Part one of volume two critiques alternative theories of the cycle, including Keynes’s theories of depressions and fluctuations, Keynesian “sticky” price and wage theory, and real business cycle theory. Part two shows what a free market in money and banking would look like, provides an outline to transition to a free market in money and banking, and gives a detailed explanation of why it would lead to greater stability in the monetary and banking system and raise the rate of economic progress in the economy.
The book is highly recommended for anyone interested in free-market ideas or monetary, banking, and business cycle theory. Economics professors will find both volumes excellent for courses on “macroeconomics,” money and banking, Austrian economics, or the business cycle. Both volumes would also be great additions to the collections of university libraries and libraries of free-market institutions.
Thomas Piketty’s latest book, “Capital in the Twenty-First Century” has had its fair share of criticisms. The political right continues to bludgeon the latest critique of capitalism by challenging the veracity of the book’s mathematics, formulas, and quantitative reasoning. But Harry Binswanger understands that the basis for every attack against capitalism is grounded in the idea that capitalism is inherently immoral. Therefore, any defense of capitalism cannot, and should not, be grounded in statistics, but must challenge the existing moral premises that permeate today’s society…
“Capital in the Twenty-First Century” offers up the same failed, blood-soaked doctrines as its forbearer, “Das Kapital.” But in our Twitterized culture, yesterday’s disgraced notions, now forgotten, can be re-Tweeted as revelations.
Evil cannot be combated by offering counter-statistics, as many conservatives are doing. No one is concerned with the statistics, only with the moral narrative. And the book’s opening epigraph gives us that, via a quote from France’s 1789 “Declaration of the Rights of Man and the Citizen”:
“Social distinctions can be based only on common utility.”
In quiet, understated language, that statement lays down the formula for total collectivism. It cuts the ground out from under individual rights, substituting “common utility” as the standard for state action. It demands the yoking of the individual to the group.
M. Piketty doesn’t mention that four years after that ill-named Declaration of Rights came the Reign of Terror. The sequence is logical: the Declaration appealed to the raw envy of the mob, whose instrument became the guillotine.
Are you bothered by the thought of government embedding itself in every aspect of your life? According to President Obama, the only alternative is “a government that tells the American people, you are on your own. If you get sick, you’re on your own. If you can’t afford college, you’re on your own. . . . That’s not the America I believe in.”
Did people shrink from the twin values of freedom and responsibility? On the contrary, the vast majority of Americans during the 18th and 19th centuries eagerly embraced life’s challenges and flourished under the new system. People didn’t flee from America, they fled to America. They came here poor, but ambitious—ready to carve out a life for themselves in a country that offered them the only thing they asked for: an open road.
Of course, Americans during this era were not “on their own” in the lone-wolf, asocial sense implied by Obama. Free Americans developed complex webs of association based on voluntary agreement. An unprecedented division of labor—capitalists, businessmen, and workers coming together to create wealth on an industrial scale—was a product of this new found freedom.
Writes David S. Addington over at Heritage on Obama’s Christmas Tree Tax:
President Obama’s Agriculture Department today announced that it will impose a new 15-cent charge on all fresh Christmas trees—the Christmas Tree Tax—to support a new Federal program to improve the image and marketing of Christmas trees.
In the Federal Register of November 8, 2011, Acting Administrator of Agricultural Marketing David R. Shipman announced that the Secretary of Agriculture will appoint a Christmas Tree Promotion Board. The purpose of the Board is to run a “program of promotion, research, evaluation, and information designed to strengthen the Christmas tree industry’s position in the marketplace; maintain and expend existing markets for Christmas trees; and to carry out programs, plans, and projects designed to provide maximum benefits to the Christmas tree industry” (7 CFR 1214.46(n)). And the program of “information” is to include efforts to “enhance the image of Christmas trees and the Christmas tree industry in the United States” (7 CFR 1214.10).
To pay for the new Federal Christmas tree image improvement and marketing program, the Department of Agriculture imposed a 15-cent fee on all sales of fresh Christmas trees by sellers of more than 500 trees per year (7 CFR 1214.52). And, of course, the Christmas tree sellers are free to pass along the 15-cent Federal fee to consumers who buy their Christmas trees.
[…] The economy is barely growing and nine percent of the American people have no jobs. Is a new tax on Christmas trees the best President Obama can do?
In recent debates GOP presidential rivals have been sparring on Social Security, with some (Rick Perry) insisting it’s a “Ponzi scheme” that should be decentralized (run by fifty states), and others (Mitt Romney) conceding that it’s shaky and needs “reform” but isn’t fraudulent because “millions of people depend on it.” (Mitt Romney). Another (Herman Cain) says privatize it, as Chile did. They’re all wrong, because they don’t name the real problem with the system – and they forego an easy fix that might boost their election chances.
That we’ve only seen GOP rivals “spar” on this key issue is an apt description, for there’s no real fight going on. It’s mere shadow-boxing. Worse, the GOP contenders are mostly on the same side of the issue (the wrong one) and aren’t sufficiently distinct from the rival party. Yet Democrats don’t even try to be candid about Social Security, or try to present a real fix; they’re content to run ads with GOP suits tossing granny off a cliff, which means they’re content to be infantile – which means they’re unfit to lead this great nation.
The facts about Social Security are these. Yes, it’s a Ponzi scheme, thus criminally fraudulent (as I’ll explain), but even worse, because it coerces us to be a part of it. Since the scheme began in 1935 the full force of the U.S. government has compelled a growing portion of citizens to suffer by it, such that we all do so by now. A scheme of such widespread, compulsory fraud is unprecedented in U.S. history, and one of the most shameful (and popular) of FDR’s schemes.
Rationality and justice require that this atrocity be terminated – now. Yet neither virtue can be found in Perry’s proposal to pawn it off to fifty states and thus to decentralize the fraud – or in Romney’s plan to “reform” and “save” the scheme and thus to perpetuate the fraud – or in Cain’s notion that it be operated by quasi-profit-seeking (loss-imposing) “firms” like Bernard Madoff Investment Securities LLC, and thus to privatize the fraud. A fraud remains a fraud regardless of its size, scope, or duration, and it is simply evil to evade this plain fact and deliberately enact policies to decentralize the fraud, perpetuate it, or profit by it.
Ms. Kennedy Townsend is very confused about Ayn Rand.
Sadly, because like many of Rand’s critics, her views on Ayn Rand are based on third-rate biographies as opposed to actually reading Ayn Rand’s views first hand. Take for example Kennedy Townsend’s straw man attack on Ayn Rand’s view of government.
America was a beacon of freedom from its earliest days. But the freedom to earn one’s living is not the same as the freedom to emasculate government. It’s a mistake to enshrine individual liberty without acknowledging the role that a good government plays in preserving and promoting it. Look at places like Haiti, Somalia, and the Congo to see what happens when governments aren’t around much.
When government is marginalized, it’s not just individual freedom that suffers; the economy suffers too. A vibrant capitalism requires a legal system: contracts must be honored, fraud punished. Markets have to work, and for that we need a strong infrastructure of roads, rail, energy, and water and sewage systems.
Ayn Rand was no anarchist as pure libertarians are.
Rather than blindly accepting Kennedy Townsend’s view that Ayn Rand was against a legal system that honors contracts, lets see what Rand actually wrote on this issue in The Virtue of Selfishness:
The only proper purpose of a government is to protect man’s rights, which means: to protect him from physical violence. A proper government is only a policeman, acting as an agent of man’s self-defense, and, as such, may resort to force only against those who start the use of force. The only proper functions of a government are: the police, to protect you from criminals; the army, to protect you from foreign invaders; and the courts, to protect your property and contracts from breach or fraud by others, to settle disputes by rational rules, according to objective law. [“The Nature of Government“]
Ayn Rand was for good government. In Rand’s view the essence of good government was judged by one principle: the protection of individual rights, which means in practice the banning of the initiation of physical force from all human relationships. Rand would agree with a government to enforce contracts, however, there is no reason for government being required to build roads, railroads, build power plants or sewage systems. Practically, because private industry can do these things more efficiently and at a better bang for the buck, i.e., before they were nationalized, America’s railroads were actually built by private industry. Morally, because such endeavors by government can only be funded by robbing the wealth of those forced to finance such projects against their will.
Even worse is Ms. Townsend’s misunderstanding of the relationship of religion and the concept freedom, the latter of which she views as a competing set of contradictory freedoms as opposed to an inseparable whole:
I’ve always understood that one’s loyalty to God should take precedence over one’s patriotic duty. [As did the 9/11 terrorists! — D&C] Churches are exempt from taxation, and conscientious objectors aren’t required to serve in war. Our high regard for the First Amendment shows the preeminence of faith in the American consciousness.
But to place economics on the same level as religious freedom seemed to me almost blasphemous. Are we really to believe that the freedom to make money should stand on the same level of religious liberty?
Yes, because freedom is an inseparable whole.
The right to religious freedom is not merely the freedom for the individual to practice religion as he chooses (so long as he does not violate the rights of others), but is the freedom from religion being imposed on the individual whether by private criminals or public bureaucrats, i.e., the freedom to not practice any religious doctrine.
Quoting Thomas Jefferson, in his letter to Danbury Baptist Association, CT., Jan. 1, 1802:
Believing with you that religion is a matter which lies solely between man and his God, that he owes account to none other for his faith or his worship, that the legislative powers of government reach actions only, and not opinions, I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should ‘make no law respecting an establishment of religion, or prohibiting the free exercise thereof,’ thus building a wall of separation between church and State.
Quoting Jefferson in a letter to Horatio G. Spafford, March 17, 1814:
In every country and in every age, the priest has been hostile to liberty. He is always in alliance with the despot, abetting his abuses in return for protection to his own.
Religious freedom is the application of the right to free speech and property applied to the religious sphere. You are free to say what you wish on these matters — even that God does not exist — and no one can physically force you to think or act differently. Remarks Jefferson’s on this point in his Notes on Virginia, 1782:
But it does me no injury for my neighbor to say there are twenty gods or no God. It neither picks my pocket nor breaks my leg.
Religious freedom — the right to free speech and action so long as one does not violate the rights of others — and economic freedom — the right to produce values necessary to support ones own life so long as one does not violate the rights of others — are equals, because the right to life is an inseparable, non-contradictory whole.
Religious freedom (the freedom from the state forcing some religious doctrine upon you) is an instance of the principle of freedom applied to the religious sphere. It is hierarchically a derivative of the fundamental right to life, liberty and the pursuit of happiness.
There is no compromise or antagonism between religious and economic freedom when the two are properly grasped and defined.
Or in Ayn Rand’s words:
It is not society, nor any social right, that forbids you to kill—but the inalienable individual right of another man to live. This is not a “compromise” between two rights—but a line of division that preserves both rights untouched. The division is not derived from an edict of society—but from your own inalienable individual right. The definition of this limit is not set arbitrarily by society—but is implicit in the definition of your own right.
Within the sphere of your own rights, your freedom is absolute. [“Textbook of Americanism,”The Ayn Rand Column, 85]
As for charity and the “special responsibility” of the wealthy here is what Ayn Rand had to say:
The small minority of adults who are unable rather than unwilling to work, have to rely on voluntary charity; misfortune is not a claim to slave labor; there is no such thing as the right to consume, control, and destroy those without whom one would be unable to survive. [CUI]
Quoting Ayn Rand in her interview in Playboy, March 1964:
My views on charity are very simple. I do not consider it a major virtue and, above all, I do not consider it a moral duty. There is nothing wrong in helping other people, if and when they are worthy of the help and you can afford to help them. I regard charity as a marginal issue. What I am fighting is the idea that charity is a moral duty and a primary virtue.
Rand did not see charity — the benevolent act of giving away one’s wealth to aid someone in need — as a badge of moral honor; she did award such a badge for the ability to produce that wealth. In Rand’s view your only political responsibility in regards to others is not to violate their rights by initiating force against them:
The basic political principle of the Objectivist ethics is: no man may initiate the use of physical force against others. No man—or group or society or government—has the right to assume the role of a criminal and initiate the use of physical compulsion against any man. Men have the right to use physical force only in retaliation and only against those who initiate its use. The ethical principle involved is simple and clear-cut: it is the difference between murder and self-defense. A holdup man seeks to gain a value, wealth, by killing his victim; the victim does not grow richer by killing a holdup man. The principle is: no man may obtain any values from others by resorting to physical force. [“The Objectivist Ethics,”The Virtue of Selfishness, 32 ]
And again quoting Rand in “The Nature of Government,” The Virtue of Selfishness, 108:
Man’s rights can be violated only by the use of physical force. It is only by means of physical force that one man can deprive another of his life, or enslave him, or rob him, or prevent him from pursuing his own goals, or compel him to act against his own rational judgment.
The precondition of a civilized society is the barring of physical force from social relationships—thus establishing the principle that if men wish to deal with one another, they may do so only by means of reason: by discussion, persuasion and voluntary, uncoerced agreement.
The difference between Ayn Rand and Townsend’s ilk is that Ayn Rand leaves people free to be good as dictated by their own reason and free choice; Kennedy Townsend wishes to use the power of the government to force her altruistic conception of the good on others (i.e., robbing the “rich” to help those who sleep under bridges, i.e., Marxian “fair” taxation, etc.).
Kennedy Townsend wishes to unleash the criminal power of government to initiate force against those who violated the rights of no one — illegitimate and immoral means — to achieve her ends. In Rand’s view, rights are not things to be violated by regulation, but are to be protected by right. Quoting Ayn Rand:
Freedom, in a political context, means freedom from government coercion. It does not mean freedom from the landlord, or freedom from the employer, or freedom from the laws of nature which do not provide men with automatic prosperity. It means freedom from the coercive power of the state—and nothing else.
Richard Salsman crunches the numbers at Forbes on the attempt to “cut” the size of the public debt:
[…] Even the most “radical” GOP plan, to “cut” $9 trillion, would boost federal outlays by 30% in the coming decade versus outlays in the past decade, while the most modest GOP plan, to cut a mere $2 trillion, would boost outlays by 55%. Yet Democrats lambaste GOP plans as “Draconian,” prone to trigger a “depression.”
By “baseline” federal spending over the coming decade, the CBO means the sum that’ll be spent even with no changes in current fiscal policy, whether in tax rates or spending schemes. As mentioned, the CBO says $45.8 trillion in outlays over the coming decade are effectively on “auto-pilot,” so any proposed “cut” is relative only to this huge number. As mentioned, Washington spent $28.3 trillion over the past decade, so embedded “baseline” spending of $45.8 trillion in the coming decade already entails an astounding increase of 62%. In the coming decade neither U.S. population nor real economic output would rise nearly so much.
[…] Why are today’s politicians, journalists and economists so complicit in deliberately misleading the public about the current and future state of U.S. finances? Why do they speak of “cuts” in future federal spending when the CBO routinely projects increases in the range of +30% to +65%? Check those numbers again, dear citizen: they’re positive, not negative. “Baseline budgeting,” which blithely presumes a perpetually-growing government, was first enacted by the U.S. Congress in 1974, in order to side-step White House efforts to “impound” (limit) federal spending; but that doesn’t condone the gimmick – or justify lying to the public. When people hear that Washington will “cut” spending by $2 trillion over the coming decade, they think that’s a lot of money and that outlays might be $2 trillion lower a decade hence – not higher by 50% or more. Even Boehner’s budget plan, like many others, backloads the “cuts” into later years; he’d “cut” outlays by only $23 billion in 2012, equivalent to less than three days of total federal spending at the current spending rate. [Richard Salsman, Forbes, Washington’s Budget “Cuts” Would Boost Spending 50%]
The amazing, John Allison, who as chairman and CEO made BB&T Corporation the 10th largest financial institution headquartered in the United States, attributes the success of BB&T to the concept of Principled Leadership, based on an uncompromising commitment to fundamental values. In this talk, he explains how Ayn Rand’s ethical system can be used practically to create a competitive advantage in any organization.