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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On Sweatshops, Liberty, and Social Justice

(Austrian) Economics, Business, Libertarian Theory, Nanny Statism, The Left
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Over at the Center for a Stateless Society, Michael Kleen asks whether compassionate libertarians can agree to oppose sweatshops as a matter of social justice. Ah, but what does he mean by “oppose” and “social justice”?

Libertarianism is not about people just getting by; it is about maximizing human liberty. Liberty cannot be achieved as long as eking out a living in dangerous conditions for 12 to 14 hours a day is an individual’s most attractive option.

So there could not have been liberty prior to modern times?

Either this line of argument was not thought out or Kleen subscribes to a Marxist-style determinist-materialist conception of history. I hope for the former, as these lines strike me as a propagandistic rhetorical flourish.

Incidentally, the conception of liberty used by Kleen here equivocates between the libertarian conception (i.e., not being subject to the threat or use of initiatory physical force) and a more left-liberal/socialist conception of liberty as positive economic freedoms. I’m afraid compassionate libertarians cannot get on board with such a conflation. To treat both as a matter of political justice is to try to wed contradictions, because “promoting” positive economic freedoms in this way will necessarily require the violation of rights (liberty). This is the mistake made by statist socialists and left-liberals.

Although Kleen uses the term “social justice,” he actually conflates political justice and social justice here and elsewhere in his post. If one insists on using the term “justice” in reference to positive economic freedoms, it is important to distinguish social justice (more a matter of personal morality and unenforceable in a libertarian legal system) from political justice (liberty/rights, which are enforceable in a libertarian legal system).

Kleen also seems to conflate pointing out that people often choose to work in a sweatshop because they see it as better than the alternatives with endorsing sweatshops as ideal work environments. I can’t speak for everyone who doesn’t see sweatshops as unjust and an indictment of capitalism, but I think that most do not think of sweatshops as ideal or unequivocally good. We just do not think that capitalism, as amazing as it is, can magically allow a poor, agricultural society to just skip over the terrible working conditions of the Industrial Revolution in its transition to an industrial or post-industrial economy.

Sweatshops are simply often better than the alternatives available and opposing them via statist means will only be counterproductive, harming the very poor such policies are meant to help. This does not mean we “favor” sweatshops in the abstract or propose them as an ideal business model. It does not mean we do not sympathize with the plight of the poor working in such conditions. Having to point this out makes me feel like I do when libertarians oppose the state performing some function and statists of all parties assume that means we don’t want that function performed at all — e.g., we oppose social-welfare policies so that must mean we hate the poor and want them out on the streets, starving to death, dying of disease. Hardly.

Kleen’s post contains a few other nits in need of picking:

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Mises Seminar — Australia

(Austrian) Economics, Anti-Statism, Education, Libertarian Theory, Statism, The Basics
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Austrian and libertarian ideas are spreading around the globe, thanks in large part to the work done by the Mises Institute to promote and spread these ideas. A case in point is the Mises Seminar being held November 25 and 26 in Sydney, Australia, and being put on by Aussienomics, an Austrian-Australian group, Liberty Australia, and the Macquare University Libertarian League. As the Aussienomics site notes,

On the 25-26th of November, a watershed moment in the history of Australian liberty will be occurring in Sydney: the Australian Mises Seminar. Over the past year we have collaborated with the best and brightest representatives of Austrian economics and libertarianism in Australia to bring you this incredible weekend.

The lead speaker at the event Hans-Hermann Hoppe. The event looks like it will be fantastic and soundly rooted in principled Rothbardian libertarian and Misesian-Rothbardian Austrian economics.

What really impressed me was the beautiful 108 page programme they produced (yes, 108 pages). It’s full of nice pictures and illustrations of Mises, Rothbard, and others, inspiring quotes, and an overview of the seminar. The main reason for its length, however is that it contains “Pre-Seminar Reading”. I’ve never seen this in a programme before but it’s a great idea (and possibly only because the material they drew from was from sources that do not lock down the content using state copyright law). As the programme explains:

The readings help provide a basic foundation and understanding of the core principles used to analyse the more complex issues that will be under discussion at the seminar. They will help you follow the overall themes and make informed contributions should you choose to do so. As a result, everyone gets more from attending the seminar.

The overview section first contains an article entitled A Primer on Austrian Economics by Jonathan M. Finegold Catalan which gives a brief summary of the school of thought, its history and contributions. The fundamental difference between advocates of the Austrian school and the rest of the economics profession is methodology. The second chapter of Hans-Hermann Hoppe’s book Economic Science and the Austrian Method, is On Praxeology and the Praxeological Foundation of Epistemology. This enthralling exposition highlights Mises insights and makes the case for praxeology as the ultimate foundation of all knowledge. Anatomy of the State by Murray N. Rothbard exemplifies the case as to what the state is, what it is not and why its existence should be lamented. What Libertarianism Is by Stephan Kinsella clarifies what separates libertarianism from other political philosophies.

The programme may be downloaded here. A podcast by some of the organizers discussing the Seminar may be found here.

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Wozinski: “A Priori of Justice”

(Austrian) Economics, Libertarian Theory
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Jakub Wozinski, who previously published “Hayek and Departure from Praxeology” in Libertarian Papers, asked me to post the draft of his working paper “A Priori of Justice” (RTF; PDF; text here). His note is below. Feel free to email comments to him or leave them in the comments field below.

 “A Priori of Justice” is an attempt to systematize the whole libertarian legal theory. This paper is based mostly on Hoppean and Rothbardian concepts, but I suggest some improvements. In my approach I emphasize homesteading should be understood as change of location and surety, i.e. material substratum of valid contracts. It is my view that this perspective can shed new light on the whole of libertarian theory.

Another aspect of my paper is the identification of law and ethics as one integrated theory justified by action and argumentation axioms. A libertarian legal code is presented as the only possible ethic and all other theories considered hitherto to be ethics are just beliefs which cannot be rationally proved.

I am hopeful that the reader will find in “A Priori of Justice” more than just the repetition of the old theories and will be surprised by my fresh approach.

Before publishing this paper, I would like to receive comments and other suggestions for improvement or refinement from other libertarians interested in these matters. I will be grateful for any comments (please send them to: wozinski@poczta.onet.pl).

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“The mountains are high and the emperor is far away”

(Austrian) Economics, Business
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Reason.com has posted an excellent article on Wenzhou, China, a city built almost entirely upon private enterprise:

For the last 30 years, private citizens in this southeastern China metropolis have largely taken over one of the least questioned prerogatives of governments the world over: infrastructure.

Driving down the cluttered and half-constructed streets of this 3-million-strong boomtown requires frequent U-turns and the patience of Buddha, but every road eventually leads back to a factory. Each factory is in turn surrounded by a maze of roads filled with hundreds of small feeder shops selling spare parts, building materials, and scraps. Every haphazard street in this town seems to have an economic purpose….

Wenzhou shopping districtThe official channels of financing and investment are routinely bypassed, replaced by local institutions with their own governance and lending rules.  It all works, if a bit haphazardly:

Gray-market lenders are often established, though technically illegal, financial institutions that lend primarily working-capital loans at rates as high as 10 percent a month. Contacts often modify interest rates based on how well you know them. Forms of repayment enforcement differ. Weng points out that in a community so dependent on guanxi—relationships—defaulting on a contact’s loan could blackball you from future business opportunities….

Lending also takes place through a number of formal lending institutions that have become informal depositing institutions. Pawnshops in Wenzhou are very different from those in the West. The shops can give out loans of millions of dollars backed by property and stocks, and they can pay depositors interest rates three to four percentage points higher than the official lending rate at banks.

It’s a vivid example of what can be achieved when the central planners are too far away to have much influence and local bureaucrats learn to simply get out of the way.  If only U. S. bureaucracy was so ineffective!

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