Tuesday, July 31, 2007

The Commercial Tendency

"It is clear that the more the commercial tendency prevails, the weaker the tendency to war must become."

Benjamin Constant
French intellectual and politician

Monday, July 30, 2007

Where Things Look Worse

Americans are well-known optimists. Or they used to be.

Reviewing the results of the Pew Global Attitudes Project, Michael Barone writes in the National Review that "...only 25 percent of Americans are positive about the direction of the nation, down from 41 percent in 2002. In only a handful of the 47 nations are there declines of similar magnitude — Uganda, the Czech Republic, France, Canada, and Italy."

It is understandable that the people in Uganda are not optimistic about the direction of their country, although it's hard to imagine things there getting worse. In France, pessimism is chic. It makes one sound intellectual, cosmopolitan, and very un-American. Barone surmises that the other three countries are on the list due to nasty political fights in Prague, Ottawa and Rome. That is probably true for the US, as well.

The common thread in all four capitals is the popular expectation that political action is appropriate and necessary to solve most of the problems in life, whether international, national or personal. When you expect government to solve all the problems in the world, from terrorism to telemarketing, you'll naturally be disappointed when the political system seizes up.

Meanwhile, politicians gain office by recasting everything as a political problem and claiming they have the political solution. Then they stay in office by blaming their political enemies for lack of progress. Considering the unrealistic expectations of the voters, the exaggerated claims of the politicians, and the inevitable disappointing results, it is no wonder that so many people are gloomy about their nation's future.

Only when citizens realize that it is a bad idea to demand political solutions for every inconvenience in life will they enjoy a renewed sense of optimism. Optimism requires faith in the future and a sense of control over one's destiny. Politics cannot reliably deliver either one. If anything, blind faith in politics leads to frustration and despair.

Pessimistic about politics. That's the most realistic view of all.

Sunday, July 29, 2007

The Basic Needs of Citizens

Who or what should be responsible for providing the basic needs of citizens?

If you answered "the government," you have some illustrious company, none other than Mikhail Gorbachev, the last president of the former Soviet Union. In an interview in Pravda, he said:

"...the government should satisfy the basic needs of the citizens – that’s a top priority. If authoritarianism is required to do the job, I’m ready to give my full support to this kind of authoritarianism."

In an unrelated but ironic development, Gorbachev appears in an advertising campaign for luxury luggage maker Louis Vuitton. Perhaps Louis Vuitton luggage is one of those basic needs, at least for those citizens who are more equal than others.

Saturday, July 28, 2007

SC Premier of "Mine Your Own Business"

The South Carolina premier of Mine Your Own Business, a documentary about the dark side of environmentalism, will be shown at the American Theater in Downtown Charleston in September.

The Bastiat Society is offering the controversial documentary by Phelim McAleer and Ann McElhinne to the public, free of charge.

The film will be shown at the American Theatre, 446 King Street in Charleston on Wednesday, September 5th, 2007 at 5 pm.

“Move over Michael Moore. You have competition in the art of political film making…but instead of advancing the cause of smug liberal hypocrisy, he’s [McAleer] debunking it.” – Wall Street Journal Online.

Space is limited.

RSVP to: Stephanie Whitener

Friday, July 27, 2007

When Traders Get Things Right

One of the best books on business is "When Genius Failed" by Roger Lowenstein. It is the the story of the spectacular and scary 1998 blow-up of the hedge fund Long Term Capital Management.

Although the book focuses on the financial markets, it offers lessons for business in general. My favorite passage:

"Even when traders get things 'right,' markets can hardly be expected to oscillate with the precision of sine waves. Prices and spreads vary with the uncertain progress of companies, governments, and even civilizations. They are no more certain than the societies whose economic activity they reflect. Dice are predictable down to the decimal point; Russia is not; how traders will respond to Russia is less predictable still. Unlike dice, markets are subject not merely to risk, an arithmetic concept, but also to the broader uncertainty that shadows the future generally. Unfortunately, uncertainty, as opposed to risk, is an indefinite condition, one that does not conform to numerical straight jackets."

The broader business moral in the story of Long Term Capital Management is that the world is far less stable and predictable than we care to admit. Finance and accounting make the world manageable, but they do not necessarily make the world more predictable. This is true because finance and accounting are themselves a subset of the way the human mind sorts through large seas of data in search of signficant details, a process science defines as cognition.

Cognition creates a sense of order in the universe that is tremendously useful for accomplishing many tasks. But it is dangerous to assume that that particular sense of order is all there is, or that it will capture all the significant details, or that it will remain permanently useful.

Cognition is like a map. A map is useful because of what it includes, and because of what it leaves out. When circumstances change, it can be worthless for the same reasons.

Thursday, July 26, 2007

"To the Use of Merchants"

The Antwerp Bourse (from the Latin bursa, or purse) was one of the world's first securities exchanges. It opened for business in the 16th century. It's motto is as good today as it was then: "To the use of merchants of every land and tongue."

Business is not about patriotism, language, or religion. People who live in different countries, who don't speak the same language, and who don't worship in the same place can peacefully do business together, to their mutual satisfaction.

Wednesday, July 25, 2007

Power, Corruption, and Success

Great myths are always about us, and about somewhere else.

The tales of Harry Potter offer us universal morals about power, corruption and success. They offer them through the lens of a young boy with British sensibilities, coming of age in the modern United Kingdom. He is also a wizard, locked in a life-or-death battle with relentless evil.

Some French intellectuals deconstructed the texts of the Harry Potter phenomenon in search of grander – or more menacing – conclusions. No surprise, they found them. Equally no surprise, they don’t agree.

Perhaps their high-brow criticism has something to do with J. K. Rowling's less-than-flattering portrayal of the French wizard school, Beauxbatons, in Harry Potter and the Goblet of Fire. Or, perhaps they cannot admit that it might be a harmless thing that something as quintessentially British as Harry Potter is so popular all over the world, even in France. Or maybe it has been so long since some French intellectuals actually witnessed a market economy satisfying human needs that they have a hard time believing in one, even in a work of fantasy. Regardless of their motives, they have concluded that Harry Potter represents everything from a ruthless capitalist to a crusading antiglobalist.

The truth is, the world of Harry Potter is first and foremost British. His school, its students, their social priorities, their names, and even their slang make the world of Harry Potter irresistibly British.

Britain provides the place, the launching point of the mythic enterprise, the sense of somewhere else. But the morals of the story are universal. Lord Acton famously observed, "Power tends to corrupt, and absolute power corrupts absolutely.” In Harry Potter and the Order of the Phoenix, the just released movie based on the earlier book, corrupt power is immediately on display. In almost the first scene, two dark creatures under the control of a government agency, the Ministry of Magic, attack and nearly kill Harry and his cousin, Dudley.

In order to save their lives, Harry performs a difficult magic spell. He is successful, but instead of being praised as a hero, he is stunned to learn that he might lose his wand and be kicked out of school for breaking wizarding laws.

The Minister of Magic, Cornelius Fudge, is corrupt, power-hungry, self-righteous and paranoid. He wants to get Harry out of the way as quickly as possible. Fudge plants a spy in Harry’s school, Dolores Umbridge. She is sadistic and inflexible. She imposes rule after rule to suppress non-conformists, until she assumes complete control of the school. She is willing to use torture to get what she wants.

Fudge and Umbridge illustrate just how power corrupts. But there is a far more sinister kind of power in the story. It is the essence of evil, an evil beyond redemption, and an evil without remorse. It is the evil of Lord Voldemort.

Some critics have concluded that Voldemort represents the logical end of a market economy, where success is measured solely by personal gain. This line of thinking has gone so far as to turn Volemort’s name into “Waldemart,” a combination of Wal-Mart and Voldemort. If Voldemort is a capitalist icon, then Harry Potter must be an anticapitalist hero. This would conveniently explain why Harry’s sensibilities are entirely different from the clean car and kitchen-scrubbing values of his middle-class aunt and uncle.

But this is an incorrect conclusion. Harry's distaste for the middle-class reveals more about British cultural ambivalence than mythic moral values. Remember that the world of Harry Potter is unfailingly British, and modern British culture has decidedly mixed feelings about middle-class business success. On one hand, British citizens enjoy the productivity and personal freedom of the market-based government reforms brought about by Margaret Thatcher and her Conservative successor from 1975 to 1997. On the other hand, they have grown used to the anti-business rhetoric and social welfare system of various Labour governments over the past sixty years. J. K. Rowling simply conveys the background noise of ambivalence about markets from the real world to the fictional world of Harry Potter.

There is no antiglobalist economic moral in Harry’s epic battle with Voldemort, any more than there is an economic moral in his regular arguments with his aunt and uncle. There is, however, an unresolved class conflict within the cultural context of the story, but it comes from the British lens Rowling uses to draw us into her myth, not the myth itself. It is a mistake to draw antiglobalist economic morals from a story that deals with economics only tangentially.

Indeed, although it doesn’t figure prominently in the story, economics doesn’t come off too badly in the Harry Potter tales. In fact, it comes off better than the aristocracy or bureaucracy, both of which are frequently in league with Voldemort. Harry’s fellow students demonstrate a familiar set of youthful wants and wishes, the kind that are often criticized as being shallow, but the kind often satisfied by exchanges in a competitive market economy. They want to date, they buy lots of candy and butter beer, they want to be good at sports, they want to do well in school, they buy books and magazines, they want to own the best wands, brooms and robes, they enjoy receiving gifts, and they want a job when they graduate. While some of these may be shallow interests compared with lofty morals, they cannot be honestly called precursors of evil. They are normal human desires, best satisfied by peaceful, voluntary behavior. Markets do that. It’s almost magic.

In the final analysis, Harry Potter is neither a ruthless capitalist nor an antiglobalist crusader. He does not seek success as measured by the market. He does not seek success as measured by social status. Rather, Harry Potter seeks success as measured by universal morals of power, corruption, and success. With him, we learn first that power is dangerous and must be used responsibly if it is to be used at all. Second, we learn that we must resist corruption, but never mistake blind obedience to a set of rules for virtue. Finally, we learn to measure the success of our lives by love and friendship more than anything else.

Those are values every muggle in the world can appreciate. Even French ones.

Monday, July 23, 2007

Tax that Guy Behind the Tree

Don't tax you.
Don't tax me.
Tax that guy
Behind the tree.

That little bit of doggerel popped into mind when I saw a headline in the Financial Times about a global backlash against globalization. The article stated, "In response to fears of globalisation and rising inequality, the public in all the rich countries surveyed – the US, Germany, UK, France, Italy and Spain – want their governments to increase taxation on those with the highest incomes. "

If the public had been asked, "Do you think we should increase your taxes?" I'm sure they would have come up with a different but no less confident conclusion. Even better, we should have asked them point blank, "Are you rich?"

In the United States for 2004, to be in the top 1 percent of adjusted gross income (AGI), you needed to earn $309,160, according to Arnold Kling at Econlib.

An awful lot of working couples and small business people make more than $309,160. They don't think of themselves as rich. Comfortable, maybe, but not rich. But of course, a campaign to "tax the comfortable" wouldn't get very far.

Beware those who want to "tax the rich." They may be talking about you.

Sunday, July 22, 2007

What Makes Business Possible

Humans like to trade. Business is hard-wired in human nature.

So why are some groups better at it than others? Why do some nations grow rich on business, while others remain desperately poor?

All too often, people have tried to explain differences in wealth by the accidents of geography, race, or nature. The truth is, success or failure in trade is based on capital, and capital is based on law. The Peruvian economist Hernando DeSoto addressed this issue in his book, The Mystery of Capital.

For example, I can get a loan from a bank because I own my house. How does my banker know that I own it? Because there is a reliable system of law that converts the physical property of my house into a socially acceptable representation of it called a deed. The same reliable system of law allows me to convert that deed into another form of capital, a loan. I can then use that loan for another round of wealth creation.

In most of the world, poor people own property, but they can't prove it. Not being able to prove it, they can't get a loan against it. Without a loan, they can't engage in a new round of wealth creation.

In short, wealth begins with ownership. It expands as the legal system makes it easier and more reliable to demonstrate ownership.

A reliable legal system is the key to creating wealth through trade. And secure property rights are the key to a reliable legal system.

The following video features Hernando DeSoto discussing some of his work.

Saturday, July 21, 2007

Hammer & Tickle

The following is a bit of Soviet-era humor from Ben Lewis, who wrote "Hammer & Tickle" for Prospect magazine, and produced the documentary of the same name. The documentary trailer appears below.

A man dies and goes to hell. There he discovers that he has a choice: he can go to capitalist hell or to communist hell. Naturally, he wants to compare the two, so he goes over to capitalist hell.

There outside the door is the devil, who looks a bit like Ronald Reagan. "What's it like in there?" asks the visitor. "Well," the devil replies, "in capitalist hell, they flay you alive, then they boil you in oil and then they cut you up into small pieces with sharp knives.""That's terrible!" he gasps. "I'm going to check out communist hell!"

He goes over to communist hell, where he discovers a huge queue of people waiting to get in. He waits in line. Eventually he gets to the front and there at the door to communist hell is a little old man who looks a bit like Karl Marx. "

I'm still in the free world, Karl," he says, "and before I come in, I want to know what it's like in there." "In communist hell," says Marx impatiently, "they flay you alive, then they boil you in oil, and then they cut you up into small pieces with sharp knives.""But… but that's the same as capitalist hell!" protests the visitor, "Why such a long queue?"

"Well," sighs Marx, "Sometimes we're out of oil, sometimes we don't have knives, sometimes no hot water…"

Friday, July 20, 2007

Harry Potter, Businessman?

A French intellectual has deconstructed the texts of the Harry Potter phenomenon in search of its deeper meaning.

The result? The world of Harry Potter is a capitalist universe. Depending on your view of business, Harry is either a business superhero or a business super villain. Either way, Harry is more about the Market Order than the Order of the Phoenix.

Only a French intellectual could come up with a conclusion like that with a straight face. Anyone who has read the Harry Potter series knows that they contain no economic morals.

Harry Potter's most important moral is that we should measure success in love, friendship, and courage, not in money.

Thursday, July 19, 2007

How to Honor Fallen Fire Fighters

In June, nine firemen in Charleston, SC died fighting a blaze that destroyed a furniture store. Immediately, the Mayor and other city officials said that the city was going to purchase the store site, at market rates, and build a memorial park there. The following are some thoughts about that suggestion.

It goes without saying that everyone in Charleston mourns the loss of the nine brave fire fighters and desires to memorialize them appropriately. The suggestion, however, that the site of the fire should be converted to a memorial park because it is sacred ground, which it certainly is, seems to me to be a thought that would come from those who have been in government too long. While applauding the motives of our city officials, implicit in this idea is the (probably unconscious) thought that continuing to do business and make a profit on this site would somehow sully it and the firemen’s memory.

Business and commerce are the life blood of our city and it was a business that these men died protecting. It seems to me that using public funds to buy a commercial location and remove it from active commerce denigrates what these men did and what their remaining colleagues continue to do. It also sends a subliminal message that a site of commerce is not suitable as a memorial. However, business is a noble enterprise. It is from businesses that we get our medicine, clothes, food and other necessities of life. When we need a place to eat or spend the night it is total strangers engaged in commerce who fill our needs. It matters not that the providers’ motives may be their own self interest, we get served just the same. This is the genius of our capitalistic system. To suggest, even indirectly, that these activities should not continue at the site of the tragedy is to misunderstand both the nature of man and our society.

Meaning in no way to lessen what our fire fighters do for us, for they are indispensable in our community, those who take huge risks to start businesses that satisfy our needs and wants; fill our tax coffers; and create the jobs upon which our society depends are heroes also. Our fire fighters know this - that is why they fight so valiantly to protect our businesses.

So, a modest proposal – first, let’s build a memorial in a fitting public place. Additionally, let’s honor the sacrifice of those nine heroes by keeping commerce flowing in what is a commercial site in the middle of a commercial area. Yes, make sure a suitable plaque is installed on the new building that is constructed on that site; but let’s honor the fire fighter’s memory everyday by having everyday people honorably going about the business of delivering goods and services to our community. In that way the community will continue to reap the benefits of commerce, which those nine gave their lives to try and save. That would be a truly lasting tribute.

Wednesday, July 18, 2007

The Call of the Entrepreneur

"...how we view entrepreneurs—as greedy or altruistic, as virtuous or vicious—shapes the destinies of individuals and nations."

That is the message from the Acton Institute, in a new documentary worthy of attention, "The Call of the Entrepreneur."

Tuesday, July 17, 2007

Jeremiah, Milton Friedman, and Liberty

On Wednesday, July 11, 2007, Bob Chitester was the speaker at the monthly meeting of the Bastiat Society. His topic was “Jeremiah, Milton Friedman, and Liberty.”

Some excerpts from his comments follow:

Milton Friedman was a modern Jeremiah. His God, if you will, was liberty. The citizens of the United States had a covenant with freedom, in which they had lost faith. He was determined to sound the alarm. He never concerned himself with what others would think of him.
Freedom is not at the top of business leaders’ agenda, although they profess otherwise.

Freedom is not at the top of politicians’ agenda although they profess otherwise.

Have any of you stood up and said it’s immoral -- taxing workers struggling to make their own mortgage payments, to help a few business people ---- and advance some political careers? If there is a principle underlying these kinds of schemes it is one I do not wish to embrace.

People should be free to gamble if they wish, but the government should not be involved and communities should not be going out of their way to help establish gambling facilities.

If people are going hungry here in Charleston and around this nation, it is not because of lack of food. Even the federal government, who’s own “food bank” effort - food stamps – has been operating for decades, admits that the greatest health problem among poorer members of our society is obesity.

My passion and the goal of Free to Choose Media, izzit.org and The Idea Channel, is to relate economic freedom, personal freedom, individual freedom and the rule of law to peoples’ personal experience. Our first goal is to make school age children aware of the power of voluntary association and the rule of law to make the world a happier place for all people. Creating awareness of these fundamental values in the next generation of citizens must be part of any effort “save the Republic.”

Driven by rigorous logic, the use of rhetorical tools through mass media is essential to preserving liberty in a democratic society.

Don’t use government to force citizens to pay for services they would not freely support. Resist others who want to do so.

The wealth created by economic freedom is a necessary but not sufficient condition for a better life. We must not forget, or let others forget, that free markets provide not only material well being but the time to explore our inner visions of the beautiful and profound.

Monday, July 16, 2007

Stumbling on Happiness

Stephen Colbert interviews Daniel Gilbert, the author of Stumbling on Happiness. You'll be astonished to learn that marriage makes people happier than money.

Sunday, July 15, 2007

Business and the Good Samaritan

Today, Catholics everywhere will once again hear the story of the Good Samaritan from the Gospel of Luke. It is one of the world's most famous parables.

In the time of Christ, Jews and Samaritans were bitter enemies, each considering the other heretical. The idea of a Samaritan helping a wounded Jew would have been unsettling. Even more disturbing would have been the fact that the two other orthodox Jews in the story, a priest and a Levite, ignored the suffering of their kinsman.

There are many lessons we can draw from this parable. For people in business -- that is to say, for anyone involved in the process of wealth creation -- one of the most important lessons comes from Margaret Thatcher, Prime Minister of the United Kingdom from 1979 to 1990.

In a 1987 speech to Scottish Conservatives, Thatcher observed, "No one would remember the Good Samaritan if he'd only had good intentions. He had money as well."

Wealth makes charity possible. The creation of more wealth makes even more charity possible.

One other person in this parable is often overlooked. He is the unnamed innkeeper who took in the wounded Jew, and extended the Good Samaritan credit for the Jew's care. The innkeeper was not acting charitably, but the resulting business arrangement made him an important player in the Samaritan's charitable effort.

Business and charity are not the same thing, and it is a mistake to make them act like they are. But they can work well together towards the same end when each acts according to its strength and purpose.

Chad Waldorff at Bastiat in August

Chad Waldorff, the Chairman of the South Carolina Club for Growth, will be the speaker at the August monthly meeting of the Bastiat Society.

"Putting Sound Economics Into Politics"

Date: Wednesday, 1 August 2007
Hors d'oeuvres : 5:00 pm
Speaker: 6:00 pm
Location: Imaging Arts Gallery 175 King Street, Charleston, SC
RSVP to Stephanie Whitener

Chad’s first government experience came when he took a year off from college to serve in President Reagan’s Office of Political Affairs. After the 1988 election cycle, Chad left the White House to return to the University of Virginia. Shortly after graduating, he and two high school friends moved to Mount Pleasant to create the first Sticky Fingers restaurant.

Their original concept has grown to over 1000 employees in their sixteen restaurants, catering, mail order, and wholesale businesses. Chad and his partners have been named Ernst and Young “Entrepreneurs of the Year” for the Carolinas as well as the Lowcountry’s “Most Philanthropic Company.”

In 2003 Chad took a two-year sabbatical from his business to serve as a Deputy Chief of Staff to Governor Mark Sanford. It was largely through that experience of seeing sound fiscal policy fall prey to legislative gamesmanship that lead to his current involvement with the South Carolina Club for Growth.

Saturday, July 14, 2007

Stossel Teaches Bill Gates A Business Lesson

ABC News anchor and 20/20 correspondent John Stossel, one of the few people on television who appreciate the productive and ethical wonders of competition, had a business lesson for Bill Gates after the Microsoft billionaire spoke at Harvard in June.

In his speech, Gates lamented the suffering of the world's poor who have "no power in the market and no voice in the system." Stossel responded that the solution to poverty and human suffering is not philanthropy or blanket criticism of markets:

"Gates faults the free market for problems caused by governments. What constricts the reach of the free market is the state. Gates seems oblivious to all the ways that governments here and abroad cripple enterprise. In poor countries, corrupt bureaucracies smother entrepreneurship while enriching cronies. The lack of formal property rights and stable law keeps average people from accumulating capital. So the poor stay poor. That's what causes "scarcity of clean water" and kills 'children who die from diseases we can cure.'"

People are not poor because of lack of charity. They are not poor because markets make them poor. They are poor because their governments do not protect their lives, their property and their freedom to trade.

Friday, July 13, 2007

Bad for Business

When is a tax break bad for business?

When it goes to your competition and not to you, too. That's playing favorites with the tax code, and it's a game politicians play all too well.

It's especially bad when it's big business getting the tax break, and small business paying the taxes. That's worse than robbing Peter to pay Paul. It's more like robbing David to pay Goliath. And it's exactly what the South Carolina Legislature is going to do. Surprise, surprise.

Governor Sanford vetoed a bill that gave big box retailers a tax break. The Governor said, correctly, that the bill did "what we should never do to small businesses in our state—it takes their money to subsidize a large corporate competitor that could well put them out of business.”

The Legislature, however, disagreed. It overrode his veto, and big business got what it wanted. The little guy got the bill.

This isn't free enterprise. It's a free for all. In the scramble for political favors, big business has most of the advantages, and ends up with most of the loot.

Thursday, July 12, 2007

Sowell on Money

A couple of thoughts on money from Thomas Sowell, Rose and Milton Friedman Fellow at the Hoover Institution at Stanford University.

"A month doesn’t go by without several offers to lend me money arriving in the mail. Where were these people when I was broke?"

"Many people who have never run one business for one day are nevertheless confident that they know corporate CEOs are not worth as much as they are paid."

Wednesday, July 11, 2007

A Windfall Contribution Tax

Politicians love to talk about "windfall profits," by which they usually mean profits that just fall into the lap of business with absolutely no conscious or socially responsible effort. Undeserved. Unjustified. Unfair.

Like the profits that come from the mindless and technologically simple tasks of exploring for oil on a planet where it is difficult to find, extracting it from the earth's crust or from deep beneath the sea, transporting it safely to another location, converting it into gasoline, and making sure that every Joe Sixpack can conveniently find it at a local station, 24/7, along with a Diet Coke and a candybar.

Gosh, can't anyone do that? What's so special about the energy business, especially compared with being President. A President has to do so much more than an energy executive. And a Presidential candidate has to do even more than the President, just to get elected.

Like get a haircut. The Washington Post reports that John Edwards' campaign spent a whopping $1,250 for just one haircut for its candidate in 2004. His defense? He didn't know how much it cost. He doesn't pay the bills. Someone else scheduled it for him. It wasn't his money.

Not a reassuring message from a guy who wants a job with even more responsibility and more access to money that is not his. Not a reassuring message for the poor guy who wrote Edwards a check believing that it was going to change the world, and who found out it didn't even pay for a haircut.

This is just more evidence that American Presidential elections have gone way beyond being a serious debate about ideas, and are now more like American Idol than the American Revolution. Haircuts matter! All we need now is Ryan Seacrest on election night, and instructions on text messaging our votes. Like the entertainment industry, running for office has become a process where lots of money changes hands with reckless abandon and questionable results.

However, there is a solution. Why not make politicians pay taxes on the money they raise and the money they spend? Why not tax them on their "windfall contributions" and limit their "election expense deductions?" Why not limit deductions by a progressive rate on contributions, whereby the more they raise, the more they pay? Why not tax them with an "alternative minimum contribution tax" if their intelligent tax planning drives their effective tax rate too low? Why not tax them on money held in their "political estate?" Why not tax them on their "political transfers?"

Making the taxation of political income and political wealth a mirror image of the taxation of private income and private wealth would place the full burden of their thoughtless actions on politicians who currently could care less.

Tuesday, July 10, 2007

Bridges and Heroes

Have you ever noticed that almost all of the named highways, bridges and public buildings in America are named after politicians? I began thinking about that the other day while driving on a highway named after a politician who was especially good at bringing “pork” home from Washington to his native state. The thought occurred to me that it is interesting that we name things built with tax money after the people who spend the money. Would it not be more equitable to name things after people who paid the money? Who after all are the heroes, the ones who spend our money or the ones who make it and pay for the things we depend upon from government?

It seems to me that spending money is pretty easy, especially when one does not have to figure out how to make it in the first place. Now, making money is a different story. That takes courage, the willingness to take risks, intelligence, hard work and an innate sense of what people need or want. Those are the qualities which we should be encouraging others to admire and aspire to. Sure, some politicians have such traits, but are they the only ones with them? I think it is a shame that we do not use this vehicle of naming public facilities to celebrate publicly the real heroes in our midst.

Think about it. Men and women who start and operate successful businesses by definition are net contributors to society. Most people never think about the fact that every commercial transaction, freely entered into, is a win-win proposition. When someone buys a pair of shoes, tennis racquet, new car or any other item two things are true. One, the customer wanted the item more than they wanted the money in their wallet. Second, the seller wanted the money more than they wanted the item. So both parties end up with what they wanted most – the ultimate win-win deal. Those of us who live in a free society get all the things we need and desire through the medium of commercial exchange. The only way one can get money, un-coerced, is to produce some product or service that others will willingly part with their money to buy.

Therefore, by definition, successful business enterprises tend, in the vast majority of cases, to fill people’s needs, thus making the world a better place to live. That seems to me to be a pretty good case for considering as heroes those who take the chance to start new enterprises to better cater to our wants and needs. If it were not for them and the jobs they create, there would be no taxes with which to build our vast public infrastructure to which the politicians attach their own names. I say let’s name things for the people who make the money – not the ones who spend it.
Photo by Frank Starmer.

Monday, July 9, 2007

Families and Free Markets

The Bastiat Society's argument states that the free market is the best way to organize large numbers of individuals in a productive and just society. Why large numbers? Because humans organize successfully on a smaller scale in a variety of other ways. Families for example.

As any parent can tell you, the relationship between parent and child is a long way from being organized on a market basis. Being a baby is the one time in your life you can be fat, bald, toothless, unemployed and incontinent, and everyone thinks you’re cute. Try getting away with it when you’re fifty.

As a kid gets older, he regularly takes more out of the parent-child relationship than he puts into it. Parenting is a one-way drain of the parents’ time, money, and energy. If an employee acted like your kid, you’d fire him. If your business partner acted like your kid, you’d sue him. If a kid who isn’t your kid acted like your kid, you’d kick him out of your house.

We tolerate our own kid for twenty years – or more. Construct a balance sheet of the advantages and disadvantages of having a kid. You’ll find that in return for paying for his room, board, clothes, education and entertainment, all you’ll get is love. Yet, it seems to be enough. That is the power of love.

But when we attempt to expand such one-way, sacrificial, and emotionally intense relationships to larger numbers of people, they quickly break down. Humans can work effectively with just a handful of these kinds of relationships, and no more. At some critical point, the nature of additional relationships must change if they are going to work at all.

Markets are a powerful way of coordinating an infinitely large number of new relationships. Unlike small scale relationships, markets do not require unilateral sacrifice. They do not require the intense emotional commitment of families. They allow individuals to trade for mutual benefit, using the smallest bits of information about the other individuals involved. Market relationships actually save time, create wealth, and conserve energy.

When you buy something from a vendor, you save time because you don’t have to make it, distribute it, or stock it. When you buy something for sale, you trade a less desirable possession (money) for a more desirable possession (the thing purchased), thereby creating a net social positive (a satisfied buyer and a satisfied seller). Finally, when you buy something, you conserve your energy for the same reason you save time. All this occurs without violence.

Human nature is consistent with both kinds of organization, in their proper context. Small scale organization produces families. Large scale organization produces civilizations. A free market produces the most prosperous, peaceful, and just civilization of all.

Sunday, July 8, 2007

Global Warming a Cover for Terror

Suspected terrorist Kafeel Ahmed, the driver of the Jeep that crashed into the Glasgow Airport and burst into flames, told his family in India he was involved in a "large scale confidential project. It is about global warming."

Well, Ahmed did blow up an SUV. How fitting that one radical faith was the cover for another.

The solutions to the problems of the human race do not lie in blind faith in God or blind faith in nature. They lie in liberating individual talent, intelligence, and self-interest in ways that serve the needs and respect the rights of others.

Photo from the Associated Press (AP).

Saturday, July 7, 2007

Live Earth, Bad Policy

We can all breath a sigh of relief. The brightest minds in the entertainment business have discovered the solution for nearly every crisis on earth: grab some musicians and give a concert.

Did somebody say there were poor people in Africa? Live Aid. What about vanishing farms in the US? Farm Aid. Find some more poor people? Live 8. What about The Last Days of Planet Earth? Live Earth.

Live Earth happens today, July 7th. It's described as a day of "concerts for a climate in crisis." Kevin Wall and Al Gore organized it with the goal of spreading the environmental message and changing behavior.

What's the message? Humans are ruining the planet. Our only hope is to dramatically change the way we live. Voluntarily, if possible. By command, if not. After all, the future of life is at stake. What's the violation of a few natural rights and a lower standard of living in the face of looming global disaster?

Unfortunately for their true believers, Wall and Gore didn't check out the track record of the previous "aid" concerts. There are even more poor people in Africa, American farms are fewer than ever, and in most of the world, the poor are easier to find than even the modestly well off. So much for the power of music to change the world.

In fact, the two countries that have done the best job at reducing poverty, India and China, didn't have a concert at all. China and India reduced poverty by adopting public policies that reduced the power of the state and gave individuals and businesses the freedom to trade. Two very unlikely outcomes if that pop group Gore & the Gang makes its way to the top of the political charts.

The danger in radical environmentalism is not bad science or pretentious celebrities. It's bad public policy. It's a point of view that values a questionable theory of the environment more than human life, fundamental human rights, and a standard of living that is the envy of the rest of the world.

The video below is a powerful counterpoint to Gore's radical environmental politics. After viewing "A Convenient Fiction," you might conclude that Gore won an Oscar for "Best Original Screenplay."

Friday, July 6, 2007

The Good Deeds of Strangers

Business performs small good deeds every day. They are neither glorious nor glamorous. We largely take them for granted.

Recently, I traveled to Milwaukee for a conference on progressive taxation. I had never been to Milwaukee before. I knew nothing about the city.

The trip was a long one. It required a change of planes in Memphis, an airport I had never been to either. On both flights, I was the beneficiary of the talents of many strangers: those flying the planes, the mechanics who maintained the planes, and the ground crews that cleaned them after each flight.

At every step of the journey, someone was prepared to make my life more comfortable. Flight attendants offered drinks, blankets, pillows and something to read. Vendors in the airports offered drinks, candy, books and newspapers. Restaurants offered light fare, heavy dinners, and those universal necessities for human travel, lots of coffee and alcohol.

When I arrived in Milwaukee, a total stranger took my bags and drove me in safety and comfort to my hotel. He did this in complete confidence that, at the end of the ride, I would pay him. I rode in complete confidence that he would deliver me safely to my hotel. We were both correct.

At the hotel, I was greeted by a stranger at the registration desk who welcomed me and explained that I could pay for everything at the end of my stay. I moved into a comfortable room. For the next four days, strangers made my bed, cleaned my room, prepared my meals, and washed the dishes.

We are surrounded by human genius and human kindness everyday. We don't recognize it very often because it is not our genius, or our kindness.

Thursday, July 5, 2007

National Health Care Doesn't Add Up

A well-done op-ed by Daniel Steele, a professor at the University of South Carolina, on why we really don't want national health care. It was written in response to an op-ed from a doctor who belongs to a group of physicians calling for national health care. Remarkably, these doctors think bureaucrats are better than insurance companies. Let's hope they're better at medicine than policy.

Professor Steele does a nice job summarizing the advantages of using competitive markets for health care rather than a single payer system:

"There are at least four ways that free markets encourage better costs and services:

Markets more efficiently allocate resources to the right needs. Government wastes resources.

Markets facilitate innovations by forcing out failed programs. Government retains programs well past their useful life.

Markets foster “learning” by trial and error. Government regulates and retards innovation.

Markets are controlled by consumers. Government programs tend to be controlled by special interests. For health care, this would mainly be doctors and other suppliers (including insurance companies), all who would steer regulations to protect their positions."

Wednesday, July 4, 2007

Start a Revolution!

The Declaration of Independence is one of those documents everyone talks about and nobody reads. In the spirit of the 4th of July, I offer the meaning of the original document expressed in modern language.

Date: July 4, 1776

To: Posterity

CC: Government

From: Second Continental Congress, Philadelphia

Subject: "We're Not Going to Take it, Anymore"

God knows, sometimes a man has to stand on his own two feet. We think that time is now. Let us explain what we're about to do and why. We know you'll understand.

Who do you think should run your God-given life? You, or the government? The answer is as plain as the nose on your face: you should. The government is here to protect your life, not to run it. When it tries to, you have the right to say no. If it gets really bossy, you have the right to tell it to drop dead. Of course, you shouldn't cause big trouble for nothing. It's best to put up with most of the crap in the world. It's not a perfect world and never will be. But when a government keeps insisting that it owns your life and all your stuff too, you have the right to start a revolution.

Well, we're starting one. Here's why. If this list won't convince you, nothing will:

1. The government is ignoring its duty to protect us.
2. The government won't allow us to handle the business that it ignores.
3. The government won't allow us the right to vote on our laws and our taxes.
4. The government has made it difficult for us to protest.
5. The government has stripped all power from any of us who disagree.
6. Power to the people! But until we get this mess straightened out, the government is inviting all kinds of trouble, and we're the ones who are going to have to deal with it.
7. The government refuses to let us live where we want to.
8. The government refuses to let us peacefully settle our own disputes in our own courts.
9. The government insists on treating our judges like its puppets.
10. The government is growing too big, too fast, and it cost too much.
11. We are occupied by the government's army.
12. The government keeps us quiet at the point of a gun.
13. No matter what we say, the government keeps trying to run our lives. For example:
a. There are a lot of soldiers with guns around here

b. These soldiers are killing people, and nobody does a thing.

c. The government won't let us trade with the rest of the world. We can't earn a living.

d. We have to pay taxes, but don't have any say in which ones or how much.
e. Kangaroo courts.
f. Kangaroo justice.

g. The government intimidates innocent people.

h. The government makes up its own rules.

i. The government usurps the power of the people.

. The government kills innocent people.
k.The government kills more innocent people, and destroys their property.

l. The government kills even more innocent people.

m. The government takes innocent people captive, and forces them to kill other innocent people or be killed.

n. The government encourages Indians to kill innocent people.

It's not our fault that it has come down to this. God knows we've tried to get along. But the government insists on treating us like slaves.

The rest of the civilized world isn't listening to us. We've warned them about what's going on. We've asked for their help, begged for it, really. But they have ignored us, even though we speak the same language and share many family ties. Now we have no choice. Reluctantly, we are forced to call them our friends if they don't fight us, and our enemies if they do.

That's the way we see it. Who are we? We represent the united states of America. We ask the Big Guy upstairs to help us do the right thing for the right reasons. Power to the people! The old government is finished. It doesn't matter anymore. If we want a war, we'll decide that, no one else. If we want peace, we'll decide that, too. It's our business if we want to trade and make money.

As of right now, it's our country.
We hope like hell we're right and this thing works.


[Sign Here]

Tuesday, July 3, 2007

Mine Your Own Business

The modern environmental movement doesn't care about poor people.

That is the message of a documentary, "Mine Your Own Business" by Irish filmmaker Phelim McAleer. He focuses on the lives of desperately poor people in Romania and Madagascar who would gladly work in new mines, if the environmentalists who live in modern comfort would only get out of the way.

Don Boudreaux, Chairman of the Economics Department at George Mason University (and a member of the Bastiat Society's Academic Advisory Board) reviewed the film in the Pittsburgh Tribune:

"...just as religious belief sometimes can inspire adherents to commit acts of cruelty against other human beings, so, too, can environmentalism. Such cruelty is vividly revealed in the new film 'Mine Your Own Business.' This movie is a documentary centered on a small Romanian town, Rosia Montana. A poor mountain village, Rosia Montana was chosen by a western mining company as a site for a new mine -- an enterprise that would have offered higher-paying jobs to the mostly peasant, rural population....

The environmental congregation, however, paid no attention. Living in cities far away from Rosia Montana, environmentalists -- against all evidence -- insisted that the townspeople really don't want the industry, jobs and greater prosperity that the mine would bring."

View the trailer below.

The following story about the film aired on Fox. It includes a rebuttal by a spokesman for Greenpeace. Predictably, he denounces the film as propaganda because it was paid for by the mining company.

Greenpeace knows a thing or two about propaganda. The environmental group built its reputation around publicity stunts (read propaganda).

Monday, July 2, 2007

The Wealth of the Merchant

French intellectual Bertrand de Jouvenel made the following observation in his book, The Ethics of Redistribution, published in 1951:

"...during the whole range of life of commercial society, from the end of the Middle Ages to our day, the wealth of the rich merchant has been resented far more than the pomp of rulers."

How troubling, that people resent earned wealth more than fortunes built on taxes and social privilege.

Sunday, July 1, 2007

The Morality of Inequality

Let's begin with a statement that is widely accepted as true: it is immoral to use violence against innocent and peaceful individuals to accomplish one's aims.

With that in mind, consider this headline from USA Today: "Dems Call for Ending Tax Cuts for Rich." Hillary Clinton "criticized [President] Bush for what she called his indifference to income inequality." John Edwards "has made economic disparity a focus of his candidacy....He said racism 'goes through every single part of American life' and is visible in inequality in health care, education, and income."

Clearly, Clinton and Edwards share another basic premise: income inequality is morally unacceptable. They are ready and willing to use the tax code to seize the income of those who earn it and hand it over to someone they believe needs it more. In their view, the needs of the community trump the rights of the individual.

This may be an appealing political message, especially to those who need help. But there are dangerous long-term consequences for all members of society in such a policy.

Reducing inequality in income requires increasing inequality in political power. Political inequality is far more harmful than economic inequality. In fact, you could argue economic inequality is not harmful at all.

Economic inequality is the result of talent, hard work, or just plain luck. Michael Jordan is rich because he is naturally talented. Sam Walton was rich because he worked hard. A lottery winner is rich because he was lucky. In all three cases, the result is clearly an economic inequality. But who has been harmed? Were people forced to buy Bulls tickets? Were people forced to shop at Wal-Mart? Were people forced to buy lottery tickets? The answer is no. In all three cases, economic inequality is the result of peaceful, voluntary, and mutually beneficial behavior. There is absolutely nothing immoral here.

Contrast that conclusion with what happens under political inequality.

Political inequality is the result of deliberate social design, not voluntary behavior. It is what happens when one group of people has enough power to force another group of people to submit to its will. Political inequality punishes those who do not cooperate. If you doubt this, try disobeying the order of even a minor bureaucrat. First, you will get a warning. Second, you will get a fine. Ignore the fine, and the state will attempt to confiscate your property. Resist, and the state will arrest you.

The demand to obey is bad enough, but there is something even more sinister. When we create class differentials in political power, an enforcer and an enforcee, it does not matter if the enforcer is, for a time, benevolent. Eventually, someone less benevolent seizes the political advantage and uses the political differential in power for his own self-interest.

Consider the facts of political inequality: it grants some people special power over the lives, labor and property of others; it demands obedience; it punishes those who refuse; it opens the door to injustice and corrupt political behavior. If anything can be called immoral, this must be.

We would not tolerate a modern politician who called for taxing Protestants at one rate, Catholics at twice that rate, and Jews at three times that rate, as the English tax code did in 1691. We now recognize that such a tax policy is arbitrary, unfair, and immoral.

Demanding that one group of citizens -- no longer identified by religion, but now identified by income -- pay rates at two or three times the rate of the rest of the population is no different. It is morally indefensible.