TGIF: Immigration vs. Settler Colonialism

The people performing those mind-boggling contortions to justify, on libertarian grounds, state violence against migrants without papers—restrictatarians, I call them—cite a 1994 article by Murray Rothbard (1926-1995) in support of their double-jointed acrobatics. Rothbard was correct about many things, but a position is not correct merely because Rothbard held it. I expect no disagreement over that.

As a general matter, Rothbard's importance to the shaping of the modern libertarian movement needs no documentation. He was accomplished in economics, social theory, and history. In his time, he was known as Mr. Libertarian, the guardian of the plumb line. (He was also my friend and, informally, my teacher.) His words carry much weight for people who love liberty. It's therefore appropriate to show why, in this case, in 1994, Rothbard was stunningly wrong about immigration, or the freedom to move.

TGIF: Damn Those Innovators!

The problem of survival is never "solved," once and for all, with no further thought or motion required. More precisely, the problem of survival is solved, by recognizing that survival demands constant growth and creativeness....

Capitalism, by its nature, entails a constant process of motion, growth and progress. It creates the optimum social conditions for man to respond to the challenges of nature in such a way as to best further his life. It operates to the benefit of all those who choose to be active in the production process, whatever their level of ability. But it is not geared to the demands of stagnation. Neither is reality.

—Nathaniel Branden, "The Divine Right of Stagnation"

Our lives are improved in all sorts of ways by courageous, risk-bearing entrepreneurs, who seek to change the world at a profit. For that reason alone, we should jealously safeguard an environment friendly to entrepreneurship. As the economic historian Deirdre McCloskey has shown through indefatigable research, when society is marred by envy of the richer and highly successful, we all suffer. Widespread prosperity soars, McCloskey demonstrates, when a culture in effect erects huge neon signs brightly flashing the message, "You think you have a great idea? Well, give it a go!"

That is not how people have felt through most of history. Envy that bred a fear of pioneers smothered innovation. Thomas Sowell has documented the horrors, including massacres, inflicted on "middleman minorities," such as Jews in Europe, Chinese in Southeast Asia, and Indians and Lebanese in Africa. The economically illiterate masses could not understand why middlemen got rich "doing nothing," never asking themselves why they nevertheless availed themselves of those allegedly unproductive services. That the relatively rich middlemen were usually different ethnically from the majority population made persecuting them with a clear conscience all the easier.

The point is that our lives, health, and comfort depend on innovators and entrepreneurs, and that they need freedom and security of life and property if they are to render their services. I don't think people fully understand that, even today.

TGIF: The Right to Move

If people individually own themselves and have a right to be free of aggressive force, then they have a right to change their location in ways consistent with other people's rights. Whether you call this moving around relocating, emigrating, or immigrating, doesn't much matter. The default position is that each individual may rightfully move to somewhere else permanently or temporarily.

Inside the United States, nobody questions this. People freely move from state to state, etc., sometimes temporarily, sometimes permanently. They need no one's permission.

Why should things be different when we talk about countries rather than smaller jurisdictions and when the individuals who do the moving are not recognized as citizens of the destination country? An opponent of the freedom to move might begin by rejecting self-ownership and nonaggression, so the argument with him would take place at that basic level. But what if the opponent of the freedom to move espouses support for self-ownership and nonaggression? That's a different kettle of fish.

TGIF: Inept Con Man in the White House

Trump is hardly the first con man in the White House, but he is by far the most flagrant, and his scale is gargantuan. He's also rather inept. His latest confession came in a recent message to Norway's Prime Minister Jonas Gahr Store:

Considering your Country decided not to give me the Nobel Peace Prize for having stopped 8 Wars PLUS, I no longer feel an obligation to think purely of Peace, although it will always be predominant, but can now think about what is good and proper for the United States of America.

I've italicized confession. Here is Trump admitting that, in his quest for the Nobel Peace Prize, he prioritized something over "what is good and proper for the United States of America." In year two of his second term, that will change, he warns.

What did he put ahead of America's interest? Peace. There's another confession.

You hear that, MAGA? You got that, America Firsters? Your Dear Leader acknowledges that he has not been an America Firster at all, but a Nobel Peace Prize for Trump Firster. His goal wasn't to Make America Great Again, but to make his White House or Mar-a-Lago mantelpiece great.

Alas, the Nobel committee gave the prize to Venezuela's opposition leader, Maria Corina Machado, a deserving recipient. Having lost the prize, presumably out of Norwegian spite, Trump has now reduced the cause of peace to merely one of several concerns.

So much is wrong with what Trump wrote to Store. First, Trump has not been thinking "purely of peace" since Jan. 20, 2025—far from it. He's aided and abetted Israel in its savage battering of the people of the Gaza Strip. His touted ceasefire, which Israel has violated over a thousand times, is a farce. He, along with Israel, attacked Iran while pretending to negotiate with its diplomats. His conduct regarding Russia's war against Ukraine hardly speaks of a person who thinks purely of peace. He invaded Venezuela and kidnapped Maduro. He has bombed boats and executed their crews in the Caribbean. He's bombed Somalia repeatedly, along with several other countries, including Syria. I'm sure I've missed some things.

Don't get me wrong. Trump does not lie. Lying implies one knows the truth and says something else. In contrast, he seems sincerely to believe, or hope, that what he says will shape reality. How can you be lying if your words create the facts? He's the ultimate primacy-of-consciousness subjectivist. As I observed in Trump's first term, the only way to shut him up is to inject him with sodium pentathol, i.e., truth serum.

One may wonder why Trump complained to the Norwegian prime minister. He doesn't pick the Peace Prize winner. Greenland, over which Trump had threatened tariffs against Western Europe, is a territory of Denmark, not Norway (as Trump acknowledged further on). And what does Greenland have to do with the Nobel Peace Prize? At any rate, not winning the prize hardly justified Trump's damaging tantrum, after which he claimed he did not care about the prize, classic sour grapes. Isn't it time he grew up?

Notwithstanding his embarrassing bluster at Davos over Greenland—which he several times called Iceland; could he have meant Graceland?—Trump (for now) has backed down. Europe and the stock market pushed back, and Trump again caved. He says he won't use force. He's cancelled the tariffs, and he claims, vaguely, that he and NATO have worked out a "framework of a future deal" for Arctic security. The top man at NATO says the sovereignty of Greenland, which Trump had insisted was absolutely necessary, was no part of the post-speech discussions.

In other words, Trump antagonized friendly nations and shook the world economy—then settled for the status quo. An open-ended security arrangement with NATO and Denmark has existed in treaty form since 1951! Did no one tell Trump? It must have been a blow to his ego. If he thinks he's saved face, he's pathetically mistaken. He looks like a damned fool, and everybody knows it.

Trump's monomaniacal quest for adoration and gratitude is so warped that he seems oblivious to the harm he does. Noninterventionist libertarians have opposed U.S. membership in NATO since its founding in 1949 because a strictly limited government would not obligate its taxpayers or military to defend other countries. Preparation for war is the health of the state. It's also provocative. So the U.S. should leave NATO. However, gracefully leaving an alliance and nihilistically smashing it on the way out are two different things. While Trump clearly has no intention of leaving NATO, he seems intent on wreaking havoc anyway.

In his first inaugural address, Thomas Jefferson cautioned against "entangling alliances." That was good advice. But Trump is showing that things could be worse than the current alliance system. Presidential pugnacity toward people who bear us no ill will is bad for them and us. Jefferson also called for "peace, commerce, and honest friendship with all nations." Trump must have missed part.

TGIF: Trump Weighs in on Netflix, WBD, and CNN

The proposed merger of Netflix and Warner Bros. Discovery (WBD) "could be a problem," Donald Trump says, because Netflix has "a very big market share. When they have Warner Bros., that share goes up a lot." He said he would consult "some economists" on the matter, adding, "I’ll be involved in that decision, too."

He went on to say that CNN, which is owned by WBD but is not part of Netflix's offer, should be included in any deal because the cable-news channel's management must be ousted: "I don't think they should be entrusted with running CNN any longer." He also said the "dishonest [people who run CNN] should not be allowed to continue." (Emphasis added.)

I'm tired of the Trump Show. Can we change the channel now? Is there anything else on—something more friendly to free enterprise?

TGIF: Defending Israeli Mass Murder Isn't Easy

Although much has already been said, I can't not comment on Sarah Hurwitz, the former Hillary Clinton and Barack Obama speechwriter, who faults young people (especially young Jews) for applying their power of abstraction in thinking about the Holocaust.

What do I mean by that? Hurwitz thinks (or says she does) that the TikTok generation makes a big mistake by drawing general lessons from the National Socialist regime's mass murder of European Jews last century. She is dismayed that young people have concluded that powerful bad people, no matter who they are, should not harm weak people, no matter who they are.

So what's the problem? According to Hurwitz, they were supposed to learn that killing weak people of a particular ethnicity or religion is horrible only when the victims are Jewish. Moreover, they should have learned that Jews by definition can never constitute the oppressor. Therefore, TikTok'ers are wrong to think of the Holocaust when they see videos of powerful Israeli soldiers harming weak Palestinians in Gaza. Or so Hurwitz believes. See for yourself. (By the way, Ms. Hurwitz, in both cases, the mass murderers did not only harm weak, emaciated victims; they made them weak and emaciated in the first place.)

All this perplexes Hurwitz and others in the American pro-Israel constituency. Young people have drawn broad rather than narrow lessons—and she equates that with antisemitism. Of course, this is buncumbe. Abstracting—drawing generalizations—from real events is a virtue, not a vice. It is quintessentially human. Ayn Rand disparaged persons who refuse to abstract as "concrete-bound." We think in concepts, and we wouldn't be able to do much thinking without them. Concepts are abstractions. We observe reality, note differences and similarities among entities, and integrate similar things into a conceptual hierarchy (for instance, chairs, furniture, manmade things). This facilitates efficient thinking by economizing on mental units. (Rand explained all this.)

Of course, we can make mistakes. We can misclassify things. We're not infallible, which is why logic and reason are indispensable guides. If Hurwitz thinks that certain generalizations drawn from the Holocaust are fallacious, let her argue for her opposing position. However, she can't get away with the libel of attributing those generalizations to  "people who don't really love Jews." For one thing, many Jews have drawn those generalizations. At demonstrations protesting Israel's destruction of life and property in Gaza, Jewish participants have held signs reading, "Never Again Is Now." Hurwitz thinks that "Never Again" means only that Jews should not be persecuted or exterminated. Apparently, she also believes that if officials and military forces of the Jewish state seem to be committing those crimes, it can't really be so, no matter how it looks. "Who you gonna believe, me or your own eyes?" said Chico Marx.

Only an idiot or a demagogue could draw those conclusions. (I've drawn an additional lesson.)

Hurwitz might have made a stronger—though not valid—argument. She might have said that young people don't know the full story of Gaza because their generation is post-literate and video-oriented. All they know is what they see on TikTok: nonstop images, day in and day out, of Israeli military violence against helpless Palestinians. She does not challenge the authenticity of the videos, but she is frustrated that her pro-Israel arguments stand no chance against those images. (Hillary Clinton—she still shows her face?—shares the same concern.) As Hurwitz put it, "I'm talking through a wall of dead children." Yes, she is.

However, Hurwitz overlooks the fact that many videos from Gaza have been posted by Israeli soldiers—on TikTok—with audio sadistically celebrating their violence. Young viewers may not read, but I'm sure they hear.

Let's concede that an image may not tell the whole story. If you saw a man taking a watch from another man, you would not know by that scene alone whether you were witnessing a robbery or the recovery of stolen property. But that's not what we have with Israel and Gaza. The images of Israeli violence have not only been graphic, but they have poured out in an unending stream since Oct. 7, 2023. Gaza looks like August 1945 Hiroshima. Many tens of thousands of children and old people, as well as other noncombatants, have been killed, maimed, starved, and traumatized. Medical facilities have been destroyed, making the treatment of survivors and other sick Gazans virtually impossible.

Viewers of this material will properly ask, "What could justify such total violence over such a long period?" Viewers may also have heard that many international authorities on genocide and Holocaust studies, including Israelis, believe that Israel is committing genocide as the law defines it. (See this from Omar Bartov and this from Raz Segal.) The burden falls on Hurwitz and her colleagues to do more than repeat official Israeli propaganda, but that's what they have done.

Yes, Hamas and other groups launched a brutal attack on Oct. 7, 2023, inexcusably committing atrocities against Israeli noncombatants and seizing hostages. But it is also true that Hamas, an abhorrent organization judging by its never-repudiated antisemitic charter and record of crimes, did not exist before the late 1980s, long after the wholesale dispossession, expulsion, and subjugation of the Palestinians began. Moreover, Israel encouraged the growth of Hamas, hoping it would weaken the Palestinian cause by becoming a religious rival to the leading faction, Fatah, which is secular. Later, Benjamin Netanyahu permitted Hamas to collect money, since he could use the group's presence as a reason for not allowing a Palestinian state

This history does not excuse the Oct. 7 crimes, but neither do those crimes excuse Israel's indiscriminate destruction of the people and places of Gaza.

The Europe-based Zionist movement has abused the Palestinians for more than one hundred years. Moreover, imperial Britain helped boost Zionism beginning in 1917. Nevertheless, it is a mistake to see Zionism as just another episode in a long-running story of Western imperialism, the solution to which is (presumably) worldwide de-Westernization, or "global intifada." The history of Zionism has too many distinguishing features, including the real persecution of Jews at the hands of Europeans and the real, partially carried out "Final Solution" at the hands of the National Socialists.

Moreover, Jewish supremacy (so identified by Israeli human-rights organization B'Tselem) is not held to be generally applicable. Rather, it is a political device intended to guarantee Israel's existence as a haven for Jews should virulent antisemitism arise elsewhere in the world. Thus goes the argument: in Israel (but not other places), Jews must be legally and politically privileged or else the Jewishness of the state will not be assured.

I don't mean that the Zionist program—punishing Palestinians for what Europeans did—was the correct response to the historical record, only that this episode is importantly distinguishable from other colonial episodes, despite the similarities. The critics of Zionism who target Western civilization per se are attacking a strawman. If anti-Zionism is portrayed as anti-Western, Zionism wins. On the other side, Zionists who reject universalism in favor of blood-and-soil tribalism unwittingly make common cause with antisemites, who also reject universalism in favor of blood-and-soil tribalism.

Bottom line: supporting the individual natural rights of Palestinians—who are individuals before they are members of "a people"—to live where they have lived continuously for millennia is not anti-Western. On the contrary, it is in line with the glorious and, yes, superior liberal Western Enlightenment ideal (still to be fully realized) of individual sovereignty.

(See my Coming to Palestine.)

TGIF: Socialism with a Fig Leaf

What work does democratic perform in the phrase democratic socialism? It's a fig leaf intended to conceal what would presumably be repugnant to most people: the coercive regimentation inherent in socialism, whether international (Marxist) or national (fascist).

Socialism has a nasty record dating back to 1917, so socialists have felt compelled to clean up its image. Democracy is supposed to do the cleaning up. But does it? Could it?

Before we get to that, we should remind ourselves that no single conception of socialism exists. In one version, socialism denotes central economic planning, the top-down command economy. However, other socialists envision a collection of operations governed locally and democratically by workers, perhaps with input from other so-called stakeholders. That used to be called syndicalism.

These visions do not blend readily. If each firm, factory, and farm is run by its workers, who have seized it from the creator/owner, whence the central plan?

In the market, individual productive entities do not exist in a vacuum. They buy and sell along a vertical structure of production ranging from extraction to retail. For example, a steel processor buys iron ore from a mining company and sells its products to manufacturers of producer and consumer goods. Global supply chains are so complex that no one could grasp the whole. Conditions and prices often change, requiring flexibility, foresight, intuition, improvisation—in a word, entrepreneurship. And don't get me started on transportation. Raw materials and semifinished products must move expeditiously from one place to another, often over long distances, in bad weather as well as good. Business is the original worldwide web. (See Leonard E. Read's "I, Pencil.")

Thus, coordination is indispensable if billions of people with diverse needs and tastes are to have access to the most goods at the lowest possible expenditure. The more that scarce resources are economized, the more stuff we can have. How can the coordination of diverse plans be achieved? Ludwig von Mises and F. A. Hayek, along with other sound economists, long ago demonstrated that what permits coordination is the market—that is, the price system and its institutional requirements. Prices are constantly updated guides to producer and consumer action, carrying critical, dispersed, and often unarticulated information about supply and demand. Prices are not magic. They require 1) private property in the factors of production and consumer goods, 2) markets, in which unencumbered trade of private property can take place, and 3) money, a medium of exchange, the less subject to political manipulation the better. Without these things, economic calculation, coordination (mostly with strangers), and general prosperity cannot take place.

That's how it works in a market economy, even a government-hampered one such as ours. How could this seeming miracle be accomplished under socialism, which is hostile to the market and its requirements?

A central planning board, nominally acting on behalf of society, would presumably have the power to issue orders to its personnel; everyone would be a state employee. Well, it could try, but the results would be a disaster, as history shows, because of the aforementioned coordination and knowledge problem (and incentive problem) long documented by economists and economic historians. Getting to vote for the members of the planning board, which wouldn't last long even if it began that way, could not save the system.

What about an "economy" of autonomous democratic plants, offices, and farms? We can imagine an answer. First, at the lowest level, the workers (and perhaps other stakeholders) would vote not only for their managers, but also for representatives to a council of firms at the next level up. In turn, the members of that council would vote for delegates to an ever-higher council, and so on until the pinnacle is reached, where a comprehensive plan would be promulgated and then imposed.

How could it work otherwise? If it sounds rigidly hierarchical, that's because it is. But things could hardly be expected to go smoothly. Where does the information that market prices convey come from under socialism? Moreover, even if everyone in society wants some kind of central plan, the odds of everyone wanting the same plan are precisely zero. And if everything is to be decided by majority rule—we're talking about democracy, right?—there will be no avoiding election campaigns for people and plans, campaign promises, and dubious efforts to convince voters to a point of view. In other words, there will be no escaping "the manufacture of consent," the essence of the democratic procedure, which self-styled dissidents condemn today. Ironic.

Such an arrangement has no prospect of creating or sustaining a modern industrial economy that could properly cater to billions of people worldwide.

That's the economics of the matter. The descriptor democratic before socialism, remember, is to give state regimentation a smiling face. Being able to vote within a socialist system is supposed to make all the difference. But having a mere one vote—when (at best) your whole life is to be subordinated to majority rule—is nothing compared to the sovereignty one has in the unhampered competitive market, or even in today's sea of government intervention. Mayor-elect Zohran Mamdani's signature theme of dignity through pervasive democracy is exposed as so much snake oil.

The idea that the key to dignity and liberty is voting on everything was stripped of its romance by the 19th-century Swiss/French classical liberal Benjamin Constant (1767-1830) in his must-read essay, "The Liberty of Ancients Compared with that of Moderns (1819)." His title is self-explanatory. Here's how Constant described the modern notion of liberty:

For each [person] it is the right to be subjected only to the laws, and to be neither arrested, detained, put to death or maltreated in any way by the arbitrary will of one or more individuals. It is the right of everyone to express their opinion, choose a profession and practice it, to dispose of property, and even to abuse it; to come and go without permission, and without having to account for their motives or undertakings. It is everyone’s right to associate with other individuals, either to discuss their interests, or to profess the religion which they and their associates prefer, or even simply to occupy their days or hours in a way which is most compatible with their inclinations or whims. Finally it is everyone’s right to exercise some influence on the administration of the government, either by electing all or particular officials, or through representations, petitions, demands to which the authorities are more or less compelled to pay heed.

Yes, Constant included democratic participation in his description. But note that he put it last. The rights that he lists first, if respected, would limit what the voting public, acting as the state, could do to the individual. (Keeping the system limited is the problem that has proved insurmountable. That's why the state must go.) Democratic socialism could not be expected to observe limits. How could it? It's touted as rational social engineering.

What about the ancient idea of liberty?

[It] consisted in exercising collectively, but directly, several parts of the complete sovereignty; in deliberating, in the public square, over war and peace; in forming alliances with foreign governments; in voting laws, in pronouncing judgments; in examining the accounts, the acts, the stewardship of the magistrates; in calling them to appear in front of the assembled people, in accusing, condemning or absolving them.

Constant emphasized the narrowness of the ancients’ notion of liberty: “[T]hey admitted as compatible with this collective freedom the complete subjection of the individual to the authority of the community.... All private actions were submitted to a severe surveillance. No importance was given to individual independence, neither in relation to opinions, nor to labor, nor, above all, to religion.” (Emphasis added.)

Isn't having one vote real power? Constant said no. "Lost in the multitude, the individual can almost never perceive the influence he exercises," he wrote. Can you think of one election whose outcome would have changed had you done something different on election day?

We can see that Zohran Mamdani and his fellow democratic socialists, like the conservative populists, reject liberal modernity and the individual freedom it delivered. They may style themselves "postmodernists," but in fact they are reactionaries.

(For a full discussion of democratic socialism, see Stephen Hicks's Open College podcast, episode 36, "Democratic Socialism for Beginners.")

TGIF: The Capitalist-Socialist Asymmetry

Free-marketeers have long pointed out a particular asymmetry between capitalism and socialism (whether of the international or national variety). While anyone in a capitalist society would have a right to engage in socialism (as anyone can do now in our hampered market economy), the reverse would not hold: under socialism—that is, a centrally planned economy, democratic or not—no one would be free to engage in "capitalist acts between consenting adults" (to use Robert Nozick's phrase from Anarchy, State, and Utopia). It would upset the plan.

In other words, in a fully free society, no legal barriers would prevent people from setting up communes, worker and consumer co-ops, etc., but in a socialist society, money exchanges of land, producer goods, and labor services (and perhaps even consumer goods) would be outlawed. Goodbye, entrepreneurship, free private enterprise, and economic calculation via trade-generated market prices.

That asymmetry speaks volumes, does it not? It ought to end the debate between the proponents and opponents of capitalism. Do you wish to live as a socialist with a clear conscience? Embrace the free market.

But socialists will have none of that. For them, individual choice is unimportant, if not destructive. In their view, voluntary capitalist relations are exploitative regardless of how the participants see them. So they must be forbidden. Socialist planners and their court intellectuals know better. Thus, for their own good, mere people must be controlled.

That is the height of presumptuous and arrogant elitism. The appropriate question for the socialist is that quintessential American retort: "Who asked you?"

How do the socialists know that transactions are exploitative? We can be sure that at the time of the transaction, the parties demonstrably prefer what they give up to what they receive. "No, no!" cry the socialists. One party is weaker because he must eat, work, obtain shelter, etc. What socialists refuse to acknowledge is that market relations are how we cope with a world of natural scarcity, a world in which resources—that is, natural stuff for which human ingenuity has found uses—are finite, costly to obtain, and usable in a variety of ways. (By all means, see this video from Stephen Davies and the Institute of Economic Affairs.) Scarcity is not a capitalist plot. On the contrary, the combination of the division of labor, technology, and trade is the only way to push back the constraints of scarcity. Most of today's eight billion people live much better now than one billion did in 1800.

How do the socialists know that employees are exploited? Apparently, they just do. It has something to do with the market return on goods sold being greater than the wages employees are paid. The "surplus" collected by employers is seen as stolen. That actual employees value their wages more than the effort they expend to earn them is irrelevant as far as the socialists are concerned. But again, who asked them?

Those with only a scant acquaintance with economics often find Marx's exploitation theory plausible. However, they overlook a critical factor: time. When something happens matters to us as much as what happens. Eugen von Böhm-Bawerk, the second-generation Austrian economist who delved into this matter, put the point rather nicely:

The completely just proposition that the worker is to receive the entire value of his product can be reasonably interpreted to mean either that he is to receive the full present value of his product now or that he is to get the entire future value in the future. But … the socialists interpret it to mean that the worker is to receive the entire future value of his product now.

People value present and future goods differently. Other things equal, we prefer the results of our actions sooner rather than later. Asked if you'd want a dollar today or a dollar in a month, you'll take it today. But asked if you'd want a dollar today or two dollars next month, you may choose to wait if the extra dollar will make the wait worthwhile. If two dollars won't do it, maybe three dollars will. The time element is what explains interest. I'll let you use my money for a period if you promise to compensate me later. It's perfectly legitimate. (For more, see this.)

The employment relationship involves time too. Employees typically don't want to wait until the consumer or producer goods they work on have been sold. Most prefer to be paid regularly, predictably. Nothing wrong with that. But in that case employers who advance (lend) their employees wages out of previous savings will have to wait for the sales—which may not take place if no buyers are interested. Why shouldn't employers be compensated for doing what their employees are unwilling to do: namely, assume the risk and uncertainty of waiting? If socialists don't like it, let them start businesses. (Gene Epstein points out that unions are flush with money from their members' dues. Why don't they start worker-owned firms? Why don't the union members demand it?)

In market-oriented but not fully free economies, we see few if any worker-owned businesses. Why? Probably because most people don't want the risk and responsibility of ownership. So they forgo some money in return for the relative security of employment. That's their right. But employees should not begrudge employers because the latter earn profits (which comprise both interest on the loans to employees and entrepreneurial rewards for spotting price discrepancies that others overlooked).

Socialists who dislike conventional enterprise should stop complaining and set up worker-owned firms. On the other hand, it's easier and less risky to complain about capitalism. Admittedly, in one respect, socialists would not be free to engage in socialism. They could not force anyone to go along.

TGIF: Envy, Ignorance, Barbarism Triumph in New York

Democratic socialist Zohran Mamdani's mayoral victory in New York City is a triumph of moral barbarism, economic illiteracy, illogic, and just plain envy. Mamdani's campaign had a double pitch: billionaires should not exist, and "the people" deserve free stuff.

At first I thought his supporters did not understand the old free-market meme, TANSTAAFL: There Ain't No Such Thing As A Free Lunch. Nature provides only raw materials, which are useless in their original state. Ingenuity turns them into resources. But then I realized that while Mamdani used the word free, he also said he would get the money for the free stuff by further taxing the rich. The people who voted for him heard that, so they couldn't have thought that bus rides, daycare, and whatever else he has plans for would really be free—just free to them.

The demand that other people should pay—whether they want to or not, under threat of imprisonment—for what you want is monstrous on many levels. The economic harm from the variants of this demand has been documented theoretically and empirically many times over many years. You can look it up. Begin with Henry Hazlitt's Economics in One Lesson. Then read up on the Soviet Union, pre-1979 China, pre-1991 India, Cambodia, North Korea, Cuba, or Venezuela.

Like the laws of physics, the laws of human action (economics) cannot be repealed; if they are ignored, the consequences are catastrophic, especially for the most vulnerable, who are the ostensibly intended beneficiaries of giveaways. When bus rides are free, how long will it be before civilized people find them unusable? When rents are frozen, which Mamdani's supporters robotically demand, how long before apartments deteriorate even further or are taken off the market?

When the state forces other people to pay for what you want, that's slavery. Mamdani and his ilk insist on the right to medical care, housing, education, "affordable" groceries, etc. But how can such rights exist? Each of those services must be provided by individuals. Don't they have the right to life, liberty, property, and the pursuit of happiness? If A has a right to B's labor or the fruits thereof, then B must be A's slave. I thought good people were against slavery. Did I miss the memo?

Ayn Rand taught us that people's extraordinary achievements and resulting financial success do not justify declaring open season on them. They have the same rights as those who achieve less or nothing at all. Treating them as sacrificial animals is unjust (and self-defeating). Great producers of wealth have no duty to serve those who produce little or nothing, just as no one has a duty to serve the great producers. Each life is an end in itself requiring no justification. Respecting all people's rights, that is, living by reason not force, is constitutive of the self-interested life. (Selfishness, as most people use that word, is actually myopia, that is, under-concern, not over-concern, with self.) The code of self-sacrifice, as Rand pointed out, is incoherent because if applied universally, no one would be entitled to receive the booty. In practice, when someone preaches self-sacrifice, she said, someone is planning on collecting the sacrifices..

The oppressive bigotry against the "rich" is unseemly because it is a resentment of achievement in itself. The exploitation claim is long-demolished nonsense. (Making a fortune off the taxpayers is another kettle of fish.) Moreover, it ought to be obvious that punishing people for their success will discourage the thought and effort that make success possible. Incentives matter. Considering that innovators earn only a small fraction of the value that they make possible for others, how does punishing success help the people Mamdani says he cares about? Thanks to innovators—in the technological and management senses—the "poorest" Americans are actually among the richest people who ever walked the earth. Extreme poverty has been plummeting for decades. The rest of the world has been catching up with the bourgeois West thanks to technology, increasing liberty, and global trade. What has Mamdani and the Democratic Socialists of America done to benefit anyone?

A final word about that qualifier democratic in "democratic socialism." It is meant to dupe the naive; that is, it is intended to dissociate socialism from the Marx-inspired tyrannies that produced a hundred million corpses beginning in 1917. Communist East Germany was officially the German Democratic Republic, just as communist North Korea is the Democratic Republic of Korea.

That this PR trick fools anyone anymore is hard to believe. Even if elections were held under socialism, how would that change it into something benign? Democratic or not, socialism is government planning of people's lives, in contrast to capitalism—the competitive market economy in which people make their own plans and peacefully coordinate with others through the price system and mutually beneficial free exchange. Periodically casting one vote among many for those who will formulate and carry out the plan would not fix what's wrong with socialism. Even under majority rule, the minority must obey or starve, as the nice Bolshevik Trotsky so charmingly put it. Any individual is a potential threat to the plan and therefore must not be tolerated. Central planning and social cooperation through individual freedom cannot coexist.

Either Mamdani does not know this or he won't acknowledge it. That destroys his claim to care about people. For him, the people are mere stage props (as are the Palestinians). His ideology would oppress them. Despite the democratic sales pitch, this child of the elite aspires to implement the most elitist of oppressive systems. Fanatic or grifter? You decide.

 

TGIF: Separating Powers

We may be sure that the "separation of powers" doctrine is of no interest to the vulgar egotist currently residing in the White House, which happens to be undergoing the most glorious renovation the world has ever known. Or so we hear. But it stands to reason that the doctrine is vital to personal liberty. No imagination is needed to understand what concentrated political power is likely to mean for the individual and society.

The name most closely associated with the separation of powers is Charles Louis de Secondat, baron de La Brède et de Montesquieu (1689-1755), a judge, philosopher, and historian whose 1748 book, The Spirit of Law, sometimes called The Spirit of the Law[s], heavily influenced the founders of the United States and the framers of the U.S. Constitution. Living in a censorial regime, Montesquieu originally published the work anonymously.

I won't attempt to divine what Montesquieu really thought about the doctrine. A glance indicates that this is no simple matter, as indicated by his several seemingly conflicting statements and competing scholarly interpretations. I will only venture to say that the doctrine is essential to limiting government, if government we must have. (I'm not convinced.) Any principle or taboo that would inhibit the growth of the state and leave room for individual freedom is to be desired. As Thomas Jefferson wrote, "The natural progress of things is for liberty to yeild [sic], and government to gain ground." Thus, he also said, the proper attitude toward government is not confidence but vigilance.

At any rate, it doesn't really matter how committed Montesquieu was to the doctrine. We can make up our own minds. Quoting Montesquieu on behalf of the doctrine should be useful to liberty-minded people. So let's do it. The passage is from Chapter VI: Of the Constitution of England. Montesquieu wrote:

The political liberty of the subject is a tranquillity of mind arising from the opinion each person has of his safety. In order to have this liberty, it is requisite the government be so constituted as one man need not be afraid of another.

When the legislative and executive powers are united in the same person, or in the same body of magistrates, there can be no liberty; because apprehensions may arise, lest the same monarch or senate should enact tyrannical laws, to execute them in a tyrannical manner.

Again, there is no liberty if the judiciary power be not separated from the legislative and executive. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary controul; for the judge would be then the legislator. Were it joined to the executive power, the judge might behave with violence and oppression.

There would be an end of every thing, were the same man, or the same body, whether of the nobles or of the people, to exercise those three powers, that of enacting laws, that of executing the public resolutions, and of trying the causes of individuals....

Here, then, is the fundamental constitution of the government we are treating of. The legislative body being composed of two parts, they check one another by the mutual privilege of rejecting. They are both restrained by the executive power, as the executive is by the legislative.

To say the least, this is out of step with today's chief executive, who presses for autocratic power on virtually every front—from redesigning the White House to "emergency" tariffs to detention and deportation without due process to extrajudicial murder on the high seas and in Somalia. His attempt to control speech and generally dictate the terms of our economic relations betrays a failure to appreciate an even more important separation: of the government and our private lives. He didn't begin the erosion of those separations; that happened long ago. But he certainly has accelerated it.

If political power must exist, it must be contained, and the way to do that is dispersion among branches and levels. To be sure, the separation of powers and the related checks and balances could impede efforts to roll back power, but preventing new expansions of power seems the higher priority now. No one said that establishing full liberty would be easy.

Mr. Trump no doubt regards the separation-of-powers doctrine as a mere petty annoyance, something his enemies only recently concocted to thwart his grand ambition to be adored a thousand years from now. With barely any exception, the legislative branch of the central government has had no stomach to challenge him. Fortunately, some courts have pushed back. How The Maestro takes a major setback at the Supreme Court, if one should occur, will be instructive.

TGIF: The Absurdity of Democracy

If the continuing incompetence of Congress over passing a budget and reopening the U.S. government doesn't show the absurdity of unlimited representative republicanism, what could do so? Whether or not to extend COVID-era special subsidies for medical insurance appears to be the main issue, but other issues are undoubtedly involved. If it isn't one thing, it's another. That's politics.

The problem is that the government has its hands in everything. That means a constituency exists for each thing the government does. If you want to upset and mobilize a group of people, call for an end to some privilege or restriction, which must come at the expense of the freedom and wealth of everyone but the favored beneficiaries. That's how "democratic" government works, after all. This sets off a mad quest for favor, which some contenders will be more capable of securing than others. Don't fall for the canard that the bureaucrats and politicians rationally produce useful things. If something looks, quacks, and waddles like a canard, you can be sure it's a canard. "Who rules" is a secondary question. The first should be: what are the rules?

Rejecting democracy—representative republicanism, more precisely—does not entail accepting authoritarianism in any form. Quite the contrary. It entails full acceptance of the protection of individual liberty and property rights—the rights to life, liberty, and the pursuit of happiness, as Thomas Jefferson, inspired by John Locke, put it in the Declaration of Independence. If we cannot have market-ordered, individualist, anarchism, then at least let's keep the government strictly limited to barring physical force. If it ventures beyond that boundary, it sets off a civil war over the people's private wealth and liberty. If you seek the consequences, look around. They are blindingly evident.

As Adam Smith wrote in The Wealth of Nations:

All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions.

But isn't pervasive government necessary to engineer a decent society? No, it is not. Thomas Paine, no anarchist he, understood this. As he wrote in The Rights of Man:

Great part of that order which reigns among mankind is not the effect of government. It has its origin in the principles of society and the natural constitution of man. It existed prior to government, and would exist if the formality of government was abolished. The mutual dependence and reciprocal interest which man has upon man, and all the parts of civilised community upon each other, create that great chain of connection which holds it together.

 

 

TGIF: Hooked on the State

Since the government partial shutdown began, we've been seeing panicked headlines about states being denied federal money for promised or already-started energy and infrastructure projects. Other sorts of subsidies are also in jeopardy. You'd think that not getting money from Washington was the worst thing that could happen. Oh my goodness, federalism might be breaking out!

Unfortunately, we can be sure that no restoration is in the works. We are not about to return to the long-gone world in which the national government had few powers and the people of the 50 states grappled with governments that were nearby as well as competitive with one another, thanks to their residents' freedom to exit an oppressive jurisdiction for a freer one. This occurs today to a degree, but that ultimate safeguard of liberty—exit—diminishes when Washington imposes or strongly incentivizes uniformity nationwide—when it sets a coercive baseline. Revenue that looks like free money has been an effective way to accomplish that end. So much the worse for liberty, considering that a major factor leading to original free-market, small-government liberalism in Western Europe was the relatively low cost of fleeing tyranny. In practice, the more centralized the power, the less free we are.

The panic to which I refer did not begin with the recent so-called shutdown. We saw it when Trump cut back on tax money to universities and other organizations earlier this year. It was as if a divine right had been abolished. For decades before that, presidents have threatened to withhold federal funds if states didn't do things like impose a 55-mph speed limit or raise the drinking age to 21.

How was that not a violation of the spirit, if not the letter, of federalism and decentralization, which, at least theoretically, was the distinctive American system? (Market-ordered anarchism would be even better, but it's not on the menu today.)

It's a good time to remember, or realize for the first time, that throughout the 20th century, American classical liberals, or libertarians, warned of the dangers of national funding for every sort of thing. There was the New Deal, of course, the beginning of the national welfare state, which included Washington-run relief and pensions systems. Many people might have been willing to forgive that because of the Great Depression, but centralization didn't end after that crisis and World War II. The programs were accepted and thus became permanent. We later saw national funding for highways, education, and housing, often tied to imagined crises, such as the Soviet presence.

A few politicians (such as Robert Taft and Barry Goldwater) and writers (such as Leonard Read, Felix Morley, and Henry Hazlitt) warned that money from Washington jeopardized liberty. They foresaw that people would get hooked on the money, that the government slope was slippery, that each program would be a precedent for the next, that mission creep was to be expected, that even a reduction in an anticipated spending increase would be seen as a heartless cutback, and that with money comes strings. For their troubles, they were smeared as paranoid, reactionary, and extremist. What they really were was libertarian.

But the Cassandras were right! They said people would become habituated to money from the national government—and they did! For many, no alternative exists to Washington. Even the possibility of a delay of one dime prompts street demonstrations demanding that the government "keep its hands" off some government program. How absurd!

The champions of centralized government have been winning for over a century. That the relatively free parts of the private sector keep enriching us is a tribute to capitalism, not to the politicians and bureaucrats. No doubt, many, if not all, of the architects of centralization intended that once they got the ball rolling, there would be no going back. Their opponents certainly knew it, but they were shunned, disparaged as old-fashioned, and shut up.

Is there a way back? That is the question. If we cherish freedom, we must find it.

TGIF: Trump and the Separation of Powers

The U.S. Court of Appeals' rejection last week of the Trump administration's global "emergency" tariff program was a welcome affirmation of the separation-of-powers doctrine. Next stop: the U.S. Supreme Court. I'm keeping my fingers crossed for a 9-0 ruling that Trump grossly exceeded his constitutional powers. One can hope.

Liberty is never secure. However, if we must have a state, the separation of powers may provide some measure of security. The framers, drawing on Montesquieu, understood this. Unfortunately, politicians have weakened the doctrine over the centuries. Most egregiously, presidents have waged war without congressional authorization, as the U.S. Constitution requires.

The first U.S. constitution, the Articles of Confederation, was better than its successor because, among other things, it lacked the powers to tax and regulate trade. (Hard to believe.) The replacement, alas, did assign Congress those powers in Article I, Section 8. Too bad, but at least it did not give them to the executive under Article II. Autocracy is always a danger. (See my America's Counter-Revolution: The Constitution Revisited.)

Trump's minions apparently hadn't informed him that he lacks these powers, but now the Court of Appeals for the Federal Circuit has told him. He is not happy. He condemned the "Highly Partisan Appeals Court" for its "incorrect" decision.

In V.O.S. Selections, Inc. v. Donald Trump, the court, by a 7-4 vote, held that Trump exceeded his power under the International Emergency Economic Powers Act (IEEPA) when, through five executive orders, he imposed tariffs virtually across the board and on virtually all countries after declaring national emergencies ostensibly related to trade reciprocity and drug trafficking.

No, you don't, Mr. President, said the court. In so saying, the judges upheld a ruling by the U.S. Court of International Trade (CIT). The government was "permanently enjoined from imposing the tariffs, but was allowed to continue them until October 14. The administration appealed to the Supreme Court.

All that is at issue in the case is the separation of powers. The administration claimed that the IEEPA authorizes the president to "regulate," with "importation" mentioned as a factor that might trigger the finding of an emergency. Hence, Trump's people said, the president can impose tariffs.

The majority of judges felt it necessary to give Trump a history lesson:

The Constitution grants Congress the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations." ... Tariffs are a tax, and the Framers of the Constitution expressly contemplated the exclusive grant of taxing power to the legislative branch; when Patrick Henry expressed concern that the President “may easily become king,” ... James Madison replied that this would not occur because “[t]he purse is in the hands of the representatives of the people.”

Tariffs are a tax. Right.

The judges went on to point out that "at the time of the Founding, and for most of the early history of the United States, tariffs were the primary source of revenue for the federal government.... Setting tariff policy was thus considered a core Congressional function."

Since the late 1800s, the Court stated, Congress has delegated "limited authority to 'activate or suspend' tariff rates through international agreements." But those acts were express delegations of tariff authority and bound by "substantive limitations." As the Court put it:

Taken together, these other statutes indicate that whenever Congress intends to delegate to the President the authority to impose tariffs, it does so explicitly, either by using unequivocal terms like tariff and duty, or via an overall structure which makes clear that Congress is referring to tariffs. This is no surprise, as the core Congressional power to impose taxes such as tariffs is vested exclusively in the legislative branch by the Constitution; when Congress delegates this power in the first instance, it does so clearly and unambiguously.

The IEEPA says nothing about tariffs. It only allows the president to:

investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.

"Notably," wrote the Court, "IEEPA does not use the words 'tariffs' or 'duties,' nor any similar terms like 'customs,' 'taxes,' or 'imposts.' IEEPA also does not have a residual clause granting the President powers beyond those which are explicitly listed."

How have other presidents used the IEPPA?

Since IEEPA was promulgated almost fifty years ago, past presidents have invoked IEEPA frequently. But not once before has a President asserted his authority under EEPA to impose tariffs on imports or adjust the rates thereof. Rather, presidents have typically invoked IEEPA to restrict financial transactions with specific countries or entities that the President has determined pose an acute threat to the country’s interests.

Finally, the Court made it clear that "we are not addressing whether the President’s actions should have been taken as a matter of policy. Nor are we deciding whether IEEPA authorizes any tariffs at all. Rather, the only issue we resolve on appeal is whether the Trafficking Tariffs and Reciprocal Tariffs imposed by the Challenged Executive Orders are authorized by IEEPA. We conclude they are not."

Trump has predicted calamity if his tariffs are erased. He has bragged that the Treasury has collected more than $200 billion in duties and warns that refunding that money would sink the economy. Earlier his lawyers argued against a preliminary injunction on the grounds that the money could easily be paid back. Now he seems to have forgotten that when the government takes, private individuals are taken from. Thus the Treasury's loss would be the people's gain. That would be good for "the economy" (that is us). On the other hand, the government runs a $2 trillion deficit, so the money must be gone, and the government would have to sell more bonds—monetized by the Fed—to pay it back. We lose no matter what.

Trump has faced judicial setbacks on tariffs, deportations, and his National Guard deployment in Los Angeles. What's next? How will he react if the Supreme Court affirms the decisions? Buckle your seatbelts.

TGIF: The Chicanery Behind Inequality Data

If self-described progressives decry anything more fiercely than poverty, it is income and wealth inequality. Some have even suggested that they would prefer low-income equality to inequality, regardless of how affluent the lowest level was. What counts is the gap.

The terms poor and low-income are relative, of course. We'd be better off talking about the poorer and lower-income. Also, it's better to be poor in America than anywhere else if we factor in immeasurables such as good prospects. However, some people don't understand the point or perhaps don't want to understand it. Reasonable people ask, "How am I doing and how can I do better?" not, "How much less am I making than Jeff Bezos and Elon Musk [but not Taylor Swift or Juan Soto]?"

So let's talk about inequality—not in the legal and political sense but in terms of income and wealth. You can't go a day without hearing politicians and commentators complain about the top 1, 10, or 20 percent. Those complaints seem to be backed up by government statisticians and parts of the economics and sociology professions. Dissenters are rarely invited on television and podcasts. The impression given, to which compassionate laypeople will be vulnerable, is that America is riddled with extreme, even obscene (so Bernie Sanders says) inequality. Is it true?

Economists Phil Gramm and Donald Boudreaux make an overwhelming case against it in their book, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism. Gross inequality is one of those myths. (Last week I discussed their chapter on poverty.)

"[T]he claim that income inequality in America is high and rising on a secular basis is almost universally accepted as true," Gramm and Boudreaux report. But: "Census numbers overstate the difference between the top and bottom quintile household incomes by over 300 percent." Can they back up that claim? Let's see.

The U.S. Census Bureau tells us that in 2017 the average income of households in the richest quintile (the top 20 percent) was 16.7 times greater than the average in the lowest quintile. No one can say, without other information, whether that number is appropriate or not. But is it accurate?

"The official Census data also show," Gramm and Boudreaux continue, "that income inequality has grown on a secular basis and, by 2017, was 22.9 percent higher than in 1947." That's not all. According to the Organization for Economic Co-operation and Development, the United States has the worst record on this count among the wealthy countries—and it's been getting worse.

Let's pause for a word about the morality of income and wealth inequality. Individuals contribute unequally to the production of wealth, which improves living standards even for those who contribute little or nothing. So why would anyone expect their incomes and wealth to be equal? Now back to our regularly scheduled program.

Gramm and Boudreaux disclose a puzzle about the government's numbers: "According to the official statistics of the nation’s two leading statistical agencies, the bottom 20 percent of American households had an average income of $13,258 in 2017 yet, in that same year, consumed $26,091 of goods and services."

This fact raises the obvious question of how the bottom 20 percent of households can consume twice their income. This extraordinary gap between the official measure of income and the official measure of consumption has grown more or less steadily since 1967, when funding for the War on Poverty began to ramp up."

That indeed is a puzzle. Could it be that the government agencies do not count everything that's relevant? Write Gramm and Boudreaux:

[T]he Census Bureau does not count two-thirds of all transfer payments to the recipients as income [88 percent for the lowest quintile], instead counting only $0.9 trillion of $2.8 trillion of government transfer payments. In addition, the Census Bureau neither adjusts household income for taxes paid nor counts tax credits as income received by the recipients, even though they receive checks from the Treasury. Census does not count food stamps as income, despite beneficiaries receiving debit cards to pay for groceries. Also not counted as income are benefits received from Medicaid, under which the government pays for each beneficiary’s health care. And also uncounted as income are the transfer payments dispensed through more than one hundred other federal, state, and local programs.

In other words, the government understates the incomes of the poorest, while overstating the incomes of the richest, ignoring that America has a generous welfare state (coercively paid for) and the most progressive income tax in the world. That strikes me as a rather shoddy way of estimating income inequality.

"Because the Census Bureau excludes $1.9 trillion of transfer payments as income received and fails to count $4.4 trillion of taxes paid as income lost to taxpayers," Gramm and Boudreaux write, "the Census measure of household income ignores some 40 percent of national income, which is either gained in transfer payments or lost in taxes."

The advocates of even more confiscation and distribution do not want to acknowledge what is really going on. Why not? The resulting distortion is scandalous. The authors show that instead of the officially estimated top-versus-bottom income ratio of 16.7 to 1, the real ratio is 4 to 1, a fourth of the often-lamented official estimate.

"But even these numbers for household income," Gramm and Boudreaux write, "overstate income inequality by failing to account for differences in the number of individuals living in the average-sized household of each income quintile." The average top-level household contains more people than the bottom-level household (3.10 versus 1.69). (See the book for details.)

What has happened to inequality over time, considering that transfer payments and taxes have increased? Gramm and Boudreaux report:

Over the seventy years from 1947 to 2017, after adjusting for inflation, the real value of all transfer payments grew 212.2 percent, faster than earned personal income had grown. Taxes grew less dramatically, rising only 7 percent faster than earned income over these seventy years. Income and payroll taxes rose 21 percent faster than income. Sales, excise, and property taxes rose 8.3 percent slower than income. The net result was that the US income-tax system became significantly more progressive in the seventy years leading up to the COVID-19 pandemic as an ever-larger share of the tax burden has been shifted from low- and middle-income households onto higher-income households, reducing income inequality. [Emphasis added.]

They also show that while the standard international method for measuring inequality, the Gini coefficient, indicates an increase, "much of this increase was due simply to two very significant changes made in the way the Census Bureau collects and records data." The Bureau acknowledges that those changes distort the picture, but it does not adjust accordingly.

In fact, "the [adjusted] Gini coefficient is actually slightly lower today than it was in 1947...," Gramm and Boudreaux write. "America’s Gini coefficient falls to a level roughly in the middle of the seven largest developed countries."

I began by denying the importance of income equality to human wellbeing. As Gramm and Boudreaux explain, more equal does not mean richer: "Major developed nations that have more equal distributions of income than the United States have significantly lower incomes overall....  [They] also have larger portions of their populations that are poor." Beware a fixation on equality. Better to agitate for the repeal of government obstacles to the creation of wealth, starting with taxes on savings and investment.

A closing note for envious readers who despise the 1 percent. Gramm and Boureaux write that according to a study titled “Income Inequality in the U.S.: Using Tax Data to Measure Long-term Trends” (2024), "when all transfer payments and taxes are counted, the share of national income going to the top 1 percent of American households is about the same as it was in the mid-1960s." [Emphasis added.]

Of course, there is no such thing as "national income," as Gramm and Boufdreaux would agree. That's a statistical category. In reality, there is only your, my, and their income.

TGIF: The Poverty of Poverty Data

"Poverty has no causes; prosperity has many. As history attests, poverty is humanity’s default condition.... But prosperity is not natural; it does not just happen."

—Phil Gramm and Donald J. Boudreaux

To hear some people tell it, America is in the grip of a vast conspiracy in which billionaires get richer, the middle class stagnates at best, and the poor get poorer. Poverty and inequality, by this account, are the shame of America. How can we let this go on!

Do not fall for it. Except for the part about billionaires (those who get rich by innovatively serving consumers), the story is hokum. The middle class shrinks because its members move up, and the "poor" get richer with mass production and lower prices. If a monolithic predatory ruling class has been making war on the rest of us, it has been bloody bad at it. Do you need proof (besides the abundant evidence in your home and out the window)? Check the data! This doesn't mean all is well with the American political system—far from it. Rather, it means that the market economy and the freedom it entails can take a licking and keep on ticking—better and better as years go by. Free the market (that's us) of government shackles, including Trump's tariffs, and the pace of wealth creation for all will quicken.

Phil Gramm and Donald J. Boudreaux document the real story in their book, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism. Let's see what they have to say about poverty.

Admittedly, the officially released statistics are a downer. Data compiled by many prestigious-sounding agencies and organizations, Gramm and Boudreaux write, "show that a higher percentage of Americans live in poverty than in any other developed country in the world." If true, that might be a mark against a commercial society like the United States. (Then again, it might be the government's fault.) "All of these damning conclusions," the authors continue, "are buttressed by the US Census Bureau’s official measure of poverty, which shows that the poverty rate has not declined on a secular basis for more than fifty years."

That stinks, but is it so? Actually no.

Gramm and Boudreaux, both economists, show that from 1947 to 1967—before the Great Society got into gear—the U.S. poverty rate dropped by over 50 percent. So "It seems strange that ... when the War on Poverty began and its programs were funded at significant levels, beginning in 1967, the poverty rate then remained essentially unchanged for over a half-century."

That is strange, especially because "the average bottom-quintile household has seen the inflation-adjusted value of government transfer payments rise from $9,700 per year in 1967 to $45,400 in 2017...." (That excludes the administrative costs.)

"Obviously," they write, something is wrong here."

What could be wrong? How about this? The data leave out quite a few important things.

[T]he official Census measure of poverty fails to count 88 percent of all the benefits that poor American families receive from the government as part of their income." [Emphasis added.]

Eighty-eight percent!

The omitted benefits include "refundable tax credits where the beneficiary receives a check from the Treasury, debit cards loaded with food stamp allowances, and benefits from over a hundred other major programs, including Medicaid and housing subsidies in which the government simply pays bills that are incurred by the programs’ beneficiaries." (This curious practice of omitting benefits is left over from when government benefits were mainly in cash.)

How do things look when that data is restored? Gramm and Boudreaux write, "When all transfer payments, net of the costs of making those payments, are counted as income to the recipients of the transfers":

• The 2017 overall poverty rate drops from the official 12.3 percent to 2.5 percent;
• The child poverty rate drops from the official 17.5 percent to 3.1 percent; and
• The poverty rate for seniors drops from the official 9.2 percent to 1.1 percent.

Gramm and Boudreaux account for the small percentages remaining by people who "have fallen through the cracks" because of medical and other problems. In any society, no matter how rich, some people choose poorly. The authors cite other studies that support this adjusted overall poverty rate.

Moreover, Gramm and Boudreaux point out that "the number of people who are classified as poor changes dramatically over time."

Less than a quarter of families classified as being poor have been poor for two years or more. It should also be understood that twice as many families were poor for only some part of the year as those families who were poor the entire year. Experiences such as being laid off, suffering illness, or being employed in seasonal work contribute to people alternating between being on the poverty rolls and rising off of them."

The misleading official picture, Gramm and Boudreaux note, is also exposed by the fact that, according to a different Census Bureau study, "42 percent of poor households own their own homes, the average of which has three bedrooms, one and a half baths, a garage, and a porch or patio. Of the households considered to be poor, 88 percent have air conditioning, and the average poor American family lives in a home that is larger than that of the average middle-income family in France, Germany, and Britain."

And this is impressive: "Of all American households in 2017, 66.3 percent had real incomes, after transfers and taxes, that only the top 20 percent enjoyed in 1967." That hardly looks like stagnation.

Does this mean the welfare state works? Not if the goal is to foster independence in lower-income people. But the data do tell us that the welfare state does not need expanding, as the progressives claim.

For one thing, it discourages people from working and thus encourages dependence on the coerced taxpayers. Gramm and Boudreaux write,

The explosion in poverty benefits since 1967 caused the prepandemic employment rate among the bottom 20 percent of income earners to plummet from 67 percent to 36 percent, as well as the employment rate among the second quintile of earners to fall by almost 6 percent.... The growth in the welfare program has largely delinked the bottom 20 percent of income earners from the American economy....

It is not good when working people in the second lowest quintile have only slightly higher incomes than those who work little or not at all.

What's unseen is that without the welfare state, not only would the incentive not to work disappear, but the most innovative and productive people would have more money with which to make everyone more affluent.

TGIF: Socialist Confusion

Recent polls indicate that many people under 30 view socialism and communism favorably. (For Marx, those words were synonyms.) It seems that socialism and communism are "in." What's going on?

A self-described "democratic socialist," Zohran Mamdani, won the Democratic nomination in the New York City mayoralty primary. He promises to set up city-owned nonprofit grocery stores and plans other giveaways. He favors a $30 minimum wage. He also says billionaires should not exist. Will he set up camps?

Members of Congress, such as Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez, also call themselves "democratic socialists," but it's unclear what they mean by the term. When Sanders was asked what he meant by socialism, he said it was the realization that "we're all in this together." That's helpful.

Sanders, Ocasio-Cortez, and their ilk do not call for expropriating and nationalizing the means of production. (I'm not sure about Mamdani.) Instead, they want an even bigger welfare state, for instance, "Medicare for all." That's bad—the welfare state makes people poorer—but it's not socialism. They further illustrate their confusion by claiming that the Scandinavian countries are socialist, which they're not. They score high on rankings of economic freedom. That would be a strange sort of socialism, no?

This tilt toward a murkily defined socialism and communism suggests cultural and ethical considerations, not social science, are at work. These days, it's edgy and romantic to declare oneself a socialist, especially if you wear a Che Guevara T-shirt. I suppose the word democratic is intended to make socialism, the record of which is horrendous, sound humane. It does no such thing, no more than the word national makes socialism sound sweet.

At any rate, as the Cato Institute's Michael Chapman wrote this year:

A recent survey by the Cato Institute and YouGov paints a troubling picture: 62 percent of Americans aged 18–29 say they hold a “favorable view” of socialism, and 34 percent say the same of communism. This is shocking given that communism is responsible for 100 million deaths worldwide and is rooted in socialism, the same philosophy that spawned both Mussolini’s fascism and Hitler’s National Socialism. To favor socialism is to flirt with tyranny.

That is stunning, considering that free-market capitalism, however imperfectly practiced —that is, profit-motivated global investment and trade—has increased per-capita wealth and lengthened life spans worldwide by an astonishing degree over the last few hundred years. What used to be called the "Third World" got wealthier to the extent it had economic dealings with the developed world. If young people don't understand what economist and historian Deirdre McCloskey calls "the Great Enrichment," what does that say about government-run education?

What do fans of liberty and prosperity do about this? We can become better promoters of capitalism and bourgeois culture, which have enabled so many people to achieve such high living standards. In 1947 economist Ludwig von Mises, writing in Planned Chaos, said, "Nothing is more unpopular today than the free market economy, i.e., capitalism." That was shortly after World War II. Despite a few bright spots, how little things have changed! (Trump's devotion to global trade restrictions at least has brought out latent free-trade impulses in some people.)

Mises noticed something that is still true today, despite differences in detail:

Everything that is considered unsatisfactory in present-day conditions is charged to capitalism. The atheists make capitalism responsible for the survival of Christianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its “bourgeois” pacifism, contrary to human nature and to the inescapable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the “progressives” blame capitalism for the preservation of allegedly outdated rules of sexual restraint. Almost all men agree that poverty is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism altogether.

How convenient to have such a scapegoat for your problems. Unhappy? Blame capitalism. Too few people will speak up for it.

Although capitalism is the economic system of modern Western civilization, [Mises wrote,] the policies of all Western nations are guided by utterly anti-capitalistic ideas. The aim of these interventionist policies is not to preserve capitalism, but to substitute a mixed economy for it. It is assumed that this mixed economy is neither capitalism nor socialism. It is described as a third system, as far from capitalism as it is from socialism. It is alleged that it stands midway between socialism and capitalism, retaining the advantages of both and avoiding the disadvantages inherent in each.

Mises rejected the equation of interventionism with socialism.

There are many supporters of interventionism who consider it the most appropriate method of realizing—step by step—full socialism. But there are also many interventionists who are not outright socialists; they aim at the establishment of the mixed economy as a permanent system of economic management. They endeavour to restrain, to regulate and to “improve” capitalism by government interference with business and by labour unionism.

For the market to work to the advantage of all people, it is not enough that property be owned in the strict legal sense. Legal title must be accompanied by real control. When private parties nominally own property while government authorities control property, that is fascism, even if people vote now and then. (Economist Charlotte Twight has coined the term participatory fascism.)

Mises made an important point about interventionism.

If within a society based on private ownership of the means of production some of these means [such as grocery stores] are owned and operated by the government or by municipalities, this still does not make for a mixed system which would combine socialism and private ownership. As long as only certain individual enterprises are publicly controlled, the characteristics of the market economy determining economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods and labour, and as sellers of goods and services, must fit into the mechanism of the market economy. They are subject to the law of the market; they have to strive after profits or, at least, to avoid losses.

Mamdani promises that his city stores will forgo profit and charge only wholesale prices. How then will they pay their expenses, such as wages? Mises addressed that issue:

When it is attempted to mitigate or to eliminate this dependence [on the market] by covering the losses of such enterprises with subsidies out of public funds, the only result is a shifting of this dependence somewhere else. This is because the means for the subsidies have to be raised somewhere. They may be raised by collecting taxes. But the burden of such taxes has its effects on the public, not on the government collecting the tax. [Emphasis added.]

Well, Mamdani may say, he'll tax the rich. It's not that simple, Mises noted:

It is the market, and not the revenue department, which decides upon whom the burden of the tax falls and how it affects production and consumption. The market and its inescapable law are supreme.

If you tax the rich, they will produce less and take more leisure. Or they will move—harming the nonrich, who will have fewer goods, services, and amenities. And more taxes to pay. Do politicians never learn?

But, bad as that is, it is still not socialism.

The system of the hampered market economy, or interventionism, differs from socialism by the very fact that it is still market economy. The authority seeks to influence the market by the intervention of its coercive power, but it does not want to eliminate the market altogether. It desires that production and consumption should develop along lines different from those prescribed by the unhindered market, and it wants to achieve its aim by injecting into the working of the market orders, commands and prohibitions for whose enforcement the police power and its apparatus of coercion and compulsion stand ready. [Emphasis added.]

Ah yes. Behind every progressive interventionist lurks the police force. We should be little comforted that our so-called democratic socialists are not true socialists, but only interventionists on steroids.

However, all the methods of interventionism are doomed to failure. This means: the interventionist measures must needs result in conditions which from the point of view of their own advocates are more unsatisfactory than the previous state of affairs they were designed to alter.

They might hope to produce abundance at low prices, but they will fail, as theory and history have consistently demonstrated.

Minimum wage rates, whether enforced by government decree or by labour union pressure and compulsion, are useless if they fix wage rates at the market level. But if they try to raise wage rates above the level which the unhampered labour market would have determined, they result in permanent unemployment of a great part of the potential labour force.

Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If government spending is financed by borrowing from the commercial banks, it means credit expansion and inflation. If in the course of such an inflation the rise in commodity prices exceeds the rise in nominal wage rates, unemployment will drop. But what makes unemployment shrink is precisely the fact that real wage rates are falling....

No less than the socialists, the interventionists despise consensual profit-driven market activity as unsightly and exploitative. This aversion is as much aesthetic as moral, but on both counts it is wrong. That Adam Smith's "system of natural liberty" has improved the lot of mankind, and will continue to do so if left unmolested, is a beautiful thing. Self-made blindness explains why so many people do not appreciate it. Workers and consumers are not victims. They are beneficiaries. The world is increasingly divided into haves and have-a-bit-mores. The have-nots have been moving on up, especially if they work at it.

Mises reminded us that capitalism is not about profits only. It's also about losses, which shines a whole different light on the matter.

In the eyes of the interventionists the mere existence of profits is objectionable. They speak of profit without dealing with its corollary, loss. They do not comprehend that profit and loss are the instruments by means of which the consumers keep a tight rein on all entrepreneurial activities. It is profit and loss that make the consumers supreme in the direction of business. It is absurd to contrast production for profit and production for use. On the unhampered market a man can earn profits only by supplying the consumers in the best and cheapest way with the goods they want to use. Profit and loss withdraw the material factors of production from the hands of the inefficient and place them in the hands of the more efficient. It is their social function to make a man the more influential in the conduct of business the better he succeeds in producing commodities for which people scramble. The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities. What made some enterprises develop into “big business” was precisely their success in filling best the demand of the masses.

Who loses when interventionists get their way? Regular people do.

TGIF: Immigration and Free Association

Immigration. Despite other headline-grabbing news, this issue persists.

How could it not? Trump's masked goon squad, ICE (Immigration and Customs Enforcement), abducts peaceful people off the streets, from their workplaces, and from Home Depot parking lots, then shuttles them without due process to detention centers, including the ominously named Alligator Alcatraz, and prepares to deport them to third countries deficient, shall we say, in their devotion to individual rights. Many detainees have been unable to contact family and attorneys. Even American citizens have been swept up, subjecting them to the trauma of confinement until they demonstrate that they "belong here." Trump's quota of 3,000 detainees per day creates the most perverse of incentives for ICE agents. He reportedly has berated ICE because the arrest numbers are too low.

Need I say that this should not be happening in America, and Americans should not forget that it is happening? Fortunately, some glimmers of hope penetrate the dark clouds. The latest to come to my attention is the reported bad morale among ICE agents. Apparently, they don't enjoy "arresting gardeners." Why don't they quit?

Moreover, recent polls indicate that a growing number of Americans dislike how Trump is handling immigration. Naively, they seem surprised that Trump did not confine his hunt to real criminals (that is, murderers, muggers, rapists, thieves, etc.) but is going after people who hold jobs, live normal lives, behave neighborly, and bother no one. (And, alas, pay taxes.) We're also seeing federal district judges smack down ICE raids and Trump's autocratic bid to rewrite the Constitution on birthright citizenship. (See the 14th Amendment.)

For example, ABC reported the other day, "A Los Angeles federal judge issued a pair of temporary restraining orders today limiting the ability of U.S. immigration-enforcement agents to detain people absent reasonable suspicion beyond merely their race, ethnicity or occupation, while also requiring that detainees be given access to legal counsel." (Emphasis added.) No profiling, that is. It's a start. Yet it still might be good policy for people with accents and darker skin tones to avoid Home Depot parking lots, car washes, restaurant kitchens, and farms. 

We can hope that future generations will look back on this terror with shock and shame.

I've heard it said that libertarians should favor government control of immigration in principle (and so such roundups) because free movement constitutes "forced integration." Specifically, it has been said that laws against discrimination in employment, housing, and public accommodations violate our freedom of association and, hence, a property owner's right to exclude immigrants, among others. Freedom of association, of course, should be respected, and it logically includes the freedom not to associate, or the freedom to exclude, even when it takes irrational and bigoted forms. Freedom must be defended—even when it is exercised obnoxiously. Absolutely true.

But would open borders increase coercion in America by prohibiting discrimination and exclusion? Before I answer that question, let me pose another one. If all the antidiscrimination laws were repealed tomorrow, would the libertarian restrictionists withdraw their opposition to open borders? I think not. 

As a practical matter, free immigration under today's laws would not effectively compel individuals to associate. Open-borders champion Bryan Caplan explains why in his newest collection of blog posts, Pro-Market and Pro-Business: Essays on Laissez Faire ("Association, Exclusion, Liberty, and the Status Quo").

Caplan writes,

One of my conservative friends keeps telling me that, “The right to associate is the right to exclude.” As a libertarian, I agree.  But the subtext of his slogan is that libertarians focus far too much on government regulations that abridge the freedom of association—and far too little on government regulations that abridge the freedom of exclusion. His claim, in fact, is that the only feasible way to protect the freedom to exclude is to restrict the freedom to associate. Since discrimination laws make it impossible for voluntary contracts to keep foreigners out of a neighborhood, for example, it’s OK for immigration laws to keep foreigners out of the country entirely.

Some otherwise-libertarians make the same argument. Since we are not free to exclude foreigners from our personal affairs, we must not let them in.

That prompts Caplan's question: "To what extent do existing policies that restrict freedom of association and exclusion actually bind? In other words, how different would the modern U.S. look if people were free to live, work, and play anywhere if and only if the property owner consented?" He responds:

Let’s start with exclusion.  Many existing laws restrict the right to refuse to hire workers and serve customers. In real estate, restrictive covenants and home owners’ associations are common, but if you try to use them for racial exclusion, courts won’t enforce them.  Single-gender clubs also occasionally face lawsuits.

I’m against all of these limitations on the right to exclude, but how much do they actually change behavior in the modern U.S.?

His answer: "Only slightly, for a long list of reasons."

Among his reasons are: businesses want money too badly to exclude people without good cause; most people frown on exclusion and would feel funny about a business that practiced it; and alternative methods of exclusion are available, such as "high prices..., dress codes..., and educational credentials." Where there's a will, there's a way.

"I don’t deny, he says, "that laws against exclusion occasionally have important effects.  But their main effect in the modern U.S. economy isn’t to reduce exclusion, but to pressure businesses" to find workarounds.

So much for the consequences of mostly paper violations of freedom of exclusion. What about the consequences of government limits on free association, that is, immigration control? Remember, border restrictions prevent Americans from selling to, renting to, buying from, employing, befriending, dating, and marrying would-be immigrants.

"Indeed," Caplan responds, "they [border restrictions] probably have a bigger effect than all other regulations combined."

It’s simple. Billions of people around the world live on a few dollars a day or less.  Under open borders, tens of millions of them would migrate to the U.S. every year.  Remember: Even if you’re an illiterate peasant from Bangladesh, credit markets and/or employers would be happy to front the money for airfare.

This immigration flow wouldn’t stabilize until real estate prices massively increased and low-skilled wages drastically declined. The U.S. population could easily increase by 50% in a decade. New cities would blanket the country. The level of output would skyrocket—and its composition would rapidly change, too. Whether you love this vision or hate it, you can’t deny that free association would radically and rapidly reshape the face of America.

The upshot: "restrictions on the right to associate are massive, and there is enormous pent-up demand to migrate. Hundreds of millions of people want to move here, landlords want to rent to them, employers want to hire them—but the law won’t allow it.... While restrictions on exclusion are occasionally irksome, they rarely ruin lives. Immigration laws, in contrast, usually condemn their victims to life—and often early death—in the Third World."

Like free trade, free immigration is overwhelmingly win-win.