TGIF: Tariffying Trade-Warmonger Trump

"The word tariff, properly used, is a beautiful word. One of the most beautiful words I’ve ever heard. It’s music to my ears." —Donald Trump

The once and possibly future president threatens to wage economic warfare against countries and companies everywhere if they don't knuckle under to his nationalist demands. He promises to impose tariffs on American firms that calculate that moving operations to Mexico or other foreign locations makes good business sense. He's also ready to strike at allied countries that irritate him by, say, slighting the dollar. (Watch or read his economic-policy speech.)

To his credit he promises to lower taxes on investment and to cut the regulatory burden. He also wants lower energy prices, which would be good all around, but exactly how matters. He's no laissez-faire advocate.

At any rate, Trump's determination to restore the American economy to what it was when much of the world lay in ruins after World War II suggests that, despite all the changes since then, he would much do more than de-tax and deregulate. For example, he promises to lure foreign companies here. Again, how? His government would no doubt play an active role in what should be private matters. He's already promising to make the taxpayers pay for business infrastructure projects. As he said about the audio industry, "It’ll be like it was 50 years ago." He won't be able to turn the clock back, but he can do much damage trying.

This is economic nationalism. He sees the world as an arena in which countries—as if they were companies—compete against one another: for one country to win, the others must lose. Powered by this worldview, Trump wants to be the CEO of the company known as the United States.

His vision is dangerously wrong. The world is not an arena in which countries compete with one another, where one nation's gain is the others' losses. That American manufacturers routinely buy foreign-made materials, tools, machines, and semi-finished products demonstrates this. We have a global division of labor in which capital, resources, and all kinds of goods have been able to move across national boundaries fairly freely as market forces require. As a result, world poverty has diminished unbelievably, and Americans are richer than ever. (The rough spots can be attributed to unabated domestic government intervention.) This progress has been in the making for about 80 years, but the liberalization responsible for it has been reversed recently—to the world's detriment.

Trump understands none of this, and he has no incentive to do so. Since entering politics, his demagogic promise has been to wreak vengeance on the world for, as he sees it, taking advantage of the United States. This is his aggrieved-nation shtick. The U.S. government has been the biggest bully since 1945, but Trump would have gotten nowhere politically had he promised to stop throwing America's weight around. Instead, he portrays the United States as a pitiful giant that has been everyone's chump. It's nonsense.

What's foreign to Trump's mentality is any notion of an unplanned, spontaneous market order built on individual freedom and choice, which is at the heart of sound economics. He must see himself as a hands-on CEO who can solve any problem. That's the last thing we need. He should read Leonard Read's "I, Pencil." (The video version is here.)

In a word, Trump is an economic warmonger, a not-too-distant cousin of a regular warmonger. As the old free traders said, "When goods can't cross borders, soldiers will."

It would be one thing if Trump were promising to shrink the government so much that businesses everywhere wanted to flock to these hospitable shores. But his "New American Industrialism" is an old-fashioned industrial policy in which he or his team of experts would pick winners to carry out his glorious vision. Which firms and industries get protected or subsidized and which don't? Those decisions would be made on a political, not an economic, basis. The problem is that Trump and his experts could not know what they would need to know to carry out their plan. Only the free market—through the unhampered price system—can produce that knowledge, which would be widely dispersed, often tacit, and therefore unavailable to a central bureaucracy. Even the great Donald Trump cannot defy the laws of economics.

What would Trump do if other countries tried to make their economies more hospitable to the world's businesses, say, through rigorous liberalization? Would he up the statist ante? The economic nationalist is not likely to back down.

No one should be surprised that Ludwig von Mises—the unparalleled champion of peace through full liberalism—had much to say about economic nationalism. In Human Action, he wrote: "Economic nationalism is incompatible with durable peace.... It is an illusion to believe that a nation would lastingly tolerate other nations’ policies which harm the vital interest of its own citizens."

Trump might endorse Mises's last sentence, but he'd be missing the point. Other countries would respond to Trump's program. If he responds in turn, he will hurt Americans for sure (and perhaps foreigners). Consumers will largely pay the tariffs and, along with import-using American manufacturers, face higher prices. That's the point!

Freedom in the economic sphere, as in all other spheres of life, is in the deepest interest of all citizens. Protectionism and other interference are not. One industry or firm may calculate that if it can win protection from the state, it will prosper even if others suffer. But protection granted to one interest will encourage others to ask for it too. Now the original gain begins to dissolve. As Mises put it in Socialism: An Economic and Sociological Analysis,

A system which protects the immediate interests of particular groups limits productivity in general and, in the end, injures everybody—even those whom it began by favouring.... The greater the protection afforded to particular interests, the greater the damage to the community as a whole, and to that extent the smaller the probability that single individuals gain thereby more than they lose....

[I]f all particular interests were equally protected, nobody would reap any advantage: the only result would be that all would feel the disadvantage of the curtailment of productivity equally. Only the hope of obtaining for himself a degree of protection, which will benefit him as compared with the less protected, makes protection attractive to the individual. It is always demanded by those who have the power to acquire and preserve especial privileges for themselves. [Emphasis added.]

Why would they all lose? Because, as we've known at least since David Ricardo formulated the law of comparative advantage (or what Mises called the law of association), the division of labor and free exchange bring specialization that yields immense gains to all—even when an individual, group, or nation is less efficient than others at producing a whole range of goods.

Trump displays the words Made in the USA onstage. The wiser course is to specialize and to trade with others rather than trying to produce everything. Market price signals, not Trump, should be our guide. If the frontiers were closed to foreign goods, Mises wrote in Socialism, "Capital and labour would have to be applied under relatively unfavourable conditions yielding a lower product than otherwise would have been obtained."

Thus Trump's blustering warfare would shrink incomes and risk conflict by disrupting the signals that channel productive energies to where consumers most want them.

TGIF: Who Cares about Inequality?

What accounts for the preoccupation with income and wealth inequality? We hear about it every day. Isn't our absolute living standard what matters and whether it is improving or deteriorating? I'll bet that's what regular people care about. However, the professional grievance mongers see things differently, They want you to resent those who are richer.

To start with the basics, we are not talking about inequality. We're talking about income and wealth differences. Substitution of the term inequality is an appeal to emotion, a cashing in on other senses of the word. "You oppose equality? Don't you believe that 'all men are created equal'?" That's demagoguery not argument.

In a market-oriented economy, most income is not distributed. There's no distribution to describe as equal or unequal, fair or unfair. (What the government does is another story.) As Ludwig von Mises, wrote 102 years ago in Socialism: An Economic and Sociological Analysis, "Under Capitalism incomes emerge as a result of market transactions which are indissolubly linked up with production." That's not distribution or allocation.

Mises continued:

We do not first produce things and afterwards distribute them. When products are supplied for use and consumption, incomes for the greater part have already been determined, since they arise during the process of production and are indeed derived from it. Workers, landowners, and capitalists and a large number of the entrepreneurs contributing to production have already received their share before the product is ready for consumption.

"[T]he concept of distribution is only figurative," Mises added. What people call "the income distribution" is not the outcome of a grand allocation plan. It's a snapshot of a dynamic, decentralized series of exchanges and is always subject to change.

People transact, trade, only when they expect to gain. Otherwise, they wouldn't bother. That's true for both parties to a transaction. It's win-win. Among the things people trade are labor services for money and vice versa. That people have to work so they can eat is not the fault of employers, who also have bosses to satisfy; they're called consumers. That's the nature of reality. But in a free and competitive market economy, few people are dependent on only one buyer or one seller. They are free to choose.

If no distribution occurs in a market economy, then no redistribution is possible. When the government taxes our incomes and gives the money to others—be they low-income people or military contractors—that's plain old distribution. And it's illegitimate.

Taxation and other forms of political manipulation are objectionable even if large-scale wealth and income differences do not result. So that cannot be the primary objection. Political manipulation is objectionable because it aggresses against nonaggressors and disrupts the process that best serves consumers. It would be odd to say, "I see inequality, so I wonder what government manipulation has brought that about." It would be reasonable to say instead, "I see government manipulation, so I wonder if, on top of all the other bad consequences, it also has disrupted the wealth-creation process."

Economic differences among individuals and groups are to be expected among free people and ought not to arouse suspicions of illegitimacy. To expect economic equality as the default is to commit the fallacy Thomas Sowell has exposed concerning all sorts of disparities among groups. Uniformity is found nowhere in the world.

Everyone knows that people's contributions to productive activities vary widely, with a relatively few people at the top and bottom and most in the middle. No mystery here. Individuals differ in intelligence, age, ability, disposition, upbringing, energy, alertness, patience, ambition, education, work habits, culture, risk tolerance, entrepreneurship, and much more. No one should be surprised that their contributions to wealth creation also differ vastly or that they change over time. Thus vast differences in income and wealth are to be expected. I couldn't have done what Bill Gates, Steve Jobs, Serge Brin, or Jeff Bezos, did—and, appropriately, my income reflects that.

Despite the seeming paradox, the huge economic differences that can result from innovation benefit everyone. Much would be lost without that possibility. Incentives matter. Moreover, the innovators' gains are minuscule compared to the total gains to consumers. A system designed to prevent or stamp out those rewards to innovation would impoverish us all. It would also put us on what F. A. Hayek called "the road to serfdom."

It should also be noted that the price system, of which income levels are a part, signals to producers what consumers want most. It's our way of telling producers where to put their efforts and scarce resources.

What indicates progress or regress in society is not the latest dubious measure of a gap between rich and nonrich, but how easily people of determination can climb the income ladder. If the government stays out of the way, the obstacles are minimized. Gaps don't matter. Think of an elevator that can expand like an accordion: the floor can rise even if the distance to the ceiling increases.

Most people don't envy wealthy innovators. They admire them. But anti-freedom politicians, intellectuals, and activists think you should resent anyone who is considerably wealthier. They're running a scam designed to obtain power. We need to call them out.

If you like gaps, check out the shrinking consumption gap, the product of the growing availability of resources worldwide thanks to the spread of economic liberalization and the liberation of human ingenuity and entrepreneurship.

 

TGIF: "We Are All Social Engineers Now"

I don't know if anyone has actually said, "We are all social engineers now," but someone might as well have. (The variation "We are all Keynesians now" was declared a long time ago, even by Milton Friedman, although see this.)

When I say "all," of course, I don't mean all. If you look hard enough, you'll find a few opponents of social engineering. But if you throw a dart into a crowd—don't try that at home—you'll most likely hit a social engineer. Most people think the government should do more than apprehend, try, and punish real criminals; maintain courts for peaceful dispute resolution; and keep a small defense force in the unlikely event of a military invasion. (The free market would most likely do those things better without coercion.) Today the government, to much public applause, goes far beyond Adam Smith's vision of "peace, easy taxes, and a tolerable administration of justice."

Large constituencies favor government management of Americans' education, trade with each other and the rest of the world, immigration, housing construction, land use, business, occupations and professions, industrial organization, finance, energy, medical services, income and wealth "distribution," product quality and safety, and culture itself, to name just a few. Did you hear a public outcry when the Republican presidential candidate promised to force the taxpayers and insurance companies to pay for in vitro fertilization? Money comes with strings.

What are the taxpayers not on the hook for these days?

Social engineering in recent years has notoriously been extended to matters involving speech and the written word. Disinformation, misinformation, and malinformation are the newest hobgoblins. Expression about climate change, COVID-19, and even elections has been targeted. We can be grateful this has been countered with a rousing defense of free speech, but caution is in order. Most advocates of free speech support social engineering in myriad other matters, ignoring that government managers will always look askance at expression that might undermine the consensus believed necessary to successful social engineering.

If you support social engineering in one area, what grounds do you have to oppose it in others? A politician who ran for high office promising to strip the national or state government of the power to manage society would surely be buried by his opponent on election day. People are addicted to government management.

That's the world we inhabit. What is the cost of living in such a world? I don't mean the dollar cost. It's easy to find the numbers corresponding to the budget, the deficit, the debt, the shrinking of purchasing power because of central-bank money creation, and so on.

I'm thinking of cost in a different way. What must we forgo because politicians and bureaucrats—no matter which major party is in office—manage so much of our lives? Social engineering is government planning. It may not be total central planning, though some may wish for that, but it does entail a significant degree of it. Many people think the president of the United States runs the country, not merely the executive branch of the government. He or she is regarded as the public's commander-in-chief and not merely the commander of the military, theoretically subordinate to Congress's constitutional war-declaration power. (That's not been a real thing since the 1950s.) No, the president is widely thought to be in charge of almost everything. Executive orders are more common than legislation, which is bad enough. The two major parties have a few differences over what the government should manage, but taken together, their programs encompass pretty much the whole kit and kaboodle.

Social engineering is a fancy term for politicians and bureaucrats telling us what we must and must not do. As Ludwig von Mises wrote: "Planning other peoples’ actions means to prevent them from planning for themselves, means to deprive them of their essentially human quality, means enslaving them."

So don't let it be said that our choice is between government planning and chaos. Wrong. It is between would-be dictators pushing us around and individual self-direction coordinated in the free market. It is between coercive bureaucracy and social cooperation—largely but not exclusively among strangers—guided by private property, contract, market prices, and entrepreneurship.

The 19th-century French liberal economists strove to explain how "Paris gets fed." Every day the shops offered meat, bread, eggs, milk, etc., yet no one ran things overall. Many people coordinated freely without commands. Those economists did not ask, "Does undesigned order exist?" They could see it. Rather, they asked, "How does it happen?" And they proceeded to explain the division of labor, enterprise, trade, market prices, and supply and demand.

That's what we lose to the extent the government interferes with social cooperation. Because of that interference, we've lost a lot since 1789. When the draft constitution was announced back then, many thoughtful people warned that it allowed too much power to the central government, which could be expected to grow from that baseline. Who would disagree with them today?

 

Foreign Interference

People are being told to be alarmed about alleged foreign interference in the upcoming presidential election. Maybe they should be understanding rather than alarmed. The U.S. government conducts a wide-ranging interventionist foreign policy, which can substantially affect other countries. That has included frequent interference in elections and other political operations. So why wouldn't the governments there not only take an interest in U.S. elections but also perhaps attempt to exercise some influence over the voters? Much is at stake militarily and economically.

American  politicians used to say, "Politics stops at the water's edge." However, after America had turned into an empire, Felix Morley, the classical liberal critic of U.S. foreign intervention, commented that politics stops at the water's edge only when policy stops at the water's edge, which it no longer did. 

If we want foreign countries to ignore American elections, the U.S. government should go back to ignoring foreign countries. End the foreign entanglements! Americans should be free to trade with anyone, but the government should pull back to the water's edge—and much further.

TGIF: The Russians Are Coming? The Russians Are Coming?

Civilization, in fact, grows more and more maudlin and hysterical; especially under democracy it tends to degenerate into a mere combat of crazes; the whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary.

―H. L. Mencken, In Defense of Women

It is in Mencken's spirit that I would size up this announcement from the U.S. Justice Department, titled "Justice Department Disrupts Covert Russian Government-Sponsored Foreign Malign Influence Operation Targeting Audiences in the United States and Elsewhere":

The Justice Department today announced the ongoing seizure of 32 internet domains used in Russian government-directed foreign malign influence campaigns colloquially referred to as “Doppelganger,” in violation of U.S. money laundering and criminal trademark laws. As alleged in an unsealed affidavit, ... Russian companies..., operating under the direction and control of the Russian Presidential Administration, ... used these domains, among others, to covertly spread Russian government propaganda with the aim of reducing international support for Ukraine, bolstering pro-Russian policies and interests, and influencing voters in U.S. and foreign elections, including the U.S. 2024 Presidential Election.

The release quoted FBI Director Christopher Wray: “Companies operating at the direction of the Russian government created websites to trick Americans into unwittingly consuming Russian propaganda. By seizing these websites, the FBI is making clear to the world what they are, Russian attempts to interfere in our elections and influence our society."

So once again a foreign power—usually Russia—is allegedly trying to manipulate the American people with disinformation as a presidential election is coming on. How dare the Russians do this? Political manipulation is allowed only to certain anointed Americans. It's a position of privilege. So the government will protect us from "consuming" Russian propaganda without knowing it. We're too stupid to check claims out for ourselves when they sound fishy—even when they come from so-called legitimate" sources. (Point of information: are Russians incapable of saying anything accurate worth hearing? Just asking.)

Before we get all primed for nuclear war, let's take a deep breath. Maybe it would help to picture a scene that may or may not have occurred in the Kremlin.

Picture President Vladimir Putin (not a guy I'd ever hang with) summoning a top aide to his office. "Sergei, I have a great idea," he might say this trusted aid. "Here's $10 million. I want you to launder it, then have some American-looking company pass the money to big-time American internet influencers. But make sure the money goes to people who are already saying what we want them to say. No sense wasting it on people who don't like us. Pay these friendly guys to post propaganda favorable videos."

Putin might have gone on: "What we want to do is capitalize—pardon expression, comrade—on the American sport of arguing about politics and culture. Muhahahahahaha! Yes, I know, America is severely divided over more issues than I can name. But it's not divided nearly enough for our purposes! We can do better, da? This will help us in many ways, primarily by disillusioning Americans about Ukraine. That would be good, nyet?"

After hearing Putin, Sergei might have laughed under his breath and agreed to oversee the project. Why might he have laughed? Because he might have been thinking, "Do we need to pay even a ruble on polarizing America? What a waste of money! America is doing just fine polarizing itself. They don't need our help. And $10 million? Is he kidding? That's a drop in the bucket compared to what Americans spend bitterly promoting their views on public issues. Is this the Putin who's cracked up to be so foxy? Sheesh! Maybe I should be president."

According to the government's indictment:

Many of the videos published by U.S. Company-I contain commentary on events and issues in the United States, such as immigration, inflation, and other topics related to domestic and foreign policy While the views expressed in the videos are not uniform, the subject matter and content of the videos are often consistent with the Government of Russia's interest in amplifying U.S. domestic divisions in order to weaken U.S. opposition to core Government of Russia interests, such as its ongoing war in Ukraine. [Emphasis added.]

Immigration, inflation, and other topics related to domestic and foreign policy? Are we to believe that Russian officials think they need to amplify divisions in America? How much more amplified can they get? And what about the Justice Department's acknowledgment that "the views expressed in the videos are not uniform"? What are we being asked to get upset about?

J. D. Tuccille writing at Reason points out:

Translated Russian documents [provided by the Justice Department] outlining a "guerilla media campaign in the United States" caution their intended audience that "in the United States there are no pro-Russian and/or pro-Putin mainstream politicians or sufficiently large numbers of influencers and voters. There is no point of justifying Russia and no one to justify it to." [Emphasis added—SR] The campaign was meant to exploit "the high level of polarization of American society" by paying commentators to say things they were already saying.

It's not clear they got a lot of mileage from that program.

That's an understatement, I'd say. But Putin's objective (if he was behind this) might simply have been to upset American officials and the public. Here's a suggestion: let's not get upset. Read the rest of Tuccille's article for more particulars about the effectiveness of meddling and about the U.S. government's own sorry decades-long record of manipulating other countries' political systems. Then remember the advice about stones and glass houses.

"So, take reports of Russian interference in American elections with a grain of salt," Tuccille advises, "knowing that Putin is paying Americans to say what they already believe, and the U.S. does the same in other countries. Importantly, none of that interference prevents you from making your own decisions."

I have plenty of criticism of democracy, as readers know, but I wonder: is America so fragile? Or is this one of Mencken's hobgoblins? If so, who benefits?

TGIF: What Government Has Wrought

Imagine two candidates for president, and ask yourself who is more likely to win.

Candidate A observes that people are facing generally rising prices. Their total at the supermarket checkout is higher than last year. Filling up the car at the gas station takes a bigger bite out of the budget. Everything the kids need seems costlier. Besides all that, the prospect of buying a home or moving to a larger apartment looks grim—too expensive.

Responding to this situation, Candidate A launches a campaign promising to defend the middle class and other working people against "corporate greed." Specifically, he proposes an expanded child tax credit, a crackdown on "price gouging," and down-payment subsidies to first-time home buyers. Targeted tax credits to homebuilders and small businesses are among the promises. (These and other tax credits are called "refundable," which means qualifying people who pay little or no taxes have their nonexistent tax payments refunded to them—a logical impossibility.)

Candidate B, not your typical frontman for a mass-marketing campaign, sees the same hardships as Candidate A, but he has a different message. He pledges to move heaven and earth to repeal taxes on savings, investment, and business, including the capital-gains tax and the corporate income tax. He explains that taxes on savings, investments, and enterprises are dishonest because businesses don't pay taxes; they collect them—from workers, customers, and corporate shareholders. Such taxes constitute double and even triple taxation. (See Roy Cordato's "Corporations Should Pay Higher Taxes?" and "Taxing Investment." ) He also promises to work to abolish regulation on business, which raises production costs, hikes prices, and reduces the supply and variety of consumer products.

The candidate unabashedly promotes his plan in the name of economic growth and prosperity for everyone. He does so because he believes that the only way for everyone to get rich(er) is for production to expand, for labor to become more productive, and for real prices to fall through increased supplies. That requires saving and investment, that is, deferred consumption. Anything that discourages savings is bad, he says. He favors prosperity, he says, over income equality, which is a recipe for poverty.

The candidate proposes to accommodate the lost revenue by pushing Congress to cut spending all through the budget. He also calls on the governors, county executives, and mayors to eliminate the barriers to home and apartment construction, including zoning, because, he notes, high housing prices are caused by politically restricted supply. This is especially egregious where some of the most lucrative jobs are. However, since housing is artificially scarce, many people can't move to where the best jobs are because they're priced out of the housing market. He also promises to get rid of any federal regulations that keep the housing supply from meeting the demand.

In general, Candidate B explains to voters that increased consumption requires increased production (not vice versa) and that bureaucracy discourages savings and raises costs and prices. The government is not good at creating real wealth; it is a consumer and engine of transfer, not a producer.

Who's likely to win the election? The one who promises direct help to middle- and working-class consumers or the one who promises to help them indirectly by freeing up entrepreneurship and free enterprise?

Does anyone doubt who, other things equal, would prevail? Candidate A would be widely portrayed as a champion of the people, a hero bursting with compassion and courage to take on special interests. Candidate B would be portrayed as a shill for Big Business and Wall Street, who favors having all the wealth go to the top 20 or even 1 percent, while the rest of America gets poorer and poorer. (Although that is the opposite of what's been happening for many decades.)

In other words, the candidate who understands how the free-enterprise system tends to work when left unmolested by politicians and bureaucrats will be scorned as an enemy of progress. Meanwhile, the candidate who either is ignorant of economics or engages in demagoguery will be lifted on people's shoulders and carried into the White House.

That's what a representative democratic republic produces. The result is a total national debt—$35 trillion and change—larger than GDP—almost $29 trillion—not counting the unfunded liabilities of the so-called entitlement programs. Interest paid on the debt will be about $900 billion this fiscal year, which ends September 30. Annual budget deficits have hit $2 trillion, which the government covers by selling bonds, which in turn the Fed (short for Federal Inflation Generator) buys up, creating money out of thin electrons. Inflating the money supply then raises prices generally as more dollars chase the same amount of goods, imposing hardship on regular people. A fiscal crisis looms.

If this tale of two candidates does not make you question the utility of government, what would?

TGIF: Doing Good at a Profit

[P]eople started to believe that the bourgeoisie and its economic activities of trade and innovation were virtuous, or at least tolerable. In every successful lurch into modern riches from Holland in 1650 to the United States in 1900 to China in 2000, one sees a startling revaluation in how people thought about exchange and innovation.

"How the Bourgeois Deal Enriched the World"
Art Carden and Deirdre Nansen McCloskey

Perhaps it's time for another, similarly positive reevaluation of exchange and innovation. Heaven knows we need it. Our age features a distinct lack of appreciation of trade through the global division of labor, the innovation and prosperity it produces, and the signs of entrepreneurial success, namely, the wealth of innovators. We have witnessed a surge in good feelings toward socialism and various socialism-lites despite their unbroken record of death, oppression, and stagnation.

Could the varied opponents of market-liberalism—libertarianism in its purest form—suffer an allergy to what Adam Smith identified as a key feature of the "system of natural liberty"? In The Wealth of Nations Smith famously observed,

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.

Apparently, for people who dislike the market economy, producing even astounding benefits for others does not count if one does it at a profit. That is strange.

In 1900 about 80 percent of the world's population lived in extreme poverty. Today, less than 10 percent does. The reduction since the 1980s alone has been phenomenal. And during that time the world's population has grown dramatically —from under 2 billion in 1900 to 8 billion today!

Deirdre McCloskey and Art Carden write that since 1800 per-capita wealth has increased by 3,000 percent. Per capita! (They explain how and why in Leave Me Alone and I Will Make You Rich: How the Bourgeois Deal Enriched the World. Also see this.)

Malthus and Marx must be spinning in their graves. Paul Ehrlich, still alive, declared in the late 1960s that "the battle to feed all of humanity is over." About that prediction, Maxwell Smart would have said, "Missed it by that much." (Ehrlich still gets treated by the news media like an oracle.)

Do people know about this marken-driven progress? Did the establishment and alternative media report it? I must have missed it.

The eradication of poverty has many freedom-related reasons. Economic liberalization (marketization), that is, the freeing up of entrepreneurship and trade deserves much credit. But something else was also required. Economic historian McCloskey primarily credits a change in attitude toward the "bourgeois virtues," such as innovation. "In every successful lurch into modern riches from Holland in 1650 to the United States in 1900 to China in 2000," McCloskey and Art Carden write, "one sees a startling revaluation in how people thought about exchange and innovation." Envy and resentment at success diminished, freeing people to innovate, trade, and get rich while making consumers better off. Mass production emerged for the first time in history. Producers didn't work just for the political elite. How great was that?

Let's put it another way: poverty has been eradicated at a profit! Was that virtuous? Would it have been more virtuous had it been done by nonprofits? The antipoverty record of nonprofits, especially governments, is dismal.

Where is the praise for the market from all the usual antipoverty voices? I can find only one voice, however grudging: Rock star Bono, who said in 2022:

There’s a funny moment when you realize that as an activist: The off-ramp out of extreme poverty is, ugh, commerce, it’s entrepreneurial capitalism. I spend a lot of time in countries all over Africa, and they’re like, “Eh, we wouldn’t mind a little more globalization actually. I would point out that there has been a lot of progress over the years.” . . . Capitalism is a wild beast. We need to tame it. But globalization has brought more people out of poverty than any other -ism. If somebody comes to me with a better idea, I’ll sign up. I didn’t grow up to like the idea that we’ve made heroes out of businesspeople, but if you’re bringing jobs to a community and treating people well, then you are a hero.

As I said, grudging, but better than nothing. But did Bono's friends and fans become pro-market? I don't see it.

One might expect that in a world of scarcity, a system of political economy that harmonizes diverse interests and creates widespread wealth from those differences to win enthusiastic praise. But no. Enthusiasts for markets and economic success have been scarce throughout history because a relative few succeed fabulously as innovators while most others merely succeed as consumers—beyond their recent ancestors' wildest dreams.

"People before profits!" shout envious ignoramuses, who can't be bothered to figure out that businesses that fail to please people record losses, not profits, and go bankrupt. It's a profit-and-loss system (unless the government violates the system by intervening).

By the way, pure entrepreneurial profit emerges when a business can sell its goods for more than its costs, including wages. That is, an entrepreneur happens upon a discrepancy between the price (valuation) of inputs and the price buyers are willing to pay for the output. Hence my battle cry: Exploit price discrepancies, not people!

However, some find it more satisfying to look for exploitation in any encounter whether it is there or not. Sellers exploit buyers; employers exploit employees. It requires no proof because it is a sacred article of faith. The faithful are blind to the deep harmony of interests of sellers and buyers, of employers and employees. They need each other because the system of natural liberty, even when burdened by state intervention, makes all parties richer than they ever could be without the market, its prerequisites (respect for others and their property), and its consequences (the global division of labor).

Getting back to Adam Smith's point, what could be the objection to trade based on mutual benefit? Why should anyone expect the butcher, baker, and brewer to live for their customers? Like their customers, they have lives and families too. Are sellers wrong because they don't give away their wares? Do their customers give away their products and services? Then what's wrong with charging what "the market will bear," that is, what people are willing to pay?

We all agree that no one can own other people? If you want something that belongs to another person, you offer to trade. Just as you don't own other people—that's called slavery—you also don't own their belongings until they accept the terms of trade. Governments often seek to set the terms of trade, but it has no legitimate power to do so. Governments are usurpers. The terms are up to the parties because the parties are trading their property. (If they violate the rights of nonconsenting third parties, that's a matter for the courts.)

Smith didn't mean that buyers and sellers can't be friendly or care about one another. His point was that benevolence is not necessary for mutually beneficial exchanges. It would take place anyway. All that's required is the realization that trade is positive-sum. Each exchanges something less-preferred for something more-preferred. Person A gets what he wants by offering to Person B what he wants, and vice versa. One serves one's interests by figuring out what's in other people's interests. The pursuit of self-interest serves the interests of all. That's one fine arrangement.

Somebody once said that if America is worth saving, it's worth saving at a profit. That goes for the whole world.

TGIF: Back to Barbarism

Has Kamala Harris inadvertently done free-market advocates a favor? Let's not get too hopeful, but maybe. How so? By pandering to voters and marketing herself as a consumer watchdog who will stamp out (undefined) supermarket "price gouging." This could create teaching opportunities for champions of the unhampered market economy.

This should be our message:

• Prices emerge from countless transactions through which people seeking mutual benefit trade their money for goods and vice versa.
• Monetary exchange, unlike the barter system that preceded it, permits the widest possible division of labor because if you want to exchange eggs for apples, you need not search for someone who wants to exchange apples for eggs. Money, which arose through the market process, does the trick.
• The division of labor is the epitome of social cooperation, which enables everyone to acquire more and better goods than they could acquire otherwise. It lets masses of people live long and prosperous lives. As Adam Smith wrote, "The division of labor is limited by the extent of the market."
• Thus, an attack on money and prices is an attack on civilization itself, a step back toward barbarism.

This is Ludwig von Mises's open-and-shut case against socialism, the obliteration of the market economy. But it is also relevant to lesser government intervention in the economy. The standard case against government price controls and guidelines applies to what Harris vaguely proposes. That case can be readily found with any search engine. Tampering with prices brings unwanted shortages, gluts, discordination, misaligned investment, and social strife. (Try this for starters.)

Here I want to concentrate on the deeper, though related reason for concern about Harris's pronouncement. (Trump should not be allowed off the hook because many of his proposed interventions, such as tariffs and job-rescue plans, fall to the same objection.)

That deeper reason is this: an attack on market price-setting, whatever the rationale and however modest at first, is an attack on society itself. While most people think a price is just a number on a tag attached to a product on a store shelf, it is much more. It is even more than an informative exchange ratio that emerges from the interactions between countless buyers and sellers pursuing their interests and signaling relative scarcity and demand. Most important, a price is the result of a life-sustaining process. Free pricing is the glue that holds a great society together and makes other kinds of social bonds possible.

Isn't that an exaggeration? It is not. Even if you think the Harris proposal to stamp out "price gouging" is modest, we have no reason to think it would stay modest. Why only groceries? What about clothing, shelter, and other things we need? (The government already has a lot of influence over interest rates.) And if the "modest" measures fail to satisfy the bureaucrats or the most vocal part of the public, we may expect the politicians to try harder to rein in free pricing. They are not likely to give up their politically winning program. Failure will be grounds for expansion because voters are economically illiterate. Intervention may beget more intervention. Think mission creep and slippery slope.

Ludwig von Mises, writing in Human Action, thought that, short of bombs and socialism, there was no more serious way to destroy civilization than by crippling the price system. Price controls, inflation, and antitrust are among the ways to accomplish that. Intervention is destructive because the price system makes economic calculation possible, and monetary calculation is indispensable for rational thought in a modern society. As a medium of exchange and a common unit of account, money permits people to translate the disparate things they subjectively value into meaningful objective sums that producers and consumers can use to plan, coordinate, and cooperate in the market. Mises's insight is that monetary calculation is necessary for a free, humane, and prosperous society.

As Mises wrote, "Monetary calculation is the guiding star of action under the social system of division of labor." Need one point out that the division of labor based on property rights is essential to personal and social progress?

It is the compass of the man embarking upon production. He calculates in order to distinguish the remunerative lines of production from the unprofitable ones, those of which the sovereign consumers are likely to approve from those of which they are likely to disapprove. Every single step of entrepreneurial activities is subject to scrutiny by monetary calculation. The premeditation of planned action becomes commercial precalculation of expected costs and expected proceeds. The retrospective establishment of the outcome of past action becomes accounting of profit and loss.

Distinguishing profitable from unprofitable activities is necessary because while consumer wants are unlimited, resources and labor are scarce. At any given moment, we cannot have everything we want in the quantities we want, so we must make choices and accept trade-offs. Market prices tell producers what consumers want more of and less of. Looking back, prices signal success or failure—and prompt course corrections.

Mises next makes a crucial point:

The system of economic calculation in monetary terms is conditioned by certain social institutions. It can operate only in an institutional setting of the division of labor and private ownership of the means of production in which goods and services of all orders are bought and sold against a generally used medium of exchange, i.e., money. [Emphasis added.]

Then he clinches the deal: "Our civilization is inseparably linked with our methods of economic calculation. It would perish if we were to abandon this most precious intellectual tool of acting."

If you don't believe Mises, try to imagine living a free, decent, and prosperous life in a society deprived of private property, the division of labor, free exchange, and the resulting market prices. It can't be done unless you count images of chaos and barbarity. Ironically, some people who view themselves as foes of slavery are eager for the government to impose the terms for the disposal of other people's products.

Mises closed Human Action with these words:

The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.

Our future depends on how quickly we repel the economically illiterate clowns who seek political power. We won't find allies among so-called "progressives" and "conservatives."

TGIF: Gaslighting

I wonder who's gaslighting us now. Here are some of the major perpetrators:

• The pundits and pseudo-economists of all tribes who try to convince us that the government can spend, borrow, and create money almost without limit or harm. What happens when interest on the national debt swallows up so much of the federal budget that little is left for anything else? The government isn't likely to close shop (too bad), so we ought to be discussing what desperate measures it and its dependents will resort to when the well dries up.
• The "labor advocates" who try to convince us that the government can set a minimum wage without inflicting hardship on unskilled workers through lost jobs, curtailed hours, deteriorating work conditions, fewer amenities like training, or higher consumer prices, which those workers face as consumers.
• The "consumer advocates" who try to convince us that the price system is the enemy of the common man and woman. When a politician promises, as Kamala Harris does, to stamp out high prices, "gouging"—without mentioning the money-creating Federal Reserve—beware. You are about to be victimized by the perennial bipartisan war on prices, which means us.
• The regulatory crusaders who try to convince us that increasing the cost of producing goods and interfering with voluntary transactions can raise the general standard of living. It cannot.
• The so-called progressives who try to convince us that mass consumption can precede mass production. It cannot. And as economist Bryan Caplan points out, mass production has never benefitted only a small fraction of society. How could it?
• The Marxists, neo-Marxists, and those they have inspired who try to convince us that our free market transactions are inherently exploitative rather than mutually beneficial. Their condescension knows no bounds.
• The "environmentalists" (having seen socialism's dismal record) who try to convince us that the free market is bad not because it produces too little, but because it produces too much.
• The anti-trade agitators who try to convince us that tariffs harm foreigners (as though that were a good thing) rather than Americans. Centuries of evidence and sound theory show this is not true. Tariffs are meant to raise domestic prices and limit choice for consumers. That can't be good.
• The national conservatives and progressives who try to convince us that immigrants cause rising housing prices rather than the endless array of government restrictions on building. How cruel is that?
• The border closers on both sides who try to convince us that Americans would be better off without eager workers from around the world seeking to escape poverty and tyranny and make better lives in wealthy America, where they can at least double their incomes. The fixed-pie nonsense was invented by demagogues and is embraced by Donald Trump and Bernie Sanders alike.
• The gatekeepers who try to convince us that the government could pull off a historic mass deportation without jeopardizing everyone's liberty and disrupting the social cooperation that voluntary represents.
• The "social justice" warriors who try to convince us that any disparity deemed unflattering is the result of bigotry and oppression—evidence to the contrary be damned.
• The bigotry hustlers who try to convince us that America is the most racist and otherwise bigoted society in world history, with the only question being, not if bigotry caused a situation, but how it did so.
• The self-described "decolonizers" who try to convince us that the only way to rectify long-past injustices associated with Western imperialism and slavery is to destroy self-ownership, private property, the market, reason, the scientific method, and individualism—anything, that is, to do with modern civilization. Meanwhile, similar past crimes committed by non-Western ethnic and tribal groups are to be flushed down the memory hole. Somehow we're supposed to believe that civil strife over past wrongs is good for everyone.
• The Israeli government and its devoted American supporters who try to convince us that the mass murder of tens of thousands of children, women, elderly, and male noncombatants packed into a small space can be morally justified. Questioning this makes you a pro-Hamas antisemite.
• The advocates of the U.S. empire who try to convince us that if we don't fight Russia in Ukraine, we'll be fighting them here. Doubting this makes you a Putin agent.
• The "transgender" ideologues who try to convince us that sex is not limited to male and female, is not immutable, and is not important, and that human beings have "gendered" souls that can be wrongly matched to the bodies they are "trapped" in.  This allegedly justifies Nazi Mengele-type "medical" sadism on children, that is, mutilation and sterilization. (Adults should be able to do what they want to themselves. But parents do not own their children and have no right to abuse them, whether the children "consent" or not. When can third parties intervene to protect children? At what age does childhood end? Libertarians need to take up these questions.)

Strictly speaking, not all of this gaslighting. In the movie Gaslight the bad husband tries to drive his wife crazy by covertly doing things, such as dimming the gaslights, and making her think she had forgotten that she'd done them. Some of my examples involve assertions that Americans should know are wrong but don't. The dominant view is a lie intended to make them susceptible to demagoguery and tyranny. We can see it as advance gaslighting: when people see the facts, they won't believe their own eyes.

 

 

TGIF: Khan Controlling Trade

Lina Khan is a Washington, D.C., rock star. She is not only President Joe Biden's celebrated chief of the Federal Trade Commission (FTC); she's also a favorite of J. D. Vance, Donald Trump's pick for vice president.

This Lina Khan must really have something going for her—until you recall that Biden and Vance, and by implication Trump and Kamala Harris, reject individual freedom as an inseparable unity. In other words, personal freedom requires economic freedom and vice versa. What chance does freedom of speech and press have in a society without private property? Individual liberty in the absence of free enterprise—unsupervised by force-wielding bureaucrats—is a delusion.

Let's look at the FTC. It was created in 1914, which immediately should make you squirm. So-called progressive Woodrow Wilson was president in those days. He is a contender for the worst American of the 20th century if not of all time. Leaving aside his incredibly evil involvement of the United States in World War I, which helped make the century a slaughterhouse, he devoutly believed that the national government should be all-powerful.

Quaint ideas like limited government under a fixed constitution may have made sense in the 18th and early 19th centuries, he thought, but not in modern progressive 20th-century America. The national government (forget the several states) and its anointed, dispassionate, above-the-political-fray experts should run society. Americans should go along with whatever directives the experts think best. Any argument against that proposition was surely motivated by selfish, profit-driven, exploitative bad faith. If the untrusted market can't be abolished, then at least it should be guided by a category of person that has always had a sparkling record for trustworthiness: bureaucrats, who, unsullied by the profit motive, have the best intentions and perfect insight into the public interest. The FTC is an example of what Wilson had in mind. The marketplace will always fall short of the progressive ideal, so public-spirited bureaucrats must keep it on the right path.

The FTC's website proclaims: "Our mission is to protect consumers and promote competition." Sounds innocuous. It's not. If you've ever visited the FTC building in Washington, you've seen the two Soviet-style sculptures on the grounds. The sculptures were Michael Lantz's winning entries in a Roosevelt administration New Deal contest, which will surprise no one. (Lantz was the brother of famed Woody the Woodpecker cartoonist Walter Lantz.)

The sculptures depict a muscular human figure struggling heroically to control a wild horse that threatens to break free and run rampant through town, leaving death and destruction in its wake. The title is "Man Controlling Trade."

That's how Franklin Roosevelt and Woodrow Wilson saw trade. It's how the Federal Trade Commission sees it today: a wild animal that needs to be restrained. Today, Lina Khan the chief controller. Khan controls trade.

But the sculptures and mission make no sense. Trade is not a wild animal. It's a peaceful, cooperative activity that individual human beings engage in when they anticipate mutual benefit. Each party exchanges what he or she wants less for what he or she wants more. No exchange takes place otherwise if the parties are free. (Compare that to government eminent domain.) Historically, trade civilized human beings by demonstrating that cooperation through the division of labor is better than conflict. It's how to get rich.

Thus, likening trade to a wild beast is obscene. It's a self-aggrandizing lie by politicians, bureaucrats, and anointed experts.

The FTC says that "for over 100 years, the antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up." But don't businesses already have "strong incentives ... to operate efficiently, keep prices down, and keep quality up." And don't they have an incentive not to endanger consumers? Unlike the government, businesses face consumers who are free to say, "No, thanks. I'll shop elsewhere" Yes, business people sometimes try to take advantage of consumers or have bad judgment, but that's a feature of people, not business. Who runs the government regulatory agencies, saints? At least businesses face competition. You can't say that for government.

The progressive answer is that businesses have all the power and customers have none. Nonsense. Unless the government helps business by stifling free competition, "market power" means nothing more than the "power" to please consumers better. The FTC (and the Justice Department's antitrust division) claim to serve consumers, but in reality, they just protect inferior companies from superior companies.

Lina Khan has excited attention for breathing new life into government interference with trade, especially in high-tech America. Her dubious innovation is in believing the government can't leave big tech companies, such as Amazon, alone merely because they please customers with great service and low prices. As she wrote in a law journal article in 2017, "Animating these critiques [about tech companies] is not a concern about harms to consumer welfare, but the broader set of ills and hazards that a lack of competition breeds.” (Emphasis added. HT: Saul Zimet of the Foundation for Economic Education.) Khan continued:

To revise antitrust law and competition policy for platform markets, we should be guided by two questions. First, does our legal framework capture the realities of how dominant firms acquire and exercise power in the internet economy? And second, what forms and degrees of power should the law identify as a threat to competition? Without considering these questions, we risk permitting the growth of powers that we oppose but fail to recognize.

Khan, a lawyer not an economist, speaks gobbledegook. It's a blank check for overseeing and quickly overruling free enterprise, as an end in itself—central planning without nationalization. Bureaucrats know better. They need no profit-and-loss test.

As we should know by now, drawing on Ludwig von Mises's critique of socialism, no set of bureaucrats can know what she claims the FTC can know. They can't even define the relevant market in which to "measure" alleged monopoly power because they don't know what consumers will deem as suitable alternatives to a given good when dissatisfied with its price or quality.

Moreover, the bureaucrats ignore how potential competition disciplines a sole firm as much as actual competition does—as long as the government grants no privileges. Abnormally high prices and profits in an industry are engraved invitations to potential competitors. So are perceived abuses of consumers. It's also possible that what the FTC sees as abuse the consumer sees as a good deal. (Ads tailored to one's online buying patterns may be thought superior to random ads.)

Khan is also needlessly concerned about mergers and acquisitions. Many high-tech innovators have developed remarkable new products intending to sell them to an existing tech company for lots of money with which to move on to the next innovation. Venture capitalists earn fortunes by spotting such opportunities. Khan would obstruct if not do away with that process. We'd all lose out. Has she never read Bastiat's "What Is Seen and What Is Unseen"?

Khan says that data gathering and artificial intelligence present new challenges to the marketplace that the government must meet. But the fatal flaw in all market-failure reasoning is that the alleged solution—the state—is subject to far more pervasive government failures. In the market, entrepreneurs earn profit by solving problems. No counterpart exists in the government. On the contrary, bureaucrats can prosper by not solving problems or by creating new ones, justifying larger staffs and budgets.

The basic economic fact the FTC ignores is that competition is an open-ended, dynamic discovery process driven by rivalrous entrepreneurs trying to please consumers. Technology and consumer preferences change all the time, and all businesses must keep up or lose out to better entrepreneurs. No firm—if it has zero access to government coercion—can threaten competition, not even with noncompete agreements, which are contractual terms that will fall by the wayside if they don't ultimately serve consumers. While firms cannot "threaten" competition, they can indeed "threaten" competitors by being better at pleasing consumers. Bureaucrats, who are not market participants risking their own wealth, can only pretend to know what is best from their perch in the government, which, let's remember, is a monopoly. As George Mason University Donald Boudreaux advised, if Khan has such keen insight into market shortcomings, she should become an entrepreneur. She'll make a fortune and actually help society.

(See D. T. Armentano's classic, Antitrust and Monopoly: Anatomy of a Policy Failure and other material here and here.)

TGIF: Democracy as Religion

During a conversation with someone who loves representative democracy but hates America's current political situation, I pointed out a problem with his view. The current situation, I said, is a product of representative democracy. So you can't have the system without the lamented consequences.

Why is that? People like free benefits for themselves and society, and politicians prosper by promising and delivering apparently free benefits to enough voters. Individuals and interest groups see the government as a bazaar open for business 24/7.

The problem, of course, is that there are no free benefits. The government, which does not produce anything, can't give away anything it hasn't first taken from someone else. The system's inherent perverse incentives deliver big spending, high taxes, and growing budget deficits (when raising taxes is unfeasible) financed through massive borrowing. This process eventually leads to central-bank monetary inflation, rising prices, and shrinking purchasing power. The transfer of purchasing power from regular people to politicians is a form of taxation.

I proposed to my interlocutor that a better way to go would be to move the government's few legitimate functions to the free, competitive market, which aligns incentives more consistently with individual rights and general prosperity. The government's illegitimate functions should be abolished.

He mocked my position by holding his hand in the praying position and looking toward heaven as he said, "If only we all believe." I responded that it's no article of faith that freedom and free markets—classical liberalism—have eradicated most extreme poverty and created unmatched living standards worldwide. You can easily look up the graphs that show this astounding progress. The still-lagging areas lack freedom.

For roughly 200,000 years human beings lived short lives with virtually no material progress. Then a few hundred years ago things changed dramatically thanks to liberalism, the Enlightenment, and the Industrial Revolution. That was no coincidence, and understanding what economic historian Deirdre McCloskey calls the "Great Enrichment" requires no faith.

I could have said much more to my interlocutor, and I'll say it here.

First, classical liberalism, or what we moderns call libertarianism, is not mainly about believing; it's about respecting each individual's person, property, and liberty, and particularly about the government's respecting those things. It's also about understanding that freedom leads to social cooperation (the division of labor and trade), peace, and prosperity. Economic theory and history show it.

Second, it's democracy, not freedom, that requires faith in the absence of evidence. It's a religion that holds that If we believe hard enough, tens of millions of us going to the temple polls to vote will make the right decisions. No one explains why it should work out that way. And it doesn't. It's a faith in magic, and magic is not real.

There is a glitch in the democratic religion: most voters are ignorant. Poll after poll shows that most people know little about the government and the economic process, which the government regulates. They are not only ignorant of basic economic theory, which the evaluation of candidates requires; they are also ignorant of basic indisputable political facts, such as who their so-called representatives are, how they vote, which party controls the Senate and House, and how much the government spends and borrows. How can they vote wisely? (For more on voter ignorance, check out the many YouTube appearances of George Mason Law Professor Ilya Somin and his book Democracy and Political Ignorance: Why Smaller Government Is Smarter, 2d ed.)

People shouldn't be faulted for not knowing these things because they have an incentive not to spend time and money learning; their time and money could be better spent. Better spent than on becoming an educated voter? Yes. How so? Because anything else they did would have a better chance of making a difference.

Am I saying that voting does not make a difference? Yes. In almost any election, one vote contributes nothing to the outcome. Ilya Somin says that one vote for president, on average across the states, has one chance in 60 million of determining the outcome. The chance is larger in House, Senate, and other races but not enough to make make a difference. People vote for many reasons, but one reason not to vote is a determination to decide the result. Voters understand this. With no incentive to learn what's important, they vote for what makes them feel good and against what makes them feel bad. The result is the mess we're in today.

The political realm differs from the voluntary sector because politics separates choice from costs and benefits. In the voluntary sector, when you choose a dozen eggs, you get a dozen eggs: you pay the price, and you enjoy the benefits. Not so in politics. Choosing Candidate A  doesn't mean you get Candidate A; that depends on a lot of other people. And even if Candidate A wins, you will reap only a minuscule fraction of the benefits (if there are any) and pay only a minuscule fraction of the costs. The bulk of the costs and benefits will fall on everyone else. Under those circumstances, most voters will pay no price for voting according to their biases, so that's what they will do.

What hope is there if ignorant people choose the country's rulers? The informed among us might stop having rulers, but they won't let us opt out. Somin calls for shrinking and decentralizing power. Good idea. But how?

 

TGIF: Damn Consumers!

Global free trade is about individual, not national, freedom—for consumers and producers who import raw materials, tools, and semi-finished products.

Aside from its role as an aspect of personal liberty, free trade's efficiency benefits have been well-established since the early 19th century. In this respect, domestic and global trade are the same. Trade restrictions disrupt the productive process, making it less efficient and hence less beneficial to consumers. "All that a tariff can achieve," Ludwig von Mises wrote in Human Action, "is to divert production from those locations in which the output per unit of input is higher to locations in which it is lower. It does not increase production; it curtails it." But people's interests are in expanded, not curtailed, production.

Unfortunately, free trade does not enjoy wide support today. Both major parties oppose it. They don't even pay lip service to it. They think buyers, especially consumers, buy the wrong things from the wrong people. Consumers are an unruly and capricious bunch. They prefer less-expensive, high-quality foreign-made products over more-expensive, lower-quality American-made products. What's overlooked is that they also upset American businesses and workers for reasons other than foreign competition, such as innovation and changing tastes. Also overlooked is that if we can get a better deal from abroad, American labor and resources are freed up for other things.

Government policy favors producers (including workers) over consumers and intermediate buyers. This is idiotic since, as Adam Smith pointed out: "Consumption is the sole end and purpose of all production." This doesn't mean that the government should favor consumers. It means laissez faire.

No one has argued for the wisdom of unfettered international exchange than Henry George. In his 1886 book, Protection or Free Trade, George wrote: "Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do."

This runs contrary to the view of the two major parties, which believe that individual liberty should be tolerated only if it conforms to the "national interest" as they define it.

George added:

If Americans did not want to buy foreign goods, foreign goods could not be sold here even if there were no tariff. The efficient cause of the trade which our tariff aims to prevent is the desire of Americans to buy foreign goods, not the desire of foreign producers to sell them…. It is not from foreigners that protection preserves and defends us; it is from ourselves. [Emphasis added.]

Then comes the killer line: "What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war." 

How does the protectionist respond to that? Any response would repudiate Adam Smith's wisdom. The major point of The Wealth of Nations is that well-being consists not of piles of gold in government vaults but rather of access to goods. Biden, Trump, and the anti-economists they rely on want you to forget that.

A tariff is a tax. But unlike other taxes, the aim is not to raise revenue. The purpose of a protective tariff is to raise prices and limit choice in the domestic market. That's supposed to punish the foreigner and help domestic competitors, but it's an odd way to do it because many other Americans are harmed. Even the intended beneficiaries are harmed. Many imports are not consumer products. They are inputs that American manufacturers need to make consumer products. The tariff raises producers' costs, drives marginal firms out of business, disemploys workers, and degrades the surviving firms' competitiveness internationally. Even the workers in protected industries then face higher consumer prices, offsetting the benefits they expected from the tariff.

As the British free traders used to say: incomes buy more under free trade. That means incomes buy less under protectionism.

Protectionism squanders scarce resources, restricts individual freedom, and hampers the pursuit of happiness. "This is the crux of the matter," Mises wrote. "All the subtlety and hair-splitting wasted in the effort to invalidate this fundamental thesis are vain."

Restricting Production

"At the bottom of the interventionist argument there is always the idea that the government or the state is an entity outside and above the social process of production, that it owns something which is not derived from taxing its subjects, and that it can spend this mythical something for definite purposes. This is the Santa Claus fable raised by Lord Keynes to the dignity of an economic doctrine and enthusiastically endorsed by all those who expect personal advantage from government spending. As against these popular fallacies there is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens’ spending and investment to the full extent of its quantity.

"While government has no power to make people more prosperous by interference with business, it certainly does have the power to make them less satisfied by restriction of production."

Ludwig von Mises, Human Action

"Capitalism" Is about Freedom, Not Capital

 "Why 'capitalism'? Words have an unfortunate tendency to confuse. Free market capitalism is not really about capital, it is about handing control of the economy from the top to billions of independent consumers, entrepreneurs and workers, and allowing them to make their own decisions about what they think will improve their lives. So careless talk about 'taking control of capitalism' actually means that governments take control of citizens.

"But it doesn't sound like it, does it? One of my intellectual heroes, Deirdre McCloskey, complains that the word capitalism gives the misleading impression that it is about the rule of capital, rather than liberating people to make their own economic decisions, which is really what the free market is about: 'Capitalism' is a scientific mistake compressed into a single word, a dramatically misleading coinage by our enemies, and still used by the sadly misled among out friends.' So why do I use it? Because, no matter what we think of it, and no matter which word we would prefer for a system of private property and free markets, this is the word that has become inextricably linked to it, and if its supporters don't fill that word with meaning, its opponents will."

--Johan Norberg, The Capitalist Manifesto, 2023

TGIF: The Populist Trap

If you care about individual freedom and general prosperity, you'll want to avoid all shades of populism like the plague. It is economic illiteracy proudly proclaimed and writ large. As an alternative to libertarianism, it is bad in its own right—freedom is not on its agenda—but it is bad also because it is wedded to nationalism. That is, it treats the nation-state—not individuals and their projects—as the fundamental unit. It's ours against theirs. Disregard the hosannas to persons, families, and local communities. It's the nation that matters. 

Don't believe me? Then why do populists always want to interfere with people's right to trade as they wish regardless of borders? Never mind that protectionism holds the seeds of economic and military conflict and that unmanaged global trade is global cooperation.

I'm tempted to say that basically, the populist believes that scarcity is a capitalist plot. (There's some unwitting vulgar Marxism in that.) Populism presents itself as the politics of grievance: "working people" are fed up with an elite conspiracy of elected officials, bureaucrats, and "corporate" cronies who enrich themselves at the expense of ordinary people.

Bailouts and subsidies give the grievance some credence, but it's exaggerated. The unnamed culprit is market dynamism—or freedom. Entrepreneurship, innovation, and consumer sovereignty bring change in the demand for goods, which understandably makes people nervous. The bias favors the status quo. Blacksmiths and assembly-line workers are no longer wanted.

Anyway, since coercive government power is the only way to grab privileges at other people's expense, power itself should be—but never is—the villain. Greedy "Big Business" is the target. No distinction is made between bigness achieved through successful service to consumers and bigness achieved through anticompetitive government interference with market relations.

What is the populists' alternative? They say they want a government that serves working people. Never mind that people produce to consume, not vice versa. How do they intend to get the government and economy they want? Through democracy, though they ignore the elitism inherent in any political system. Politicians in a democratic republic need to cobble together majorities to get elected and reelected, but when in office they have elbow room to set the agenda for the one-size-fits-all program that they decide best serves the people's needs. Since people don't understand economics and are biased against markets and foreigners, the program brings tariffs (which hurt American consumers and workers by raising prices and provoking retaliation), bailouts, and deficit spending financed through the hidden inflation tax. Fiscal restraint is not a priority. Every penny of the budget has a constituency behind it.

We find populist agitation within what is misleadingly called the "right-wing" and "left-wing." On the left, the populists try to counterbalance inane identity politics, which in their view has pushed class politics off the agenda. They seem not to realize that class politics is an earlier form of identity politics; it holds, wrongly, that an inherent and irreconcilable conflict exists between haves and have-nots, between employers and employees, that can only be rectified by making the state more powerful than it is today. Never mind that mass production must come before mass consumption, and markets have wiped out much poverty worldwide. The headline-rich "inequality" red herring will keep everyone distracted.

When a Republican populist (say, J. D. Vance) hears the term economic freedom, he is likely to envision unilateral scope for the sovereign state: specifically, a strong leader who wields tariffs, trade quotas, sanctions, antitrust prosecution (which protects inferior competitors, not consumers), and more in his crusade to strengthen the "U.S. economy" by increasing exports (by muscle if necessary), blocking imports, saving or restoring "American jobs," and punishing businesses that provide superior consumer service. What he doesn't envision is free individuals trading goods, services, and labor with whomever they want, including new immigrants who seek a better life without government permission.

The populist can't tolerate individual freedom because, in his view, that would be chaos. He rejects consumer sovereignty, so he goes with the only thing left: the state. He has yet to learn what has been known at least since the Scottish Enlightenment of the late 1700s: that the best kind of social order is spontaneous order, the order that results from free, cooperative, commercial human interaction, not central planning or industrial policy.

The populists, "left" and "right" point to people's economic hardship, but it never occurs to them that government intervention, of which there is no shortage, could be at fault. Are housing prices too high? They blame immigrants (who improve our lives along with their own), not the myriad government building restrictions. Are supermarket prices rising? Blame corporate greed and ignore the money-creating Federal Reserve. This blindness to government intervention is on display with every issue. The populists never see the straitjacketed markets, only too little democracy. But democracy can't get us out of the mess it's got us into. Virtually everything the government does affects market relations. Yet voters know nothing about economics. They don't even know that prices fall when supply rises.

The populists find industrial policy more to their liking than freedom. That's central planning—economic and social engineering, "picking winners"—without nationalization. It's subtle socialism, and it has the same flaws. No one can know enough to plan the economic interactions of billions of people. Anyone delusional enough to think he and some "experts" could manage that task should be laughed off the stage. Aside from the knowledge problem, the incentive problem will always plague us. We know what Lord Acton said about how power corrupts. But power also attracts the already corrupted.

But aren't the populists at least antiwar? Sometimes. They tend to oppose U.S. participation in the Ukraine-Russia war—now. But they can't be relied on. They tend to favor arming Israel in its Gaza onslaught. As nationalists, they always present a potential for conflict, these days with China and Iran. We saw that in Trump's term as president. He cannot be counted on to dismantle the trip-wire alliance system, and he's enthusiastic about the de facto alliances with Israel and Saudi Arabia. Think of the arms sales! That's good for American workers, right?

Let's not forget the link between border security, which populists demand, and the drug war, which they also love. That link offers populist leaders many opportunities for bloody intervention south of the border. One more thing we can be sure of: the populists do not see global trade as a peace-maker, or trade restrictions as a source of conflict. Globalization, even without a government role, is a dirty word. I see no reason for comfort here.

Even when the populists oppose wars (did Trump oppose any?), it is not so that the taxpayers can keep their money and spend it as they like. No, the populists stand with progressives: they want to transfer the money from the Pentagon and CIA to domestic departments. Details may differ, but that's all.

The best reason to oppose war and the preparation for it, aside from the obvious one, is that they require a bloated, intrusive government, battalions of bumbling bureaucrats, and the diversion of scarce resources from consumers to military contractors. Populists just want to redistribute the bloat.

It may be that the "right-wing" populist leaders are phonies and don't mean what they say. Some in the "left-wing" tribe say that about Trump and his running mate, Vance. Maybe that's true. But if they are liars who stand for something else, we can be certain they don't stand for shrinking the state and expanding individual liberty. That's not on the menu these days.

Tariffs Violate Freedom

Debate goes on over who suffers from U.S. tariffs. Biden and Trump, for example, think U.S. tariffs on Chinese goods hurt China, not Americans. This is nonsense. Even if they hurt Chinese producers (who can sell their goods elsewhere), the tariffs still hurt Americans. Whatever the Chinese do, prices in America for the relevant consumer and producer goods, imported and domestic, will rise—that's the point of the tariff—and choice will shrink. Here's what Henry George had to say in Protection or Free Trade:

If Americans did not want to buy foreign goods, foreign goods could not be sold here even if there were no tariff. The efficient cause of the trade which our tariff aims to prevent is the desire of Americans to buy foreign goods, not the desire of foreign producers to sell them.... It is not from foreigners that protection preserves and defends us; it is from ourselves.

He also wrote:

Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war. [Emphasis added.]

 

TGIF: Culture without Romance

"The entire history of the human race, the rise of man from the caves, has been marked by transfers of cultural advances from one group to another and from one civilization to another."

So said economist, social philosopher, and historian Thomas Sowell in a 1990 speech titled "Cultural Diversity." (Watch it here. I also recommend this lecture by Nigel Biggar.) By cultural diversity Sowell did not mean the still-fashionable sense of that term. He has in mind what might be called culture without romance, echoing James Buchanan and the Public Choice school's economics without romance. What does Sowell mean?

Paper and printing, for example, are today vital parts of Western civilization–but they originated in China, centuries before they made their way to Europe. So did the magnetic compass, which made possible the great ages of exploration that put the Western Hemisphere in touch with the rest of mankind. Mathematical concepts likewise migrated from one culture to another: Trigonometry from ancient Egypt and the whole numbering system now used throughout the world originated among the Hindus of India, though Europeans called this system Arabic numerals because it was the Arabs who were the intermediaries through which these numbers reached medieval Europe. Indeed, much of the philosophy of ancient Greece first reached Western Europe in Arabic translations, which were then re-translated into Latin or into the vernacular languages of the West Europeans.

That shines a different light on how many people think of Western culture. It is something that the cultural anti-immigrationists seem completely ignorant of. Setting out to protect from change a culture that is a product of centuries of unplanned and spontaneous cultural imports seems strange indeed.

Sowell's point is also a blow to the woke warriors. In light of what he's saying, we have no choice but to pronounce the purported crime of cultural appropriation pernicious nonsense. As someone said, the history of man is a history not of cultural appropriation but rather of cultural appreciation. Thank goodness for that.

"Much that became part of the culture of Western civilization," Sowell continued, "originated outside that civilization, often in the Middle East or Asia." (Emphasis added.) Imagine that!

The game of chess came from India, gunpowder from China, and various mathematical concepts from the Islamic world, for example. The conquest of Spain by Moslems in the eighth century, A.D., made Spain a center for the diffusion into Western Europe of the more advanced knowledge of the Mediterranean world and of the Orient in astronomy, medicine, optics, and geometry. The later rise of Western Europe to world pre-eminence in science and technology built upon these foundations, and then the science and technology of European civilization began to spread around the world, not only to European offshoot societies such as the United States or Australia, but also to non-European cultures, of which Japan is perhaps the most striking example.

Sowell then drew an inference that today gets him in trouble with some people: "The historic sharing of cultural advances, until they became the common inheritance of the human race, implied much more than cultural diversity. It implied that some cultural features were not only different from others but better than others." (Emphasis in original.)

Better? Oh my! Are you allowed to say that? Won't that hurt some people's feelings, especially those of some prominent well-paid Western intellectuals? Sowell then showed what a good praxeologist he is by employing the tools of purposeful human action:

The very fact that people—all people, whether Europeans, Africans, Asians, or others—have repeatedly chosen to abandon some feature of their own culture, in order to replace it with something from another culture, implies that the replacement served their purposes more effectively...."

Example: "Arabic numerals are not simply different from Roman numerals; they are better than Roman numerals." How can we know this?

This is shown by their replacing Roman numerals in many countries whose own cultures derived from Rome, as well as in other countries whose respective numbering systems were likewise superseded by so-called Arabic numerals.

It is virtually inconceivable today that the distances in astronomy or the complexities of higher mathematics should be expressed in Roman numerals. Merely to express the year of American independence–MDCCLXXVI–requires more than twice as many Roman numerals as Arabic numerals. Moreover, Roman numerals offer more opportunities for errors, as the same digit may be either added or subtracted, depending on its place in the sequence. Roman numerals are good for numbering kings or Super Bowls but they cannot match the efficiency of Arabic numerals in most mathematical operations—and that is, after all, why we have numbers at all.

But doesn't "our" culture—out of respect for our ancestors—deserve preservation by the state? Tradition! Sowell isn't buying it.

Cultural features do not exist merely as badges of “identity,” to which we have some emotional attachment. They exist to meet the necessities and forward the purposes of human life. When they are surpassed by features of other cultures, they tend to fall by the wayside, or to survive only as marginal curiosities, like Roman numerals today. [Emphasis added.]

He elaborates:

Cultures exist so that people can know how to get food and put a roof over their head, how to cure the sick, how to cope with the death of loved ones, and how to get along with the living. Cultures are not bumper stickers. They are living, changing ways of doing all the things that have to be done in life. [Emphasis added.]

It's common sense: "Every culture discards over time the things which no longer do the job or which don’t do the job as well as things borrowed from other cultures. Each individual does this, consciously or not, on a day to day basis." (Emphasis added.)

Languages take words from other languages, so that Spanish as spoken in Spain includes words taken from Arabic, and Spanish as spoken in Argentina has Italian words taken from the large Italian immigrant population there. People eat Kentucky Fried Chicken in Singapore and stay in Hilton hotels in Cairo.

But in 1990, like today, "This is not what some of the advocates of 'diversity' have in mind."

They seem to want to preserve cultures in their purity, almost like butterflies preserved in amber. Decisions about change, if any, seem to be regarded as collective decisions, political decisions. But that is not how any cultures have arrived where they are. Individuals have decided for themselves how much of the old they wished to retain, how much of the new they found useful in their own lives. In this way, cultures have enriched each other in all the great civilizations of the worlds.

De-romanticizing culture could be a big step toward junking illiberal and demoralizing identity politics and so-called social justice.

TGIF: On the Pursuit of Happiness

The most remarkable phrase in the Declaration of Independence, whose anniversary we just celebrated, is the pursuit of happiness. Looking back 248 years, that phrase may strike the modern ear as strange for a political document. But it apparently did not seem that way to Americans in 1776. The second paragraph told the world:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

The term among these indicates that Thomas Jefferson and the Second Continental Congress did not think that life, liberty, and the pursuit of happiness were our only unalienable rights. But the pursuit of happiness made the brief enumeration, which speaks volumes.

The first thing to note is that Jefferson did not write that we had a right to happiness, but only the right to pursue it. Legal scholar and historian Carli N. Conklin of the University of Missouri School of Law states in "The Origin of the Pursuit of Happiness":

[T]he pursuit of happiness is not a legal guarantee that one will obtain happiness, even when happiness is defined within its eighteenth-century context. It is instead, an articulation of the idea that as humans we were created to live, at liberty, with the unalienable right to engage in the pursuit.

Through historical investigation, Conklin shows that contrary to common belief, the phrase was no "glittering generality" (in Carl Becker's phrase) back them but rather was a term of substance.

I trust no one will take seriously that the omission of property from the list of examples means that Jefferson et al. thought property unimportant. Of course, it did not mean that. We know that the people behind the Declaration understood the deep importance of private property to life, liberty, and the pursuit of happiness. A possible reason for not listing it is that property was often used differently from the way we use it today. While we say, "That's my property," an 18th-century person might say, "I have a property in that," although today's usage was hardly unknown back then. James Madison, who was not a member of the Continental Congress but who had a lot of say about property, used the word both ways. However, here are examples of what he called "the larger and juster meaning" of the word:

[A] man has a property in his opinions and the free communication of them. [Emphasis added.]

He has a property of peculiar value in his religious opinions, and in the profession and practice dictated by them.

He has a property very dear to him in the safety and liberty of his person.

He has an equal property in the free use of his faculties and free choice of the objects on which to employ them. [Emphasis added.]

In a word, as a man is said to have a right to his property, he may be equally said to have a property in his rights.

It's widely known that Jefferson and other founders were deeply influenced by John Locke, the 17th-century philosopher who did so much intellectually to usher in the age of liberalism. Locke, who himself was inspired by the ancient Greek philosophers' focus on happiness, or eudaimonia, invoked the pursuit of happiness. Already, the term had a long and esteemed pedigree.  (Jefferson was also influenced directly by the Greeks. He wrote in a letter, "I too am an Epicurean.") Locke's Essay Concerning Human Understanding (1690; Book II, chapter XXI, section 52) says this: 

As therefore the highest perfection of intellectual nature lies in a careful and constant pursuit of true and solid happiness; so the care of ourselves, that we mistake not imaginary for real happiness, is the necessary foundation of our liberty. The stronger ties we have to an unalterable pursuit of happiness in general, which is our greatest good, and which, as such, our desires always follow, the more are we free from any necessary determination of our will to any particular action, and from a necessary compliance with our desire, set upon any particular, and then appearing preferable good, till we have duly examined, whether it has a tendency to, or be inconsistent with our real happiness: and therefore till we are as much informed upon this inquiry, as the weight of the matter, and the nature of the case demands; we are, by the necessity of preferring and pursuing true happiness as our greatest good, obliged to suspend the satisfaction of our desires in particular cases.

But a puzzle arises. In his influential Two Treatises of Government, Locke referred to "life, liberty, and estate," that is, property, and not the pursuit of happiness. Why Jefferson, without a challenge, switched to "the pursuit of happiness" has been much discussed by scholars over the years. I am certainly not qualified to render a verdict. On why Jefferson made the switch, Carli Conklin writes,

The most persistent explanation offered is that Jefferson was
uncomfortable enough with slavery to want to avoid perpetuating a
property ownership in slaves by including an unalienable right to property in the Declaration.

If that is so, we might wonder if Jefferson's immortal phrase all men are created equal was his way of assuring the future demise of slavery. He had included a condemnation of slavery in the Declaration but had to remove it to make the Declaration acceptable to the Southern colonies. We also can see from his Notes on the State of Virginia that he knew slavery was wrong: "I tremble for my country when I reflect that God is just: that his justice cannot sleep for ever."

Finally, we surely can chalk up a point for Ayn Rand, the novelist/philosopher who made the rational pursuit of happiness—self-interest—the foundation of her Objectivist ethics and politics. She has been a lone voice in this endeavor. People who find the free market repugnant—and most who do not—never tire of equating self-interest with "selfishness," that ugly-sounding word that Rand herself used in a book title just for its shock value. The equation, however, is invidious. It suggests that other people necessarily are impediments to one's happiness and thus one should sacrifice one's happiness at least to some extent. But why would anyone believe that "selfishness"—making the most of one's life by holding it as one's ultimate value—entails the disvaluing of other people? It's crazy on its face. Rand, like the ancient Greeks, understood that he who cares about only himself demonstrates that he doesn't care enough.

A belated Happy Fourth of July!