Why Not Libertarianism?

Let’s Make Low Income Workers Unemployed!

Leave a Comment

On June 16th, 1933 F.D.R. gave a speech on the just-enacted National Industrial Recovery Act.  Although the law never lived to see its second birthday, being declared unconstitutional in 1935 (Schechter Poultry Corp. v. The United States), it did yield a snappy line that, zombie-like, never dies, and lives on in the memedom of the internet:

It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country.

In lieu of silver bullets or a wood stake, let’s try to dispatch the undead with an even more lethal weapon:  brutal, unflinching logic.

Let’s imagine three businesses, all selling roughly the same thing, say baseball bats.

  • Company X, the oldest of the companies, makes their bats in Alabama. They have old equipment, from the 1950s. It is not the fastest in the world, but it gets the job done. The process is completed by 10 low skill workers who do the final sanding, varnishing and inspection. They earn minimum wage.
  • Company Y is a new entrant to the field. They use computer-controlled lathes and all the latest automation. Their automation even does the sanding and varnishing. To supervise this process requires fewer workers. In fact they only need 2 people. But because of the higher skills these two need, the company needs to offer 5x minimum wage in order to attract workers with the right skills.
  • Company Z has a website. They sell baseball bats drop shipped from suppliers in China and Vietnam. Workers there get paid far below U.S. minimum wage. But Company Z doesn’t know, or care. They hire one full-stack web developer to build and maintain the website. He is not cheap, but is worth it.

Let’s further assume that all three produce a product that satisfies some segment of the market, in terms of price/quality trade-offs, and that all three companies operate at a profit.

So, what do you think the impact of forcing Company X to shut down, because it could not afford to pay a “living wage”?

  • Would this increase or decrease unemployment in the United States?
  • Would this result in more workers, or fewer workers needing welfare?
  • Would this result in those already on welfare requiring more or less assistance?
  • Would this result in more workers, or fewer workers displaced by overseas competition?
  • Would this accelerate or slow down the push toward more workers being displaced by technological improvements?
  • Would this increase or decrease competition for baseball bats?
  • Would this change in competition increase or decrease the price of baseball bats?

It seems to me to be plain that forcing Company X to shut down will make things worse, not better, for the company’s owners, their employees, and their customers. It is hard to imagine a worse policy.

 

Some Thoughts on Safety

1 Comment

It is sometimes said that, without government, we’d all quickly die, due to the lack of mandatory safety standards for things like food, drugs, building construction, etc.  The assumption is we’re all stupid.  We need government to tell us what to do.

The embarrassing question here is to ask how all these irredeemably stupid people could possibly elect a government that was not also irredeemably stupid.  One answer might be that we, as voters, seek out expertise to advise us on whom to vote for.  But if we can seek out expertise in this sphere, then why not also with respect to other things, like good building practices, good doctors, etc.?  The only resolution appears to be that we are wise, community-oriented, and generous when in the voting booth, but are idiots, selfish and greedy when in the market place.  We’re all schizophrenics, it seems.

Another embarrassing question to ask is: How safe must we be?

NORAD has a facility in Colorado, built under Cheyenne Mountain, beneath 2,000 feet of granite, behind 25 ton blast doors. The buildings themselves sit on giant shock-absorbing springs. By all accounts it is a very safe building. It was also very expensive to build. The cost, in today’s inflation-adjusted dollars, would be over $1 billion.  I mention this to remind us that safety is not the only goal of building. It is one of many. Affordability is another. Remember, we have a housing crisis in parts of the country.  Is it possible that homes are too safe, and this is part of why they not affordable to so many?

Government has no magic solution, unknown to the private sector, for avoiding cost/benefit trade-offs. There are no methods, known only to government, for getting safety improvements at zero cost.

Given the inevitability of such trade-offs, the question is then, who decides?

  • Government regulators, in bed with lobbyists from industry, mandating an array of safety (and increasing, environmental) “improvements,” which line the pockets of industry, while raising the cost of construction?
  • Or, the free market, buyers and sellers, eyes wide open, deciding what meets their needs, and ever-reminded by their insurers of the impact to their insurance premiums of various trade-offs they might make?

Of course, just as government has no magical insight into specific cost/benefit trade-offs, neither do libertarians. This is something for individual buyers and sellers, along with their trusted advisers, to hash out in the free market.

How Libertarians Would Pay for Things

4 Comments

Suppose there is some Grand Project that several people want funded. They have a few basic ways of doing this.  They could:

  1. Fund the Grand Project themselves, from money they have on hand.
  2. Try to persuade more and more people to support the Project.
  3. Take out a loan to fund the Grand Project
  4. Attract investors to fund Grand Project, offering to pay them back a percentage of any eventual profits.
  5. Invite a private party to fully fund the Grand Project, which they would then make available to others on a rental or lease or per-use or some other basis, amortizing the cost.
  6. Try a different business model, maybe give big sponsors of the Grand Project naming rights, or offer them space for advertising.

I’m sure you can think of several more. That is the wonderful thing about the private sector, there are so many ways to fund the things that people truly want.

The harder task is funding the things that people don’t want. Let’s take the war in Iraq. How many Americans really wanted that? At the time? A decade later? 20 years later? Today? I’m sure it has very little support. But there it is, funded. Something like that could not be funded by any market-based mechanisms. It can only be funded via taxation. This is not because it the war is expensive. It is not because of free rider or public goods concerns. It is because it is unpopular. Taxation is the only means to fund things that no one in their right mind would fund with their own money. The fact that there is no alternative to this kind of funding, in a libertarian society, is a good thing.  It is a feature, not a bug.

Now, let’s imagine some intermediate Grand Project, something that many people would support with their own money, say at a 70% level. With taxation you would be able to fund it at 100%. Without taxation it would be funded at 70%. You would still have the Grand Project, but it would be a little bit less grand. Or the supporters would need to sell their idea a bit harder, trying harder to persuade citizens, and not just politicians, that it is a good idea.

I think most people understand and appreciate the need for a defensive military. They probably understand less why we still have active troops still in Germany and Japan and in 148 other countries. If the military were funded by voluntary payments, the emphasis would be on defense, and not on being the world’s policeman. Is this a bad thing? Some might disagree. Let them pay for it then, I say. The rest of us would fund a defensive military.

What about social entitlements? I’m sure there is wide support for ensuring the destitute, beset by accidents or tragedy, are not left to die on the streets. Many think that government is the solution here. Many others think private charity should play a major role. Let them vote with their pocketbooks and express their priorities that way. I’m sure when this is done, help for the most needy will be funded at a higher level than, say, corporate welfare, which would have almost no support.  Is this a bad thing? I don’t think so.

So that’s the essential trade-off. In return for some popular projects not being funded 100% by compulsory taxation, and for proponents of such projects needing to work harder to persuade the people actually paying, 100% of all the horrendous things that taxation funds, things that only make sense when someone else pays for it, would disappear. All of it.

I think that is a great trade-off. Arguably, with the money left over, the 70% that want to fund something popular might be able to fund it to 100% or even 110% and still be ahead.

Of course, this is all like garlic and a crucifix to the special interests vampires who survive only by drinking the blood of the living.

The Irresponsibility of Corporate Social Responsibility

Leave a Comment

“Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’ ” was the headline of a statement put out recently by this “association of chief executive officers of America’s leading companies.”   The statement went on to say:

Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance. Each version of the document issued since 1997 has endorsed principles of shareholder primacy – that corporations exist principally to serve shareholders. With today’s announcement, the new Statement supersedes previous statements and outlines a modern standard for corporate responsibility.

Putting aside the fact that neither in logic, nor in law, nor in morals does an individual CEO, let alone the lobbying arm for CEOs, have the ability to “redefine the purpose of a corporation,” it does prompt the question of what the purpose and responsibilities of a corporation actually are, and who decides this.

Read more from my article on Mises Wire.

The Heart of Libertarian Foreign Policy

Leave a Comment

As I write this,  protests continue to escalate in Hong Kong, protests widely described as “pro-democracy.”  At the same time there are also reports of a build up of Chinese People’s Liberation Army forced nearby.

What should the U.S. do?  Should we do nothing, say nothing, with a policy of total non-interference?   Should we make a show of military force, and send an aircraft carrier to the South China Sea?  Should we threaten economic sanctions if China reacts with force to restore order in their territory?

What is a libertarian to think?  Surely, libertarians support freedom?

I think the wisest perspective on this was offered by John Quincy Adams, in 1821, when he was Secretary of State.  In a speech honoring the 45th anniversary of the Declaration of Independence, Adams said:

Wherever the standard of freedom and Independence has been or shall be unfurled, there will her [America’s] heart, her benedictions and her prayers be. But she goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own. She will commend the general cause by the countenance of her voice, and the benignant sympathy of her example. She well knows that by once enlisting under other banners than her own, were they even the banners of foreign independence, she would involve herself beyond the power of extrication, in all the wars of interest and intrigue, of individual avarice, envy, and ambition, which assume the colors and usurp the standard of freedom. The fundamental maxims of her policy would insensibly change from liberty to force…. She might become the dictatress of the world. She would be no longer the ruler of her own spirit….

At nearly 200 years old, this remains the heart of libertarian foreign policy.

Confessions: An Innocent Life in Communist China

Leave a Comment

When it comes to tales of life under communism, narratives of soul-killing repression, the most-read and most-heard ones deal with experiences in the former Soviet Union.  From Arthur Koestler’s fictional Darkness at Noon and Solzhenitsyn’s A Day in the Life of Ivan Denisovich, to news stories of the repression of scientists like Andrei Sakharov and over-the-top Hollywood treatments in the 1980s, we’re familiar with that genre.

From China, however, we’ve heard far less.  Sure, we have a picture of pre-war China in Pearl S. Buck’s The Good Earth.  And we have Bertolucci’s evocative treatment in the movie The Last Emperor.  But these are views from the outside.  Where is the view from the inside? Where is a Chinese writer to stand with Solzhenitsyn and Pasternak?

For your consideration, I’d like to suggest Kang Zhengguo’s autobiographical Confessions: An Innocent Life in Communist China as a strong contender.

Read more on our sister site, Libertarian Book Reviews.

Capitalism and Freedom

Leave a Comment

When Milton Friedman’s Capitalism and Freedom came out in 1962, his was a rare voice defending classical liberal values and the free enterprise system.  For years his ideas were unloved in ruling circles, as the leviathan unleashed by F.D.R.’s  New Deal pressed its tentacles even further into the flesh of American society through Johnson’s Great Society and beyond.

But after nearly a generation wandering in the wilderness, Friedman lived to see the vindication of his ideas, as big government solutions repeatedly failed, and free market approaches out-performed.

The fall of the Soviet Union and communism in Eastern Europe should have sealed the argument.  But bad ideas never truly die.  They merely go dormant.  The anti-liberal contagion awaits the day to entice and poison new audiences, in new generations, with the false promise of heaven on earth, for the price of their soul and their freedom.

Read more on our sister site, Libertarian Book Reviews.

Laconics of Liberty now available as a Kindle eBook

Leave a Comment

I’m pleased to announce that Laconics of Liberty is now available as an eBook for the Amazon Kindle.  This is an annotated edition of a collection of liberty-minded quotations, short passages and poems that Charles T. Sprading assembled back in 1913.  The paperback version was published in April.

For the most part the conversion to an eBook was straightforward.  The hardest part was getting the 165 footnotes of the print version to play nicely with the Kindle platform.  As you probably know, the Kindle does not have fixed “pages.”  Everything flows freely, depending on what font size the reader chooses.

The old solution was to turn the footnotes into end notes, link to them from the text, and then have a return link for the end note.  This was not very user-friendly.  The better solution is to have the note popup at the bottom of the page (similar to where footnotes would be in a print version) so they can be easily consulted and dismissed.  That is what I’ve done and I think you’ll like it.  It looks like this:

 

The New Miracle of the Loaves

1 Comment

Say there are 10 loaves of bread, and 20 hungry people. What is a fair way to distribute the loaves?

Answer however you want, and it will be the wrong answer. Wrong, because the question is wrong. Distribute how you will, but then ask yourself, what happens the next day, after the loaves are eaten and gone?

Distribution is not really the interesting problem. Any idiot can distribute loaves of bread (In Venezuela an idiot essentially did). The harder part is encouraging a system where loaves of bread are created, today, tomorrow and the next day.

Teach a society how to redistribute loaves and we’ll all eat for a day. Teach them about exchange and trade for mutual benefit, investment, employment, division of labor and comparative advantage—in other words free market capitalism—and they will eat all the days of their lives.

Let’s Pay Everyone the Same!

Leave a Comment

It is sometimes proposed to institute a “maximum wage” of sorts, to reduce inequality with either a hard income cap, or by restricting the ratio of the highest paid to the lowest paid person in a corporation.  Let’s do a thought experiment to see what might result from such a scheme.

Imagine a supermarket aiming to reduce inequality.  To this end, every item in the supermarket has the same price sticker on it. Everything costs the same. How would this work out?  At the end of the week, what do you think is left on the shelves and what is not? What will be restocked the next week by the wholesaler and what will not? What will producers be shifting their production to?

Hopefully your intuition leads you to suspect that everyone grabs the steaks and the cigarettes on the first day. The wholesalers then hoard these goods and only ship the cheapest goods to the stores the next week. After that, only the cheapest goods are officially produced and sold. The more expensive goods, if they exist at all, are only available on the black market, where they exchange at something closer to a free market price.

The same would be true in a job market, if everyone were paid the same.  Everyone would want the fun jobs, taking care of puppy dogs, playing in a rock band or being a centerfold photographer. Very few would want to do the messy and unpleasant jobs, or jobs that require many years of study, like becoming a doctor.

Of course, you might try to prevent this dynamic by having the government test everyone, to determine their aptitudes, and assign each person a mandatory occupation, according to the “needs of society.” Some of those jobs, no doubt, would be those of a jailer and border guard, to imprison those who rebel against such notions, or shoot those who try to flee the country.

The secondary effect would be that everyone would do a half-assed job at their work. In any given line of work, say an auto mechanic, the most-skilled and most-efficient and most-diligent worker would get not one cent more than the idiot who returns cars worse than when they arrived. With no incentives for excellence, few would strive to excel.

The third predictable outcome is that those of skill and talent would make their services available, at something approximating a free market price on the black market. Side by side with this would be a common practice of bribery. To get a qualified plumber, electrician, etc., would require a bribe.

Of course, the profit motive is not the only incentive known to man. In a pinch the threat of a firing squad can work as well.