Tag Archives: Austrian School / Libertarian Theory

Exploitation — 6 of the 10 richest counties in U.S. are in DC area

(From washingtonexaminer.com)

I like Hans Hermann Hoppe’s resurrection of the terms “exploiters” and “exploited.” In his essay, Marxist and Austrian class analysis, he describes the surprisingly common ancestry and common ground between the Marxist and Austrian Schools, then explains how the Marxist depart down the road to tyranny and depravity with their patently absurd Exploitation Theory, which misidentifies the exploiters.

The exploiters are NOT the owners of capital (business men). The exploiters are those who instead of producing goods and services society voluntarily consumes, feast in the coercive sector of the economy — on wealth taken from the voluntary sector of the economy by force or threat of force. These are the exploiters.

And I suspect they are the people who largely make up the 6 out of the 10 richest counties in the U.S. which are around DC.

The Scandinavian-Welfare Myth Revisited

It is always good to look at the history of a country when examining its economic performance. Stefan Karlsson did just that back in 2006 in an excellent article on the economic history of Sweden. I will therefore only give a brief overview of this subject before focusing on the central point of this article.

Karlsson wrote the following:

As a result of its free market policies, the resourcefulness of its people, and its successful avoidance of war, Sweden had the highest per-capita income growth in the world between 1870 and 1950, by which time Sweden had become one of the world’s richest countries.

. . . .

Indeed, thanks to its “neutrality” during WWII, Sweden was never bombed or invaded.[1] This left Sweden’s industries intact and unharmed, which, along with its free-market-oriented economy, enabled the country to profit extensively from the reconstruction of war-torn continental Europe: Sweden exported huge amounts of goods and natural resources to the rest of Europe, fueling an economic boom in Sweden that lasted for over two decades.[2] As Karlsson points out, during this time “Sweden was still one of the freest economies in the world, and government spending relative to GDP was in fact below the American level.”

On the back of this boom the Swedish government began setting up a massive welfare state throughout the 1950s, ’60s and ’70s, causing government spending to skyrocket to more than 50 percent of GDP. At one point during the mid-’70s, the top marginal tax rate was an unbelievable 102 percent.

One of the people who were burdened with this tax was Astrid Lindgren, the famous author of children’s books best known for her Pippi Longstocking series. In 1976 she wrote a satirical short story published in one of Sweden’s biggest newspapers, where she told the tale of a troubled children’s-books author called Pomperipossa, who lived in the fictional kingdom of Monismania. Among other things, Pomperipossa pondered why the more she earned, the less she got to keep, and why people like her were being economically punished by the government simply for writing popular children’s books. The story also mentions that in Monismania one could escape some of the taxes by purchasing real-estate property, which is exactly what the Swedish secretary of the treasury, Gunnar Sträng, had been doing at that time.

Lindgren’s story stirred up a fierce tax debate in Sweden, and for the first time in 44 years the incumbent Social Democratic Party lost the general elections.

The Swedish economy was in an uphill struggle throughout the ’70s, mainly because the increasingly socialist policies had caused the economy to stagnate and lag behind the rest of the world. Many other European countries had caught up with Sweden and its monstrous welfare state and were now outperforming the country economically.

In an effort to save the economy, the government carried out extensive reform and liberalizations throughout the ’80s and ’90s, cutting taxes and welfare expenditures, abolishing government monopolies, reducing regulation, floating the currency, and permitting more private alternatives in the public sector.

This increase in economic freedom is partially illustrated in Fig. 1, which comes from the Heritage Foundation’s annual Index of Economic Freedom.

. . . .

We have seen that while the Scandinavian countries have extremely high amounts of what Rothbard called binary intervention, i.e., taxation, their saving grace is their relatively lower amount of triangular intervention, i.e., regulation. This puts the Scandinavian countries on a level playing field with other developed countries and helps explain why they are able to have equal or higher living standards. The misconception that the other Western countries are a lot more free-market oriented than Scandinavia is very unfortunate; it feeds the notion that more government expansion would bring joy and happiness to all, when in fact it would make things worse.

However, the real point of all this is that the world at large is so unfree that even the massive Scandinavian welfare states can be considered among the “most free” countries in the world. While things have generally moved in the right direction in Scandinavia in terms of increased economic freedom, the very opposite trend seems to be taking place in several other countries, particularly the United States. Seeing as the United States has already descended to the level of Denmark in terms of economic freedom, one can only wonder how long it will be before it finds itself approaching Finland, Norway, and Sweden. (Read more from mises.org)

My two favorite Mises Institute lectures

Keynesian Predictions vs. American History

Tom Woods is a very lucid and exciting speaker. I love this particular lecture because it reveals some monumental bits of hidden history.

Lecture begins @ 5:00.

@8:20 Tom Woods talks about how Keynesians predicted massive unemployment and a depression in 1946 because of demobilization of the military and huge reductions in government spending. In fact, 1946 was the single greatest economic year for the United States.

@18:00 Tom Woods talk about influential American economist Paul Samuelson who repeatedly praised the Soviet Union in an influential Economic text widely used in classrooms from 1973 to 1989. Samuelson wrote, among other things, that Soviet political oppression might be worth its economic gains.

In the 1989 edition he wrote “Contrary to what many skeptics had earlier believed, the Soviet economy is proof that a socialist command economy can function and even thrive.”

There was gigantic Soviet propaganda in the United States, and I like when people have the courage to point it out.

***

Technology and Social Change

I love this lecture by Jeffrey Tucker for its last ten minutes. Skip to 20:00 if you just want the best of it. He dispels the myths that progress is driven by government force or even by great individuals. Eli Whitney did not invent the cotton gin (people have been ginning cotton since the 5th century), and the Wright brothers did not invent the airplane. (They got one little patent, and sued the pants off everyone else working on airplanes. This set American aviation back so far that the U.S. had to buy planes from France during WWI.)

Progress, he argues, is made in little steps by ordinary people imitating success and making modest improvements. I found this very inspirational.

Greek Dairy Farmers & Coercion

Farmers threatened to block traffic on major roads in Greece on Monday to demand full payment of subsidies they are entitled to and better prices for their produce.

The farmers announced the planned protest Sunday after meeting with a minister in Greece’s government, which is trying to pull the country’s economy out of its worst debt crisis in decades. (AP) (Read more from ynetnews.com)

Learn to recognize coercion. This example is what Frederic Bastiat called “rent seeking.” Rather than rely on the voluntary exchange of goods and services, these farmers seek to acquire wealth by bending for forceful hand of government. They demand subsidies. Subsidies are monies taken from the public by force or threat of force and redistributed.

They make everyone poorer. By keeping the money in private hands, new industries would emerge; industries which produce things society voluntarily consumes. Instead, society is forced to buy over-priced milk.

Other countries are also hurt by this. Perhaps some poorer nation can produce very inexpensive milk. When government subsidizes local milk (or restricts trade via tariffs), the economies of foreign nations are hurt. This is wonderful for statists. Not only do they get to redistribute wealth from the public to the milk farmers, but now they have reason to take more wealth from the public and spend it on foreign aid, all the while proving their benevolence.

Jobs Jobs Jobs and the Broken Window Fallacy

This video points to the same bit of government hypocrisy as the important broken window fallacy When money is taken away from people and spent on either unproductive jobs or the repair of a broken window, it is not a net gain for society. This principle comes up often.

Hard to believe this bullshit is in bloomberg, but here it is:

The 2010 census couldn’t have come at a better time for the U.S. economy.

The government will hire about 1.2 million temporary workers in the first half of the year to administer the decennial population count, possibly providing a bridge to gains in private employment later in the year.

The surge will probably dwarf any hiring by private employers early in 2010 as companies delay adding staff until they are convinced the economic recovery will be sustained. Money earned by the clipboard-toting workers going door-to-door to verify the government population survey is likely to be spent, giving the economy an extra lift.

How Government Drives Up College Tuitions

This is several months old, but it is fantastic. How can anyone possibly oppose college tuition subsidies? Please listen and learn. Like most government programs, government tuition subsidies punish exactly the people they presume to help.

Yale University

1810-1852 tuition = $33/year or 1.65 ounces of gold
1918 tuition = $160/year (dollars were inflated during WWI) = 8.4 ounces of gold = 32 days of manual labor
2009 tuition = $36,500/year or about 33 ounces of gold = 550 days of manual labor

This was caused not by freedom or greed. It was caused by reckless government subsidies.

The False Promise of Energy Self-Sufficiency

All the goods and services of modern life are the result of the division of labor carried to immense proportions. Self-sufficiency in anything, whether it be energy or toilet paper, means that we should restrict the division of labor to some extent. Think of our economic world as a bulls-eye. The small dot in the middle would be the goods and services represented by a subsistence economy, such as that of the North American Indian tribes. Small bands of people provided everything they consumed themselves. As capital and the division of labor expand, we move further out on the rings and the size of the economy grows exponentially larger. Instead of hunting our own food and weaving our own clothes, we rely upon the specialized skills of others, who perform only small pieces of the entire process but who perform their process unbelievably efficiently and productively. The division of labor expands to such a degree that we no longer understand how most goods that we consume are produced. We take all this for granted, yet it is a miracle of the free market. The more people engaged in the division of labor, the greater will be the total amount of goods and services available. Of course, the largest possible extension of the division of labor, until we trade with alien worlds, is the entire population of planet earth. (You can be assured that shortly after encountering our first alien civilization, entrepreneurs will be looking for trading opportunities!)

It is clear from this explanation that reverting backward from a more extensive division of labor society to a less extensive one means that society must accept a lower standard of living. There are two main causes for such an unfortunate occurrence—war and misguided economic policy. (Read more from patrickbarron.blogspot.com)

The Case Against Protectionism

As a general concept, free trade has many supporters. Most of us agree that trade with other nations is a good thing. We get stuff that we would not otherwise have and/or it is much cheaper. Examples include many food items that grow only in special climates, such as fruits and vegetables. Some foodstuffs cannot be grown here, or they can be grown only in special climate-controlled facilities. If the U.S. prohibited the importation of these foreign foods, we would not have them at all or they would be very high priced and, therefore, not available on the mass market. Therefore, it is not difficult to advocate free trade in these items, although even here the U.S. shamefully prohibits the free importation of sugar cane from poor Caribbean nations and corn from poor African nations, just to name two of the most egregious protectionist policies. These are nothing more than gifts to mostly rich American sugar and corn producers, at the expense not only of the American consumer but also, perhaps more importantly, at the expense of poor farmers in the Caribbean and Africa. (Read more from patrickbarron.blogspot.com)