Phil Parhamovich is a musician from Madison, Wisconsin. Over the years, he saved up $91,800, only to have it seized by Wyoming Highway Patrol during a routine traffic stop near Cheyenne.
Phil was never accused of, or charged with, a crime. Yet, he found himself in the fight of his life to recover the money that belonged to him.
Luckily, Phil reached out to the Institute for Justice (IJ), and together we got back Phil’s life savings. But the fight is far from over; Phil’s story only highlights the urgent need to end civil forfeiture.
An Unjust Practice
Civil forfeiture allows law enforcement to take and keep cash, cars and other property without ever charging someone with a crime. Before that fateful March day, Phil had never heard of civil forfeiture. He was just a musician driving through Wyoming to a show in Salt Lake City. Phil had big plans for his life savings, which he brought with him for safekeeping.
He wanted to put a down payment on a historic music studio in Madison where bands like Nirvana, Smashing Pumpkins and Garbage recorded albums. Phil had dreams of opening up the recording studio to other bands and living in an apartment above.
But Phil’s dream of owning the music studio came to a halt during a windy drive on I-80. Battling famous Wyoming wind, Phil was having a hard time staying in his lane. He was soon pulled over by Wyoming Highway Patrol for failing to signal a lane change. During the stop, the trooper detained Phil in the patrol car and aggressively questioned him about details of his trip. The questions were not even related to the reason for pulling Phil over.
The trooper then circled Phil’s minivan with a drug-sniffing dog. After what appeared to be coaching with a tennis ball, the dog alerted to the van and provided the trooper with an excuse to search it. Neither the trooper nor other officers assisting him found anything illegal during the search. All they could find were Phil’s life savings stowed away inside a music speaker. Carrying cash is not a crime. But Phil had no way of knowing that. So, when the trooper implied that carrying cash was illegal, Phil—scared that he could be arrested—told the trooper that the money did not belong to him.
Seizing on this opportunity, the officers provided Phil with a way out. If he were to sign a pre-printed waiver form “giving” Wyoming law enforcement the money that they just found, he would be free to go. Bizarrely, the waiver stated: “I . . . the owner of the property or currency described below, desire to give this property or currency, along with any and all interests and ownership that I may have in it, to the State of Wyoming, Division of Criminal Investigation, to be used for narcotics law enforcement purposes.” At least two states—Texas and Virginia—have banned law enforcement from using such roadside waivers to pressure motorists to sign away their property.
One of the officers told Phil that if he signed the form, he would be free to go. And so, on the side of the road and with no attorney present, Phil signed the waiver. The officers wrote Phil a $25 ticket for not wearing his seatbelt and sent him on his way.
The Upside-Down World of Civil Forfeiture
Four days after the traffic stop, Phil tried to revoke the waiver and get his money back, explaining what happened and asking to be notified of any court hearings. But Wyoming officials never sent Phil a notice regarding the court proceedings, even though they knew exactly where he lived and how to contact him.
This is the upside-down world of civil forfeiture: it creates a perverse incentive for law enforcement to seize and keep as much property as possible. And even though Wyoming passed modest reforms last year, law enforcement found a way to dodge these reforms through the use of roadside waivers.
Hours after IJ announced it was representing Phil, a state judge ordered the government to give back Phil’s money. The Wyoming Attorney General’s office quickly agreed to do so. This lack of serious objection on the part of the government is not surprising. Returning seized property when facing a major lawsuit is a common practice among law enforcement across the nation, and it only perpetuates civil forfeiture.
By returning the property to those who are fortunate to find good representation, law enforcement is able to prevent a negative ruling that would chip away at civil forfeiture and thwarts the cushy revenue stream.
As news about Phil’s fight with Wyoming law enforcement spread, it even reached the Wyoming state legislature, where a bipartisan group of lawmakers pledged to outlaw the use of roadside waivers to force law enforcement to comply with its recently-passed reforms. One of the legislators, Sen. Anthony Bouchard, went even further, saying that while the pledge is a good start, more has to be done to prevent civil forfeiture abuses.
Even though Phil emerged victoriously, most victims of civil forfeiture are not as lucky. Only 14 states have completely abolished their civil forfeiture programs and Congress has struggled to pass any meaningful reforms.
No American should lose property without being convicted of a crime. There will be no justice until Wyoming—and every state—abolishes civil forfeiture altogether.
“[Bitcoin] won’t end well, it’s a fraud…worse than tulip bulbs…[but] if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than U.S. dollars." ~ Jamie Dimon: CEO, JP Morgan
Headline: JPMorgan Guilty of Money Laundering, Tried To Hide Swiss Regulator Judgement ~ via Cointelegraph
Given the current, latest successive series of spikes to all-time highs for Bitcoin, the detractors are working overtime to make the case that the crypto-currency is a Ponzi, a scam, a phantasm, or, at the very least, a bubble. Oddly, many of these same detractors spend a lot of time cheerleading “the other bubble,” that everything-bubble, stocks, bonds, real estate, even ETFs of ETFs, you name it.
It’s easy to make superficial apples-to-screwdrivers comparisons about why Bitcoin is doomed to fail until you really take some time to look into it. When I was first exposed to the idea back in 2013 and researched it, I realized that “this really is different,” and the reason why was because of something John Kenneth Galbraith had once written which (until then) had invariably held up as true. In “A Short History of Financial Euphoria” Galbraith said:
The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version. All financial innovation involves in one form or another, the creation of debt secured in greater or lesser adequacy by real assets.(emphasis added)
When one looks at history, this accurately maps every financial bubble from Tulipmania (which we will debunk as a suitable metaphor for Bitcoin shortly) right up to 2008 and beyond.
However one place where it isn’t applicable is the phenomenon of Bitcoin. Crypto-currencies, at least at present, have no leverage and are near-impossible to purchase on credit. In other words, if asset bubbles get that way largely through leverage, and there is comparatively no leverage in Bitcoin, then something else has to be driving it.
That said…
The Price of Bitcoin is a Side Show.
Granted, at the moment it’s a very exciting sideshow for those who are on the train. A long-time customer emailed me as I was writing this asking, “At what point has easyDNS’ profits from accepting and holding bitcoin exceeded the actual operating profits of the company?” I had never considered that, but some quick math revealed that even after cashing a chunk out to buy gold (not my greatest trade), that happened last year.
But the price action around this isn’t what is exciting about Bitcoin and the crypto-currency revolution. What is exciting is that the centralized, bankster-controlled monopoly over the issuance of money itself is finished. It’s over. Even if they successfully manage to co-opt some major crypto-currencies or issue their own, Gresham’s Law will assert itself as capital managers will select a truly decentralized crypto-currency wherein they control, or have the option to control, their own private keys to safely store their wealth while they’ll use the government version to pay taxes, etc.
Whatever state-issued “digital cash” comes out in the near future, I’m suspecting it will be centralized with mandatory private key custody or escrow. When that happens, it shouldn’t even be called crypto-currency. Call it something else like “pseudo-crypto” or “fauxcoin” to differentiate.
Given the mostly bad analogies and unfounded criticisms being leveled at Bitcoin, let’s first take a serious look at what Bitcoin isn’t. Then, in Part II we’ll look at what it is and why it's different.
What Bitcoin Isn’t
“Backed by nothing”
This is the go-to criticism for people who simply don’t understand that crypto-currencies are based upon mathematics, zero-trust, open-source, and consensus. They think that bitcoins can simply be created “at will” and are backed by nothing.
They also say that as if the world’s reserve currency, the US dollar, isn’t, literally, “backed by nothing” and hasn’t been since 1971; and as if it can’t be created at will, which it most certainly has, with a vengeance.
Source: St. Louis Fed
Indeed, as Galbraith continued in our earlier passage:
This was true in one of the earliest seeming marvels: when banks discovered that they could print bank notes and issue them to borrowers in excess of the hard-money deposits in the banks’ strong rooms.
All fiat currencies today really are backed by nothing and can be created at will (that’s what the word “fiat” actually means), and perhaps unbeknownst to many, we are right now in a protracted, global currency war. Every nation is “racing to the bottom,” trying to devalue their currency against their trading partners so they can:
give their exporters a competitive advantage
pull stronger currencies in to make money on the exchange, and
service their ever expanding debts back with devalued, cheaper currency
This is why everybody’s purchasing power is going down despite tenured academics and central bankers incessantly complaining about “low inflation” and political spokesmodels always talking up a “strong currency.”
Bitcoin Isn’t:“Backed by nothing.” What Is?The USD and every other fiat currency in the world.
“Bitcoin is a Ponzi”
The idea that Bitcoin or most crypto-currencies are “a Ponzi” is easily debunked by understanding what a Ponzi actually is.
As observed in CryptoAssets (Burniske & Tartar, 2017), it’s very simple: new investors pay old investors.
It is important to realize that in a Ponzi, the earlier investors are literally paid with funds being injected by the new investors in a “flow through” fashion (as distinct from later investors having to pay higher prices to earlier ones to induce them to part with an asset).
As long as the number of new investors and, thus, the influx of funds is growing at a rate faster than the payouts to the earlier investors, the Ponzi scheme thrives. When the expected payouts exceed the rate of input, it dies.
One doesn’t have to look very far to find mechanisms that fit the definition exactly: Social security programs are all classic ponzis. The demographic reality of today is that with the entry of the “Baby Boomer” generation into retirement, given that the subsequent generations are so much smaller in size, additionally penalized by falling real wages, growing taxation, decaying purchasing power of their money, and returns on any savings they can eek out suppressed into negative nominal yields — this Ponzi is in its terminal phase.
(Given that these exacerbating headwinds which face later generations can be summed up with the phrase “financial repression,” it is only logical that capital would “flee” to some asset or currency which appears resistant to them.)
Granted, the current ICO craze probably includes some Ponzis. The Cryptoassets book describes the OneCoin Ponzi as well as how to spot a Ponzi in crypto-currencies. I would have been hesitant to even call OneCoin a crypto-currency at all. It wasn’t open-source and had no public blockchain.
In Bitcoin and other true crypto-currencies, early holders are not receiving bitcoin from later entrants. In fact, quite the opposite is happening. Later entrants must entice earlier ones to part with their bitcoin. Since bitcoin cannot be created at will, it must be mined at a rate that drops over time (this year approximately 640K new bitcoin will be mined, about 3.8% of the total supply).
Demand for bitcoin is simply outstripping the supply of new coins being mined (for reasons we will discuss in Part II). If said price action rises dramatically (like, for example, Bitcoin suddenly became the highest performing asset class in the world) then a feedback loop would occur. Ever higher prices would be required to induce earlier holders to sell.
Bitcoin Isn’t:A Ponzi What Is?Social Security
Tulipmania
What is described above is the same dynamic that occurs in any “bull market,” as buying begets more buying and “fear of missing out” kicks in. It is said that one of the most accurate gauges of “happiness” correlates closely to how much wealth one has when compared to one’s brother-in-law. Alex J Pollock describes it in Boom and Bust: Financial Cycles and Human Prosperity, as “The disturbing experience of watching one’s friends get rich.”
The trick would be to have some understanding of when a strong bull market has crossed into bubble territory. One of the more popular analogies for Bitcoin is Tulipmania: the financial bubble that occurred in 1630s Amsterdam with none other than tulip bulbs. Bitcoin is compared to Tulipmania so often that I decided to take a closer look at Tulipmania to see if the comparison was valid.
What I found was that most of what we know today about Tulipmania is superficial and self-referential, deriving primarily Charles Mackay’s chapter on Tulipmania in his seminal "Extraordinary Delusions and the Madness of Crowds" (1841). It is a scant 9 pages an purely anecdotal, describing ridiculous prices paid by the otherwise pragmatic and level-headed Dutch, and then it all just blew up like all bubbles do.
Finally I found Anne Goldgar’s Tulipmania: Money, Honor and Knowledge in the Dutch Golden Age, which is the most in-depth investigation of the rise and subsequent fall of Tulipmania extant today. In it we learn about the circular references that went on to inform our present time about Tulipmania:
If we trace these stories back through the centuries, we find how weak their foundations actually are. In fact, they are based on one or two contemporary pieces of propaganda and a prodigious amount of plagiarism. From there we have our modern story of tulipmania.
She traces the lineage of MacKay’s chapter:
Mackay’s chief source was Johann Beckmann, author of Beytrage zur Geschichte der Erfindungen, which, as A History of Inventions, Discoveries and Origins, went through many editions in English from 1797 on. Mackay’s chief source was Beckmann was concerned about financial speculation in his day, but his own sources were suspect.
He relied chiefly on Abraham Munting, a botanical writer from the late seventeenth century. Munting’s father, himself a botanist, had lost money on tulips, but Munting, writing in the early 1670s, was himself no reliable eyewitness. His own words, often verbatim, come chiefly from two places: the historical account of the chronicler, Lieuwe van Aitzema in 1669, and one of the longest of the contemporary pieces of propaganda against the trade, Adriaen Roman’s Samen-spraech tusschen Waermondt ende Gaergoedt (Dialogue logue between True-mouth and Greedy-goods) of 1637. As Aitzema was himself basing his chronicle on the pamphlet literature, we are left with a picture of tulipmania based almost solely on propaganda, cited as if it were fact. (emphasis added)
Goldgar helps the reader in pursuit of truly understanding Tulipmania by rewinding to the late 1590s when there were no tulips in what is now Holland, or, in fact, the whole of Europe. Gardens were purely functional, designed for growing food, herbs, or medicinals. Then tulips and other curiosities began coming into the country and Europe from merchant vessels trading in the Mediterranean and Far East.
The “flower garden” arose for the first time, and it was spectacular — giving rise to an entire movement of collectors and aficionados whom, in the early days, were, as a rule, well-to-do. In later years, more people sought out, and then speculated in, the tulip trade not only to profit, but to lay their own claims on what they perceived to be a higher economic class or status.
At the risk of over simplifying her work, the tulip trade became intertwined and inseparable from, art.
The collecting of art seemed to go with the collecting of tulips. This meant that the tulip craze was part of a much bigger mentality, a mentality of curiosity, of excitement, and of piecing together connections between the seemingly disparate worlds of art and nature. It also placed the tulip firmly in a social world, in which collectors strove for social status and sought to represent themselves as connoisseurs to each other and to themselves.
The more I delved into understanding Tulipmania, the more I couldn’t escape thinking that the analogy was much more applicable to a different “asset class” which did enjoy a momentous bubble in recent times, but it wasn’t Bitcoin or crypto-currencies. To belabor my point, Bitcoin was impelled not by art, beauty, or any semblance of collectibility, but emerged primarily as a resistance to financial repression.
Something that was driven by uniqueness and fostered an aristocratic in-club all its own and, until recently, enjoyed stratospheric price action was the aftermarket in domain names. This isn’t the place to conduct a post-mortem on that bubble, but suffice it to say that the distinct characteristics of domain names more closely resembled that of tulip bulbs than Bitcoin does. (For the reader interested, I have written at length about the domain aftermarket here and here.)
Bitcoin Isn’t:Tulipmania What Is?Domain names.
If Bitcoin isn’t a digital fiat backed by nothing, nor a Ponzi, nor Tulipmania, then what is it? Why has this come out of literally nowhere to become the strongest performing and fastest growing asset/currency in the world?
When I started writing this article, I wasn’t sure myself. I had to go back through my library and look at history and try to find some antecedent for what was happening. After looking back through the origins of money itself and working forward, I still wasn’t any closer to a mental model that “worked.”
Then, around 2 a.m. the other night, I woke up with the idea that I was looking in the wrong place, and it hit me with such force that I had a hard time getting back to sleep — even though I had made an “off the cuff” tweet that captured the basic idea of it a few weeks earlier (which I can’t find now).
I’ll take you through it in Part II. But in the meantime, I’ll leave you with another megabank CEO whose take on all this is very different from Jamie Dimon’s. Goldman Sachs’ CEO Lloyd Blankfein here muses on why it’s entirely plausible that money may evolve from being based on fiat to being based on consensus. These are some truly extraordinary remarks coming from a man in his position.
At the very least, they’ve pushed the private sector into hospice care.
Let’s peruse a couple of recent stories from Ekathimerini, an English-language Greek news outlet. We’ll start with a rather grim look at a very punitive tax regime that is aggressively grabbing money from taxpayers with arrears.
Tax authorities have confiscated the salaries, pensions and assets of more that 180,000 taxpayers since the start of the year, but expired debts to the state have continued to rise, reaching almost 100 billion euros, as the taxpaying capacity of the Greeks is all but exhausted. In the month of October, authorities made almost 1,000 confiscations a day from people with debts to the state of more than 500 euros. In the first 10 months of the year, the state confiscated some 4 billion euros.
But the Greek government is losing a race. The more it raises taxes, the more people fall behind.
in October alone, the unpaid tax obligations of households and enterprises came to 1.2 billion euros. Unpaid taxes from January to October amounted to 10.44 billion euros, which brings the total including unpaid debts from previous years to almost 100 billion euros (99.8 billion), or about 55 percent of the country’s gross domestic product. The inability of citizens and businesses to meet their obligations is also confirmed by the course of public revenues, which this year have declined by more than 2.5 billion euros. The same situation is expected to continue into next year, as the new tax burdens and increased social security contributions look set to send debts to the state soaring.
But the government probably won’t be satisfied until everyone in the private sector is in debt to the state.
There are now 4.17 million taxpayers who owe the state money. This means that one in every two taxpayers is in arrears to the state, with 1,724,708 taxpayers facing the risk of forced collection measures. Of the 99.8 billion euros of total debt, just 10-15 billion euros is still considered to be collectible.
Here’s another article from Ekathimerini that looks at how Greece is doubling down on suicidal fiscal policy.
Greece is defying the prevalent trend among the world’s industrialized nations for reducing tax rates in order to boost investment and competitiveness… According to the report, in contrast to the majority of OECD member states, Greece has raised taxes and social security contributions as government policy is geared toward reaching fiscal targets, even though this inevitably harms the crisis-hit country’s competitiveness.
It’s hard to think of a tax that Greek politicians haven’t increased.
Greece…is also the only one among them that increased taxes on labor and corporate profits. …eight OECD member states reduced rates in 2017 on an average of 2.7 percent…, in stark contrast to Greece, which…has the highest corporate tax rates in the OECD compared to 2008. Many countries also offered breaks and reductions on income tax, …also cutting social contributions in 2015-2016. Not so Greece, which in 2016 raised both, thereby increasing the overall burden on low-income earners by 1.5 percent. Greece was also the only country in the OECD to raise value-added tax rates in 2016.
And what was accomplished by all these tax increases? Less tax revenue and recession. That’s a lose-lose scenario by almost any standard.
…in the 2014-2015 period, 25 of the 32 countries for which data is available recorded an increase in tax-to-GDP levels. The report…mentions Greece as an exception to this trend as well, noting that the country was in recession in that two-year period.
Even an establishment outlet like the U.K.-based Financial Times has noticed.
Unemployment is at 23 per cent and 44 per cent of those aged 15-24 are out of work. More than a fifth of Greeks get by without basics such as heating or a telephone connection. …Sweeping new taxes imposed across the economy have already left communities scrabbling to survive. …this year will bring €1bn worth of new taxes on cars, telecoms, television, fuel, cigarettes, coffee and beer… New taxes have eroded disposable incomes still further. Value added tax has increased to 24 per cent on food, disproportionately hurting the poor, for whom living costs represent a far higher proportion of income. Most detested is the Enfia property levy, which brings in €2.65bn a year – roughly €650 from each of Greece’s four million households. …recent direct taxes like the new estate tax have affected households that have seen their income decline greatly during the crisis. The rise of VAT, meanwhile, only adds to the cost of life of poor families.” …this month, new levies will mean the taxes paid by his business will jump 29 per cent.
Interestingly, the article acknowledges that profligate politicians created the mess, while also noting that the Greek people also deserve blame.
…blame is laid on the politicians who spent the 27 years of Greece’s EU membership before the crisis loading the country with debt to fund increased defence expenditure, more public sector jobs and higher pension and other social benefit payments. …“The Greek people should be blamed. We voted for these people,” he concludes.
The problem, of course, is that Greek voters don’t show any interest in now voting for politicians who will clean up the mess. Simply stated, too many people in the country are living off the government.
From a fiscal perspective, this chart from OECD data confirms that policy is getting worse rather than better. Measured as a share of economic output, taxes and spending have both become a bigger burden over the past 10 years.
What makes this chart especially depressing is that economic output is lower today than it was in 2005, which means that the problem isn’t so much that annual tax receipts and spending level are climbing, but rather that the private economy is declining.
Let’s close with an additional look at the moribund Greek economy and a discussion of how the bailouts have made a bad situation even worse.
The Wall Street Journaleditorialized on the impact of ever-higher taxes and a still-stifling bureaucratic business environment.
…the bailout is not in fact working, if you think the goal should be to restore Athens to sound public finances and to offer Greeks economic hope for the future. The European Commission’s autumn forecast predicts eurozone economic growth of 2.2% this year, the fastest in a decade. But Greece is falling further behind. …Investment has collapsed in the country, to 11% of GDP last year from 26% of GDP in 2007. …The bailouts are creating a dangerous situation in which the government has enough cash to meet its debts but no one else in Greece can thrive.
And here’s the scary part. What happens when there’s another global recession? The already-bad numbers in Greece will get even worse. Not a pleasant thought.
P.S. If you want to know why I’m not optimistic about Greece’s future, how can you expect good policy from a nation that subsidizes pedophiles and requires stool samples to set up online companies? I’d be more hopeful if Greek politicians instead had learned some lessons from Slovakia or Latvia.
P.P.S. Notwithstanding the constant stream of bad policy, I am capable of feeling sorry for Greece.
Daniel J. Mitchell is a Washington-based economist who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.
This article was originally published on FEE.org. Read the original article.
The International Trade Commission recently announced recommendations for the U.S. to impose tariffs of up to 50 percent on washing machine imports exceeding a quota of 1.2 million units annually.
The recommendation has been passed along to President Donald Trump, giving him 60 days to reach a final decision.
This announcement comes on the heels of the trade commission-backed claim that foreign competitors, Samsung and LG, are “injuring” the domestic washing machine—specifically, Michigan-based manufacturer Whirlpool.
If Trump decides to take the commission’s recommendation, Americans will quickly begin to see fewer washing machine options and higher prices on the common household appliance.
The protectionist move against LG and Samsung comes, perversely, just as those companies are set to employ thousands of Americans in Tennessee and South Carolina.
It may also inadvertently put the final nail in the coffin of one of the longest-standing bastions of the American service industry, Sears Holdings Corp. For more than a century, Sears has employed thousands of Americans, and despite recent store closures, still employs roughly 140,000 people in the U.S. today, with more than 6,000 of those employees in service technician roles for home warranties on appliance products.
In an attempt to move in the direction of modern and high-tech washing machines, Sears recently awarded a contract to LG for the production of some of Sears’ own Kenmore brand of washers. The washers were previously supplied by Whirlpool. Disagreements over cost contributed to the change of suppliers.
Making it more expensive for LG to import the washers it produces for Kenmore, one of Sears’ most popular product lines, will jeopardize the retailer’s efforts to revitalize its brand.
American trade rules should make the process of buying and selling easier, not more difficult.
Restricting washer imports may help Whirlpool but will hurt other American companies—and American consumers as well.
Trump should reject the remedy proposal put forth by the International Trade Commission. Doing so would keep the government’s thumb off the scale in the washer industry and allow consumers to purchase the products they prefer at the best prices possible.
Earlier this month, I wrote about the determined efforts of socialists on both sides of the Atlantic to conflate capitalism with racism. No doubt, some promoters of capitalism were racists. But that is hardly surprising, since racism, along with slavery and wanton cruelty, were universal and until recently, eternal phenomena.
The truth is, no culture in documented history comes close to the high standards of civilized behavior that we expect from one another in the contemporary, which is to say democratic and capitalist, West. What I objected to in my column was the implicit notion that socialism was, somehow, less racist. And, as I showed by looking at the history of socialism, the opposite comes closer to the truth.
Yet Jean-Jacques Rousseau’s noble savage – a mythological creature living in harmony with nature and fellow beings – maintains a stronghold on socialist imagination. Consider the recent articles in The New York Times titled, The Climate Crisis? It’s Capitalism, Stupid, and Lenin’s Eco-Warriors.
In the first, Benjamin Y Fong recommends democratic socialism as a solution to global environmental problems, while in the second, Fred Strebeigh praises Lenin as “a longtime enthusiast for hiking and camping” who turned Russia into “a global pioneer in conservation."
Before delving deeper into The Times’ peculiar take on the environmental legacy of socialism, a little bit of background is in order.
Recall that The Times was complicit in whitewashing the crimes perpetrated by communist regimes for close to a century, beginning with the discredited reportage of Walter Duranty – an Anglo-American correspondent who famously described concerns over man-made famine in Ukraine as “malignant propaganda”. Duranty’s crime against journalistic standards of truth-telling (from 1932 to 1934, the Holodomor claimed between 2.4 and 7.5 million lives), earned him a Pulitzer Prize – a high honour that The Times has repeatedly refused to relinquish.
But, let’s return to the newspaper’s recipes for saving the planet. According to the writers in The Times, capitalism is destroying the planet, while socialism (both in its original Leninist form and in its “democratic” form that is currently advocated by the US Senator Bernie Sanders) could save it. As Fong writes:
“The real culprit of the climate crisis is not any particular form of consumption, production or regulation but rather the very way in which we globally produce, which is for profit rather than for sustainability. So long as this order is in place, the crisis will continue and, given its progressive nature, worsen. This is a hard fact to confront. But averting our eyes from a seemingly intractable problem does not make it any less a problem. It should be stated plainly: It’s capitalism that is at fault…
We have a much better chance of making it past the 22nd century if environmental regulations are designed by a team of people with no formal education in a democratic socialist society than we do if they are made by a team of the most esteemed scientific luminaries in a capitalist society. The intelligence of the brightest people around is no match for the rampant stupidity of capitalism….
On the defensive for centuries, socialists have become quite adept at responding to objections from people for whom the basic functions of life seem difficult to reproduce without the motive power of capital. There are real issues here, issues that point to the opacity of sociability, as Bini Adamczak’s recent book, ‘Communism for Kids’, playfully explores. But the burden of justification should not fall on the shoulders of those putting forward an alternative. For anyone who has really thought about the climate crisis, it is capitalism, and not its transcendence, that is in need of justification.”
The Best Solution
Bini Adamczak’s “playful” Communism for Kids aside, I think it is possible to answer most of Fong’s concerns by looking at the actual environmental records of socialist and capitalist economies.
To start with, all forms of production result in some environmental damage. Agricultural production clears forests, displaces wildlife and destroys the biosphere. Industrial production spews harmful gases into the atmosphere and releases pollutants into rivers. Even the service sector pollutes, given its reliance on electricity and the concomitant CO2 emissions. So the real question is not which economic system is the perfect steward of the environment, but which economic system is the better steward.
When answering that question, the following concepts should be kept in mind: economic efficiency, tragedy of the commons and the environmental Kuznets curve.
Socialist economies were very inefficient. (That’s still the case in the surviving ones in Cuba, Venezuela and North Korea.) To compensate for the inefficiency of central planning, which emanated from the lack of a market-based price mechanism, socialist economies generally ignored environmental damage and other negative externalities.
To maximize production (in order to try to keep pace with the much more efficient capitalist economies), socialist countries had low, or non-existent, emission standards. Health and safety regulations were either ignored or lacking altogether. Socialist economies also banned independent trade unions and, often, resorted to slave labour.
The socialists’ disregard for the environment was further exacerbated by their contempt for property rights. In capitalist economies, farms and factories are owned by individual people or corporations. If they cause damage to the environment or the workforce, they can be held accountable in the court of law. In socialist economies, land and air (and, in the most extreme cases, people) were owned by the state and suffered from the “tragedy of the commons”.
A state-owned factory tasked by the central planners with producing a certain quantity of iron bars, for example, was not only allowed, but actively urged, to meet its production quota irrespective of the damage caused to the environment and to the populace.
In capitalist economies, the state is entrusted with enforcing environmental standards and protection of workers. In socialist economies, the state is both the enforcer of production quotas, and the supposed protector of the environment and the workers. When it came to choosing between the two, the socialists almost invariably chose the former: they cut corners in order to compensate for the inefficiency of central planning.
The Socialist Disregard for the Environment
That problem is clearly illustrated by the comparison of the amount of CO2 emissions per dollar of output in socialist and capitalist countries. Note that, over time, emissions declined in the United States from already low levels. A similar trend can be observed in Russia after the collapse of the Soviet Union in 1991 (regrettably, I do not have data for the USSR prior to 1991).
Perhaps the best example of socialist disregard for the environment can be seen in data for China. Emissions during Mao Zedong’s Great leap Forward (1958-1962) were, compared to the United States, stratospheric. They declined afterwards, but remained very high until the late 1970s, when China abandoned socialism. Since China started liberalising its economy (by introducing the price mechanism and property rights), its emissions drastically declined.
Last but not least, socialist countries were, in large part as a result of central planning, much poorer than their capitalist counterparts. That is important, because of a phenomenon known as the environmental Kuznets curve. As a general rule, the richer the people are, the more likely they are to pay for “luxury goods”, such as clean air and rivers, as well as high health and safety standards in the workplace. It may sound strange to the modern ear, but a clean environment and happy labour force are, in a very real sense, “luxuries” that were unavailable to our much poorer ancestors.
Really poor people, such as those in large parts of Africa and Asia, are primarily concerned with their survival. All other considerations are secondary. Don’t believe me? Following the collapse of the Zimbabwean economy, people started slaughtering the previously protected wildlife in order to feed their families.
Following the collapse of the Venezuelan economy, animals from the zoo in the nation’s capital found themselves on the menu. During the Holodomor in Ukraine, people ate one another. My point here is not to denigrate environmental concerns, but to point to the real trade-offs that poor people in dysfunctional socialist economies have to face on daily basis.
Socialism, then, is not the answer. Historically speaking, environmental damage emanating from socialist production was vastly greater than environmental damage emanating from capitalist production. All and I repeat all academic studies done in the aftermath of the collapse of the Soviet empire found the quality of the environment in the formerly socialist countries to be inferior to those in capitalist countries.
The best way to protect the environment is to get rich. That way, there is enough money not only to meet the needs of ordinary people, but also to pay for cleaner power plants and better water-treatment facilities. Since capitalism is the best way to create wealth, humanity should stick with it.
There is a lot that’s wrong with US foreign policy right now, but a broader look at US grand strategy in the post-Cold War era reveals just how broken things have been across administrations of both parties.
But America doesn’t act as if it is safe. Instead, we have a hyper-interventionist foreign policy. Over the last century, according to the Rand Corporation, “there was only one brief period – the four years immediately after US withdrawal from Vietnam – during which the United States did not engage in any interventions abroad.” Indeed, “the number and scale of US military interventions rose rapidly in the aftermath of the Cold War, just as [rates of global] conflict began to subside.”
According to data from the Congressional Research Service, the United States has engaged in more military interventions in the past 28 years than it had in the previous 190 years of its existence.* About 46 percent of Americans have lived the majority of their lives with the United States at war. Twenty-one percent have lived their entire lives in a state of war.
This suggests a truly perverse defect in the way we are carrying out foreign policy. In an era of unprecedented peace and stability, which should permit a less activist foreign policy, we are finding reasons to intervene militarily at an extraordinary pace, making the past three decades a significant outlier in US history.
America’s role in the world underwent a massive expansion following WWII and again at the end of the Cold War. Washington adopted policies and built bureaucracies that incentivized interventionism. As Joseph Schumpeter once put it in an essay on imperialism, “Created by the wars that required it, the machine now created the wars it required.”
Normalizing Aberrant Policy
In some ways, Americans have been insulated from the worst effects of this aberrant post-Cold War foreign policy (the costs have been borne more acutely by certain foreign populations on the receiving end of it). However, there have been costs here at home.
The United States has spent almost $15 trillion on its military since 1990, an enormous price tag that far exceeds what any other country has spent. This constant state of war also tends to undermine liberal values at home by eroding constitutional checks and balances on war powers, incentivizing excessivegovernmentsecrecy, and infringing on civil liberties in the name of security. In the oft-cited words of James Madison, “No nation could preserve its freedom in the midst of continual warfare.”
As predicted, Donald Trump has maintained and in some ways expandedAmerica’smilitaristic and interventionistrole in the world. And Trump’s rise is arguably another indication of how democratic norms can erode in the midst of continual warfare. As with most things, however, America’s unusual post-Cold War foreign policy and Trump’s convention-violating brashness has in many ways become normalized.
If we are ever to break out of this apathy and return once again to a realistic and prudent foreign policy commensurate with the low-threat environment we currently inhabit, we will have to reckon with the steep costs of this expansive grand strategy and wrangle the self-sustaining national security bureaucracy into the austerity it desperately needs.
*The data from the CRS report is helpful, but imperfect and incomplete. It lists 416 “notable deployments of US military forces overseas” from 1798-2017. It lists 212 interventions between 1798 and January 1989 and 204 since then. However, many of the individual items listed in the 19th century involve minor actions like deploying a small naval force to gain the release of a captured US citizen abroad or shows of force against pirates or mischievous whalers – deployments that are too minor to merit an individual itemized listing in later periods. Furthermore, “covert operations, disaster relief, and routine alliance stationing and training exercises are not included,” activities that are far more frequent now than they were in the past. One should consider the multiplecovertundeclareddrone wars the United States has waged in the post-9/11 era and, of course, programs of coordination with foreign militaries in conflict areas where US forces get killed or wounded, as in Niger recently, but which do not make it on to the list. Finally, CRS bundled many individual post-9/11 deployments and interventions together as a single item on the list, even though they are clearly distinct and included multiple countries in separate regions of the world. This is likely because the executive branch bundled them together when informing Congress of the deployments, which is the primary source for CRS’s data. Completely and accurately accounting for these discrepancies would require a full-length study, but my own ad hoc, and I think conservative, adjustments led me to a breakdown of 199 interventions from 1798 to January 1989 and 213 from 1989 to today.
John Glaser is associate director of foreign policy studies at the Cato Institute. His research interests include grand strategy, basing posture, U.S. foreign policy in the Middle East, the rise of China, and the role of status and prestige motivations in international politics.
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December 19 marks the birth of John Taylor of Caroline, who remains virtually unknown, despite being called “the most impressive political theorist that America has produced.”
Taylor, who served in the Continental Army, Virginia Legislature and U.S. Senate, was an Antifederalist, opposed to the overpowering central government he believed the Constitution would create. As F. Thornton Miller put it, “For Taylor, the Constitution was of worth only if it could serve the more fundamental cause of liberty.”
Taylor defended liberty and states’ rights, advocated a strict interpretation of the Constitution’s terms against federal overreaching, and vigorously opposed government favors and protectionism, which he called “the most efficacious system of tyranny practicable over civilized nations.”
Taylor’s positions stand abandoned today. Government has become ever more the dispenser of special treatment at others’ expense. That is why Taylor’s 1822 Tyranny Unmasked merits revisiting.
Political liberty consists only in a government constituted to preserve and not to defeat the natural capacity of providing for our own good.
Governments able to do so uniformly sacrifice the national interest to their own.
As no government can patronize one class but at the expense of others…Is not their discord the universal consequence of the fraudulent power assumed by governments of allotting to classes and individuals indigence or wealth.
Payments…extorted to feed either an oppressive government or exclusive privileges… degenerate into actual tyranny.
The only reciprocity produced by [legislative favors] is between the corrupters and corrupted.
If a man should combine with a government to take away another’s property, the tyranny of the act would not be obliterated by the power of an accomplice.
The nation which imagines that… government can by provisions convert fraud into honesty relies upon a moral impossibility for the preservation of its liberty.
Governments, under pretense of supervising the affairs of individuals… enrich themselves and their instruments of oppression.
The treasure extorted beyond the line of honest frugality is uniformly diverted from the end of defending to that of transferring property.
The wealth of nations is best secured by allowing every person, as long as he adheres to the rules of justice, to pursue his own interest in his own way.
Liberty can only be preserved by a frugal government and by excluding frauds for transferring property from one man to another.
How then is tyranny to be ascertained… except as something which takes away our money, transfers our property and comforts to those who did not earn them, and eats the food belonging to others.
The transferring policy seems to suppose that the public has no property; and though legislatures have no moral or constitutional right to give one man’s property to another; yet that by combining the property of all men under the appellation “public,” they acquire both a moral and constitutional right to give the property of all men to one man.
There are two kinds of political economy. One consists of a frugal government, and an encouragement of individuals to earn, by suffering them to use; the other of contrivances for feeding an extravagant government, its parasites and partisans, its sinecures and exclusive privileges… [one] is liberty; the other is tyranny
Government… founded upon a supposed necessity that men must be robbed of their property to preserve social order… invariably terminates in despotism.
A government… able to oppress, must… be weak for the object of preserving liberty…Every innovation which weakens the limitations and divisions of power, alone able to make a government strong for the object of preserving liberty, makes it strong for the object of oppression.
John Taylor of Caroline deserves renewed attention, particularly for his overwhelming arguments derived from what Joseph Stromberg termed “the contrast between those whose property was the creature of political force and fraud and those who earned their property through productive work on the free market.”
As F. Thornton Miller wrote, “Most of Taylor’s world is gone. But, with the continued increase in the power of the federal government and the pursuit of policies that benefit specific constituencies, the principles set out in Tyranny Unmasked are as relevant today as they were in 1822.”
Gary M. Galles is a professor of economics at Pepperdine University. His recent books include Faulty Premises, Faulty Policies (2014) and Apostle of Peace (2013). He is a member of the FEE Faculty Network.
This article was originally published on FEE.org. Read the original article.
After Bitcoin hit $10,000, it, at last, seemed to dawn on the mainstream financial press that this thing matters. There has been a panic rush to catch up on the meaning of it all. Some have doubled down on the claim that the whole thing is a hoax. Others dismiss it as a bubble (indeed, all financial models would suggest that a correction is needed). Some bigshots have called for it to be banned as if it is even possible to ban a mathematical protocol.
So much confusion out there! Having followed this technology from 2010, here are the ten points I find most salient about Bitcoin and the entire cryptoasset sector.
1. It was not invented by government. From the ancient world, it has been claimed that money (right and proper money) is the domain of government, at the very least to guard but also to invent, impose, and manage. In the late 19th century, an entire school of economic thought grew up around it: the State Theory of Money. Georg Friedrich Knapp’s treatise by that name came out in 1905 (English translation 1924) and helped entrench the nationalization of money in central banks. Bitcoin shows that the theory is wrong. Good money emerges from exchange and entrepreneurship, as Carl Menger said.
2. It was not invented by academia. The Bitcoin protocol was released by an anonymous programmer on a small email list and then put into the commons. Economists – to say nothing of political scientists and sociologists – were entirely out of the loop. This is fascinating because mainstream intellectual hierarchy puts academia at the top and everyone else underneath. The black robes rule the course of history and everyone else is their benefactor, it is said, as if there were a structure of production for ideas. The problem with this theory emerged in the age of capitalism, when the practitioners, not the theorists, starting getting all the good ideas. Then the backlash came in the 20th century: the experts would manage society. Now we are finding out something amazing: the best ideas come from those with boots on the ground.
3. It’s not all about Bitcoin. In some ways, the high-flying returns on the headline cryptocurrency are a distraction from the genius of the underlying technology: the distributed ledger called the Blockchain. This technology has spawned a financial sector just as large as Bitcoin itself, with thousands of applications, including every form of contracting. Blockchain could even lead to an upheaval in the relationship between the individual and the state. The critical thing to understand about the technology is this: it is a better way than we’ve ever had to document and enforce ownership claims. If you do not understand what this sentence means, I’m sorry but you do not understand the value of this technology.
4. The old regulations won’t work. This technology is completely new, whereas all existing financial and regulatory machinery is based on muscling legacy technology to perform in a certain way. Retooling the regulations to fit simply won’t work. It is only going to create messes, slowing down but not stopping, progress. Legacy bureaucracies and stakeholders will fight and fight but nothing can stop this revolution, which is borderless and digital, making it impossible to control. Moreover, every regulation reduces competitiveness and entrenches incumbent firms. Do you think if government had banned, for example, horseshoes, electricity, internal combustion, or flight that this would have actually stopped these ideas from becoming reality? Governments are an annoyance, not the authors of history.
5. Money will be competitive. Many people see the current goings-on as a struggle between the dollar and Bitcoin. That is too simplified. The real struggle is between national money monopolies and a newly competitive system. That competition occurs between cryptocurrencies and cryptoassets. People want to know who the winner will be. This too is old-world thinking. The competitive process will never stop. Winning will be temporary, and a new challenger will rise up and take the top spot. This is a new world. No living person knows what this is like because money has been protected from market pressure for so long. In particular, Americans are going to have to get used to a world in which the dollar is no longer king.
6. Banking and credit will change. The whole institution of central banking is premised on the idea of a money monopoly which thereby enables full control and macroeconomic management. Crypto doesn’t have to be number one in order to wreck this presumption. It only needs to bust the monopoly. With a market cap of half a trillion dollars, this might have already happened. Moreover, distributed networks weave together money and payment systems, so old-world payment processors will be next to fall. New players are crawling out of the woodwork by the day.
7. The unbanked have rights. Some people estimate that the unbanked of the world population is two billion. That is surely an underestimate. Think of the developing world but don’t limit it to that. Where I live, the unbanked are everywhere, and they are that way for a variety of reasons. Maybe they fear the privacy intrusions. They have lifestyles and sources of income that fall out of the mainstream. They might have sketchy professions. Or they are too young. Maybe it is a family issue or they fear getting roped into the system. Whatever the case, they still retain economic rights, and Blockchain tech gives them options for the first time. This is the population that will fuel the entrepreneurship in this sector.
8. No one will be in charge. Blockchain has no central point of failure and no overarching controlling force. Financial intermediaries are not out of the picture but they are not essential. The systems of the past evolved into cartels; the systems of the future will be increasingly decentralized with non-stop disintermediation. Anyone who seeks full control will wake every day to the reality of shattered illusions. This goes for huge financial firms and also governments. Traditional policy rationale is rooted in the presumption of the preeminence of a single vision. The decentralized future will be rooted in the reality of nonstop disruption. No ideology can stop this.
9. It’s a template for everything. Bitcoin isn’t really about Bitcoin. It’s about human liberty. We are not happy to live in cages of anyone’s construction. The goal of human life is to find a way to freedom. Governments and their lackeys laughed and dismissed this whole revolution, circa 2009 to 2017. There is no way the bird can escape, they said. Now it is too late.
10. No one knows the future. No one could have anticipated this would happen. No one can know what lies in store for us. The future will be crowdsourced. This seeming chaos will find itself toward orderliness, and massively improve life on earth. That is how it should be.
Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, economics adviser to FreeSociety.com, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books, most recently Right-Wing Collectivism: The Other Threat to Liberty, with a preface by Deirdre McCloskey (FEE 2017). He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press. He is available for press interviews via his email.
This article was originally published on FEE.org. Read the original article.
At the risk of over simplifying her work, the tulip trade became intertwined and inseparable from, art.
