Recessions are Dangerous

Business Cycles, Statism
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The problem FDR faced in 1938 was not all that different from that faced by President Obama and the Congress today. The bad economic times stretch on and on, and there is open talk of high unemployment as far as the eye can see. After years of claiming to see “green shoots,” officials are downplaying the chance of substantial economic recovery.

And it’s not just in the U.S.; the problem exist in Europe too, where there is a widespread belief that the European Union, as symbolized by Euro, cannot last. The OECD just predicted a double dip recession pending in the UK.

At the midpoint of Roosevelt’s second term in office, a profound fear gripped the White House that there was no real answer to the depression that seemed to continue on and on. Every respite was followed by yet another plunge in productivity, and clearly unemployment would not improve. Unemployment was 18%, which was higher than two years earlier. (Note that the broadest measure of U.S. employment today is 17+%.)

It is a documented fact that his advisers were the first to draw his attention to the possibility of stoking international problems involving the far East. Japan was the target and a series of embargoes, demands, sanctions, and diplomatic moves reinforced that the point of inspiring a massive movement in the U.S. to push for peace.

Responsible writers at the time drew attention to the plot and speculated about what was really going on. The history of the journalism of this entire period came to be buried in the ash heap of history following the Second World War. But it remains a fact that historians cannot and do not deny: FDR saw advantages in war and dearly wanted the U.S. involved – and that is true regardless of whether you believe that Pearl Harbor constituted his “back door to the war.” …

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Spooner the Entrepreneur

Anti-Statism, History
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(I’m reposting this from Whiskey&Gunpowder because it is of particular libertarian interest)

How much more ridiculous can the US Postal Service get? This you will not believe. It has embarked on a public relations campaign to get people to stop sending so much email and start licking more stamps. This is how it is dealing with its $10 billion loss last year. Meanwhile, rather than offering better service, it is cutting back ever more, which can only guarantee that the mails will get worse than they already are.

It’s true that mail still has a place in the digital world, as the post office says. But the government shouldn’t be the institution to run it. It already has competitors in package delivery but the government stands firmly against letting any private company deliver something like first class mail. And so it has been since the beginning. The state and only the state is permitted to charge people for non-urgent paper mail in a letter envelop.

It’s a control thing. The government is into that. And it is far from new.

Do you know the amazing story of Lysander Spooner? He lived from 1808 to 1887. His first great battle was taking on the post office monopoly. In the 1840s, he was like most people at the time: fed up with the high prices and bad service. But as an intellectual and entrepreneur, he decided to do something about it. He started the American Letter Mail Company, and his letter business gave the government some serious competition.

It opened offices in major cities, organized a network of steamships and railroads, and hired people to get the mail to where it needed to be. His service was both faster and cheaper than the government’s own. Then he published a pamphlet to fight the power: “The Unconstitutionality of the Laws of Congress Prohibiting Private Mails.” It was brilliant. It rallied people to his side. And he made a profit.

The government hated him and his company and began to litigate against him. It dramatically lowered the price for its services, and used public money to cover its losses. The goal was to bankrupt Spooner, and it eventually succeeded. Spooner’s private postal system had to be shut down. It’s the same way the government today shuts down private schools, private currencies, private security, private roads, private companies that ignore the central plan, and anyone else who stands up for freedom.

From this one anecdote alone, you can see that the post office is hardly a “natural monopoly” — something the government has to provide because free enterprise can’t do so. It is a forced monopoly, one kept alive solely through laws and subsidies. If the post office closed its doors today, there would be 1000 companies rushing in to fill the gap. Just as in the 1840s, the results would be cheaper, better services. The government runs the post office because it wants to control the command posts of society, including communication. The Internet as a global communication device snuck up on the state before the state could kill it.

Let’s return to the 19th century. Spooner didn’t go away. He was more than an entrepreneur. He was a brilliant and pioneering intellectual, as the collection The Lysander Spooner Reader makes clear. He was a champion of individual liberty and a passionate opponent of all forms of tyranny. He was an abolitionist before it became fashionable but he also defended the South’s right to secede.

Most incredibly, he was probably the first 19th century American to return to the old anti-Federalist tradition of post-Revolutionary America. He did this by asking the unaskable question: why should the US Constitution — however it is interpreted — be binding on every individual living in this geographic region?

This document was passed generations ago. Maybe you could say that the signers were bound by it, but what about those who opposed it at the time, and what about future generations? Why are the living being forced to live by parchment arrangement made by people long dead? Why are the living bound by a privileged group’s interpretations of its meaning?

In his view, people have rights or they do not have rights. If they have rights, no ancient scroll restricting those rights should have any power to take those rights away. Nor does it matter what a bunch of old guys in black robes say: rights are real things, not legal constructs to be added or reduced based on the results of courtroom deliberations. Plenty of Americans before his time would have agreed with him! It’s still the case.

Now, keep in mind that Spooner lived in a time where the living memory of these debates had not entirely disappeared. He knew what many people today do not know, namely that the Articles of Confederation made for a freer confederation of states than the Constitution. The Constitution amounted to an increase in government power, despite all its language about restricting government power. Remember too that it was only a few years after the Constitution was rammed through that the feds were suddenly jailing people for the speech crime of criticizing the US president!

Spooner spoke plainly: what you call the Constitution has no authority to take away my rights. Hence his famous essay: “Constitution of No Authority.” In “No Treason” he argues that the state has no rights over your freedom of speech. In “Vices Not Crimes,” he shows that people in any society are capable of doing terrible things but the law should only concern itself with aggression against person and property. Reading them all together, as they are in this book, is a radicalizing experience — a liberating experience. It makes you see the world in a completely different way.

It’s true that they aren’t teaching about Spooner in public school. But he was a giant by any standard, the 19th century’s own Thomas Jefferson (but even better than Jefferson on most issues). There is still so much to learn here. It’s no wonder that his legacy has been suppressed.

This edition of his best work is published by Fox & Wilkes, an imprint of Laissez-Faire Books. Incredibly, you are still permitted to buy this and read it without getting arrested — for now.

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Power, Both Pathetic and Terrifying

Fiction Reviews (Movies), Police Statism, Pop Culture
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J. Edgar, the new film directed by Clint Eastwood and starring Leonardo DiCaprio, is making the news for dealing frankly with the decades old rumors concerning Hoover’s private life. But that’s not what makes the film immensely valuable. Its finest contributions are its portrait of the psycho-pathologies of the powerful and its chronicle of the step-by-step rise of the American police state from the interwar years through the first Nixon term.

The current generation might imagine that the egregious overreaching of the state in the name of security is something new, perhaps beginning after 9/11. The film shows that the roots stretch back to 1919, with Hoover’s position at the Justice Department’s Bureau of Investigation under attorney general A. Mitchell Palmer. Here we see the onset of the preconditions that made possible the American leviathan.

Palmer had been personally targeted in a series of bomb attacks launched by communist-anarchists who were pursuing vendettas for the government’s treatment of political dissidents during the first world war. These bombings unleashed the first great “red scare” in American history and furnished the pretext for a gigantic increase in federal power in the name of providing security. In a nationwide sweep, more than 60,000 people were targeted, 10,000 arrested, 3,500 were detained, and 556 people were deported. The Washington Post editorial page approved: “There is no time to waste on hairsplitting over infringement of liberties.”

Here we have the model for how the government grows. The government stirs up some extremists, who then respond, thereby providing the excuse the government needs for more gaining more power over everyone’s lives. The people in power use the language of security but what’s really going on here is all about the power, prestige, and ultimate safety of the governing elite, who rightly assume that they are ones in the cross hairs. Meanwhile, in the culture of fear that grips the country – fear of both public and private violence – official organs of opinion feel compelled to go along, while most everyone else remains quiet and lets it all happen.

The remarkable thing about the life of Hoover is his longevity in power at every step of the way. With every new frenzy, every shift in the political wind, every new high profile case, he was able to use the events of the day to successfully argue for eliminating the traditional limits on federal police power. One by one the limitations fell, allowing him to build his empire of spying, intimidation, and violence, regardless of who happened to be the president at the time.

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The Chamber Says: No Unauthorized Progress!

Business, Corporatism
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Auburn, Alabama, experienced some tornado damage the other day, and the place was just a mess. Trees were down. Houses had collapse. Fences were in tatters. Yards were trash heaps. The damage was not major by any standard but there was plenty to do in the wake of this one.

As happens, enterprise was there to make a buck fixing things up. Contractors came from all states in all directions. The unemployed suddenly had work. Skills that had been dormant were suddenly needed. This isn’t the Broken Window fallacy; it is just a reality that new kinds of work needs to be done and enterprise jumps at the chance. Good for enterprise and good for those who need help repairing the damage.

So get this. The following note appeared in my inbox this morning, from the Chamber of Commerce:

The chamber would also like to remind those of you who have damage to your personal property to ask for proof of a license to do business in Auburn as you are negotiating with contractors and other businesses for cleanup, roof repair and other services. Additionally, we as a chamber encourage you to use your local chamber members first. For your convenience we have provided you with a list of chamber members who could offer their service to you.

What’s the priority? Getting the job done or preserving the cartel of favored businesses? We know where the Chamber stands.

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The Future of Books

Business, Technology
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BusinessWeek offers an interesting inside look to the bankruptcy of Borders. The perception that many people had was that this was a blow delivered by Amazon and ebooks, that there is no future to the bookstore. It might be true but the Borders case is not a good case in point, argues this article.

The piece points out that the store it is profiling here was actually very profitable, and increasingly so in the last few years. In fact, more than half the stores were in the black. The reason it closed was entirely due to the overall financial health of the company and a series of bad management decisions. It expanded insanely and wildly during the boom years, gobbling up ever more real estate as prices were soaring. When the bust hit, prices crashed and its investments in physical space suddenly looked stupid. This put massive pressure on the operation. It could no longer sustain its profitability expectations and its belief that the boom would last forever didn’t materialize. There were also a series of too-little-too-late decisions regarding digital media.

I find this account very persuasive. People without knowledge of the way business works always assume that any company that is going belly up was flopping, that people just weren’t buying the product. That is not usually the case. What it means is purely a matter of accounting: costs outran revenue and expected revenue. That can happen very easily with a few, small miscalculations. No matter how much success you are experiencing, it is the cost accounting that ultimately matters. This is true regardless of whether we are talking about a multinational with $5 billion in sales or the lemonade stand down the street. Every firm faces the same cost/revenue matrix.

Cost accounting rules, whether big or small, and this is true for everyone. This is the great egalitarianism of the market that is hardly ever noted or noticed by people who know nothing of business life.

To be sure, the book business must and will change, and dramatically. The old-line publishers will be buried. Laissez-Faire Books will be on the cutting edge. (Unpaid advertisement: please like Laissez-Faire Books FB page!)

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