The next lecture in Dr. Burke's Series on Society and God will be held on Tuesday, April 30, 2013. The topic will be What Kind of a Person is God, philosophically speaking? For further information, click here.
The Book Discussion Group will meet on Thursday, May 2, at 7:30 p.m. The reading will be Niall Ferguson's Civilization.
How did the West overtake its Eastern rivals? And has the zenith of Western power now passed? Acclaimed historian Niall Ferguson argues that beginning in the 15th century, the West developed six powerful new concepts -- competition, science, the rule of law, modern medicine, consumerism and the work ethic -- that the Rest lacked, allowing it to surge past all other competitors. Yet now Ferguson shows how the Rest have adopted these conceptions while the West has lost faith in itself.
For further information, click here.
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Arizona Set To Use Gold & Silver As Currency
Published in Market Update Precious Metals on 22 April 2013
By Mark O’Byrne
The state of Arizona may become the second state to use gold and silver coins as legal tender.
Last week, Arizona lawmakers passed a bill that makes precious metals legal tender. Arizona is the second state after Utah to allow gold coins created by the U.S. Mint and private mints to be used as currency. More than a dozen states have legislature underway to pass similar measures.
The move was launched by people who fear the Federal Reserve is not tackling the federal deficit and is thus debasing and devaluing the dollar. Some even fear, that if the Fed continues on the existing path it could lead to hyperinflation.
Miles Lester, who represents a group called Arizona Constitutional Advocates, said during a recent public hearing on legal-tender legislation that "the dollar is on its way out. It's not a matter of if; it's a matter of when."
The upcoming U.S. FOMC meeting next week is April 30th and May 1st and will be closely watched by investors.
Supporters of the legislation look forward to a day when citizens can make purchases from debit cards linked to gold depositories.
Opponents point to the volatility of gold and silver as currency after the fall in price that occurred last week. However proponents point out that the fall in gold prices last week was due to the speculative raid of Wall Street banks who the Federal Reserve is supporting and works closely with.
Using gold and silver as currency would protect people from inflation, currency debasement, predatory banks and an increasingly volatile and vulnerable financial system.
Utah has had the law on the books for the past 2 years and is working on a system for using the precious metals as currency.
The Arizona Senate Bill 1439 would allow the holder of gold or silver coins or bullion to pay a debt.
However, the coins must be issued by the U.S. government or approved by a court, like an American Eagle Coin. Oddly the government does not require that persons or business must use or accept gold or silver as legal tender in contravention of the U.S. Constitution.
The sponsor of the bill, Republican Sen. Chester Crandell, would need a final state Senate vote after approval by the House, and if passed the law would not take effect until 2014.
Crandell said, "The whole thing came from constituents".
The debate on whether gold and silver should be used as an alternative currency will continue and deepen as people realise how fiat currencies are set to be devalued in the coming months – potentially sharply.
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Send us any comments you may have about the articles below to firstname.lastname@example.org.
How Social Justice Came to America, Thomas Patrick Burke
Why Men Fight, Robert R. Reilly
Causing Harm?, Thomas Patrick Burke
Minimum Wage Destroys Jobs and Opportunities to Develop Skills, William Dunkelberg
Speech To Swedish Free Press Society, Geert Wilders
Report on Lectures in Europe, 2012, Thomas Patrick Burke
Coercion and the Measurement of Productivity, Thomas Patrick Burke
Lecture Delivered at the European Parliament, Brussels, September 18, 2012, Thomas Patrick Burke
More "Quantitative Easing" Will Only Help Big Banks, Not Employment, William Dunkelberg
Clinton May Be "Back" But Not His Economy, William Dunkelberg
The Only International Economic Policy that a Country Needs, Patrick Barron
How Social Justice Came to America
Thomas Patrick Burke
1. “Social justice" as currently understood is the theory that justice consists, not in the right way for one individual to treat another, but in a condition of fairness or equality in society. According to this theory a state of inequality in society, such as poverty, is not merely bad or regrettable but "unjust." Although many people are misled by the name into thinking it must be a form of genuine justice, it is in fact a very big departure from ordinary justice. Fairness means treating people equally; but justice means treating them as they deserve. True justice is impartial, but "social justice" favors some more than others. True justice and injustice are qualities of actions, which individuals do and for which they are therefore responsible. But poverty or other conditions of inequality in society are not actions or the product of actions done by anybody, and no one need be responsible for them. “Social justice” cuts the essential link between ethical judgment and individual responsibility, to the great detriment of human life and society. It is not justice at all, but only fake or pseudo-justice.
That was not the original meaning of the term “social justice” when it was coined in 1840 by the Italian Jesuit Luigi Taparelli. Its original meaning was rather the opposite, a demand that the popular revolutions that were taking place in Europe around that time should respect the traditional rights of property. The term began to acquire its current meaning later in that century under the influence of the growing socialist movement. The big change, however, took place after the First World War. Unlike in the earlier wars of Europe, which were fought typically between professional soldiers, the armies now consisted largely of draftees from the working classes. As a great feeling of weariness descended on European society after the war, with it came a feeling that the working classes should have a greater share in the benefits of the victory, and in the benefits of society in general. The effect of the war was to produce a levelling of the classes. Those of you who have been watching Downton Abbey may have seen something of this. In 1908 the British government had followed the lead of Bismarck and created an old age pension. Bismarck’s action was not the product of any ideology but merely of political pragmatism: he wanted simply to get votes. But in 1922 the English writer, Leonard Trelawney Hobhouse, who described himself as a “liberal socialist,” argued, in his book, The Elements of Social Justice, that the old age pension and similar measures had a basis in justice on the ground that need created a right. In 1931 Pope Pius XI published an encyclical letter, Quadragesimo anno, which canonized this conception for the Catholic Church around the globe. The pope wrote, “…the right ordering of economic life cannot be left to a free competition of forces. For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching.”
2. Up to this point little had been heard of the doctrine of social justice in the United States. Americans had traditionally held strongly to the principle of self-reliance. In comparison with later times many men earned their living as independent producers rather than as employees. For forty years the Supreme Court had explicitly accepted the legal doctrine of liberty of contract, namely that people had the natural right to make or not to make whatever contracts they wished. But in the meantime industrialization had set in, together with large-scale immigration, and many more men earned their living as employees of large firms, losing their economic independence. Now the Great Depression had begun, which threw an enormous number, some 25%, out of work. In 1932 there was a presidential election. One of the candidates, Franklin Delano Roosevelt, read the pope’s encyclical letter. In a campaign speech in Detroit he quoted from it the statement I have just quoted, calling it one of the greatest documents of modern times, and stating that the pope was just as radical as he, Roosevelt, was. Roosevelt’s theory about the Depression, so far as he had one, was that it was caused by the irresponsible behavior of greedy employers, and overproduction.
Once elected, he lost no time in implementing a social justice agenda. In1933 alone he secured passage by Congress of some 14 separate pieces of legislation for this purpose. Among them were :
· The National Industrial Recovery Act (NIRA),: by which industries set up codes to reduce “unfair competition,” and to raise wages and prices (for he thought low prices were caused by overproduction).
· The Agricultural Adjustment Act (AAA),: which raised farm prices by cutting total farm output of major crops and livestock;
· The Public Works Administration (PWA),:which built large public works projects, and
· the abandonment of the gold standard, which made it possible to print more paper money and thereby cause a general increase of prices.
In 1935 and subsequently he secured passage of
· The Social Security Act,
· The Works Progress Administration Act (WPA), a national labor program which created construction work for unskilled men; also sewing projects for women and arts projects for unemployed artists, musicians and writers.
· The National Labor Relations Act (NLRA), often called the Wagner Act, which set the National Labor Relations Board to supervise labor-management relations.
· The Fair Labor Standards Act which: established a maximum normal work week (initially of 44 hours) and a minimum wage (of 40 cents an hour) and outlawed most forms of child labor.
The Supreme Court proceeded to reject several of these measures as unconstitutional until two Justices, the Chief Justice Charles Hughes and Owen Roberts, switched sides, giving the President a slim but effective majority on the court of one. The overall result in American society was to bring about a revolution in the American conception of social order.
Although it is generally agreed now among economists that the Great Depression did not really end until the war broke out, Roosevelt managed to convince a majority of his countrymen that his social justice agenda was economically successful. It cannot be denied that he raised the country’s morale.
In 1944 in his State of the Union speech Roosevelt proclaimed a "Second Bill of Rights" very different from those in the original Bill of Rights:
The right to a useful and remunerative job...
The right to earn enough to provide adequate food and
clothing and recreation;
The right of farmers to a decent living;
The right of every family to a decent home;
The right to adequate medical care...
The right to adequate protection from the economic fears of
old age, sickness, accident and unemployment;
The right to a good education.
All of these rights were to be funded out of the public purse.
These "rights" were not enacted into law by Congress, but four years later, through the efforts of his widow Eleanor, who chaired the U.N. committee, they were included in the United Nations Declaration of Human Rights.
3. But the version of social justice that he espoused was limited to questions of economics, poverty and unemployment. Since then the conception of justice has undergone a further revolution focusing especially on race and sex, in matters sometimes described as cultural. This second and twofold revolution was brought about by the Civil Rights Act of 1964. The original purpose of this bill as stated by President Kennedy in his speech proposing it to Congress in June of the previous year was mainly to eliminate the system of racial segregation,
"giving all Americans the right to be served in facilities which are open to the public—hotels, restaurants, theaters, retail stores, and similar establishments," as well as "greater protection for the right to vote."
(The military and the public schools had originally been segregated but by 1963 were already desegregated, at least in principle,) This aim of eliminating segregation was fully in accord with ordinary justice: it was entirely right and proper and long overdue. Despite that, the bill at first encountered fierce opposition. In August, however, Rev. Martin Luther King gave a speech (‘I have a dream..’) pleading for racial harmony which had a powerful effect. Over the Christmas holiday period the nation experienced a remarkable change of heart. When Congress reassembled, it was found that opposition to the bill had greatly diminished.
As the bill worked its way through Congress’s committee system, however, its purpose and nature were substantially changed by the addition of two amendments that belong, not to the realm of ordinary justice, but to that of "social justice." One was a vast broadening of its scope, from the elimination of segregation, as indicated by the president in his speech, to the elimination of discrimination in all places of employment with more than 15 employees. This was a momentous change. For while segregation involved a threat to use force against people who had done nothing to deserve it, and was an abominable offense against ordinary justice, discrimination belongs in an entirely different moral category. Segregation causes harm, but discrimination does not. For it is possible to discriminate against a person without performing any action at all in regard to him or her. All that is necessary is to give a benefit to someone else. Not long ago in a New York court the pharmaceutical firm Novartis was fined several million dollars for paying its male salesmen $75 a month more than its female salesforce. The women were not robbed or injured, their condition was not in any way worsened, which is the definition of harm. All that happened was that a benefit was given to the men. The benefit to the men was treated as if it were an injury to the women. Their treatment was certainly unequal, and possibly unfair, depending on your interpretation of the circumstances, but it was not unjust, as injustice is ordinarily understood. It is not without reason that neither in Roman law nor in English Common law was there ever a crime of discrimination. This confusion of mere inequality or unfairness with injustice is the hallmark of “social” justice.
(Furthermore, for an action to be genuinely immoral or a crime, it must be done with an evil intention. The interior dimension of actions is always a central aspect of them for moral judgment. But in 1971 the Supreme Court decided that it is possible to be guilty of discrimination even unintentionally, namely when an action has a “disparate impact” on protected groups, that is, when it creates inequality.)
This alteration in the bill was made chiefly through the efforts of one Asa Phillip Randolph (April 15, 1889 – May 16, 1979), who persuaded Rep. Emanuel Celler, Chairman of the Judiciary Committee, who introduced the bill into the House, to accept it. Randolph was a member of the Socialist Party, and had organized and led the Brotherhood of Sleeping Car Porters, the first predominantly Black labor union. In 1941 he had organized the March on Washington Movement, to pressure Roosevelt (successfully, as it turned out) into banning discrimination in defense industries. In 1948 he had successfully pressured President Harry Truman to end segregation in the armed services. He had helped organize the March on Washington in 1963 which gave rise to President Kennedy's civil rights speech and bill. Randolph was perhaps the most radical of the black civil rights leaders, and as you can see was already experienced in arguing for the banning of discrimination.
4. The second great alteration to the Civil Rights Bill of 1963 was the addition of the word "sex." The original concern of the Civil Rights Act was restricted to the question of race. The bill made no mention of sex. The amendment was added to the bill in the House by Howard Smith, Chairman of the Rules Committee. On February 8th, at a sparsely attended Saturday session with the final vote in the House looming near, at the last minute Smith offered an amendment to additionally prohibit discrimination in employment on the ground of sex. Representative Carl Elliott (D-AL) later explained, "Smith didn't give a damn about women's rights ... he was trying to knock off votes either then or down the line because there was always a hard core of men who didn't favor women's rights."
Onlookers tell us that Smith's amendment was initially greeted by "hoots of laughter" from the floor. He read from a letter — "to show you how some of the ladies feel about discrimination against them" — that he had received from a Nebraska woman upset about the nation's "surplus of spinsters." He explained "through interruptions of howling laughter" her demand that Congress equalize the sexual ratio in the population, and recited her indignant charge that "instead of assisting these poor unfortunate females in obtaining their 'right' to happiness, the Government has on several occasions engaged in wars which killed off a large number of eligible males."
Congressman George Andrews (D-AL) shouted, "Unless this amendment is adopted white women of this country would be drastically discriminated against in favor of a Negro woman!" Emanuel Celler tried to kill the amendment with ridicule, belittling it as unnecessary because of the "delightful accord" that had prevailed in his own household for fifty years. "I usually have the last two words, and those words are, 'Yes, dear.'"
But female members of the House — there were 12 — apparently unaware that the amendment on sex was intended by its mover, not for its own sake but for the purpose of killing the bill on race, took it on its merits. Martha Griffiths (D-MI) declared "...a vote against this amendment today by a white man is a vote against his wife, or his daughter, or his sister." Katherine St. George (R-NY) argued: "We are entitled to this little crumb of equality. The addition of that little, terrifying word, 's-e-x,' will not hurt this legislation in any way."
Suddenly, what had been nothing more than a ploy to both mock the bill and poison its passage in the Senate was taken with literal seriousness and transformed into a live question. The amendment eventually passed by a vote of 168-133 and the clause was revised to read: "prohibit employment discrimination based on race, color, religion, sex, and national origin."
In this ironic manner, with no public demand, no hearings and no national debate, and as the result of a misunderstanding, did "social justice" in the form of "women's liberation," come to America.
Why men fight
Robert R. Reilly
Will women in front-line combat duty change the way men behave in combat?
Men fight to protect their women. Or, at least, that's the way it used to be.
On Thursday, however, Secretary of Defense Leon Panetta said, "Today Gen. Dempsey and I are pleased to announce that we are eliminating the ground combat exclusion rule for women and moving forward with a plan to eliminate all gender-based barriers to service." This, in effect, voids the 1994 rule that mostly excludes women from units below the brigade level when the primary mission is direct ground combat.
Gen. Martin Dempsey, the chairman of the Joint Chiefs of Staff, proclaimed that, "The time has come to rescind the direct combat exclusion rule for women and eliminate all unnecessary gender-based barriers to service."
Why is this necessary? How did such a "time" arrive upon us? According to the Wall Street Journal, "last February, Mr. Panetta ordered US military service chiefs to find ways to expand the role of women." In other words, the military chiefs did not go to the Secretary of Defense and say, "we need to place women in combat units in order to fulfill our military mission."
Had they said this, it could have been for two possible reasons. One is that there are not enough men willing to serve in combat. Or two, women are demonstrably better in combat than men. The first is clearly not the case, as the military is cutting back on personnel. The Armed Forces have more men in combat units than, according to President Obama, they need. Two, there are no studies demonstrating women's superiority or even equivalence to men in combat. In other words, this came from the top - the political top. It is ideological pressure that created this requirement, not military necessity.
The rationalizations for it are almost amusing in the distance they have achieved from reality. One of the women who filed a lawsuit to challenge the combat ban, Army Staff Sgt. Jennifer Hunt, who was injured in 2007 by a roadside bomb in Iraq, said, "Right before the IED went off, it didn't ask me how many push-ups or sit-ups I could do." Yes, indeed, an explosive can rip right through a woman as well as a man. It does not discriminate. Death is an equal opportunity killer. Usually, that would be a reason to keep women out of harm's way, not put them in it.
Rep. Tammy Duckworth (D. Ill), a former Army pilot who lost both her legs in Iraq when her helicopter was hit by a rocket-propelled grenade, said the decision will allow the "best man or woman on the front line." Absolutely, if a woman can kill men more effectively than a man can, why not let them? Women killing men is an essential part of equal opportunity.
Sen. Jack Reed (D, RI) said that on the current battlefield "all who serve are in combat." Absolutely, the person who cuts his or her finger at the company mess hall slicing bread should get a purple heart just like the infantry man who is shot by an enemy soldier. All wounds are equal. If we define everything as combat, then there are no obstacles to women in combat.
White House Press Secretary Jay Carney said that President Obama thinks that the end of the combat exclusion is "appropriate." Appropriate to what? Apparently to removing "unnecessary gender-based barriers," as Mr Carney said.
Here is evidence of the barrier. Since 2001, 152 women have been killed in combat in Iraq and Afghanistan, with 946 wounded. Considering that women make up some 14 percent of the active duty military, the killing is obviously not proportional to their participation. It only represents .019 of US fatalities in these two wars. Clearly, this must be the result of discrimination. To make sure women are given a fair shake in their new roles as front-line fighters, perhaps the fatality figure could be brought up to 14 percent. In fact, this might be the new metric of success for the integration of women into ground combat.
There is another serious problem that requires no sarcasm. According to John Luddy, in a 1994 backgrounder for the Heritage Foundation, "History shows that the presence of women has had a devastating impact on the effectiveness of men in battle." Why? For example, "a review of the 1948 Arab-Israeli War revealed that men tried to protect and assist women rather than continue their attack. As a result, they not only put their own lives in greater danger, but also jeopardized the survival of the entire unit. The study further revealed that unit morale was damaged when men saw women killed and maimed on the battlefield."
According to the late Israeli Defense Minister Moshe Dayan, women reduced the combat effectiveness of Haganah units because men took steps to protect them out of "fear of what the Arabs would do to [the] women if they captured them." In other words, men will behave like men, nowhere more so than in the presence of women. This is why Israel barred women from direct combat until 2000, when the so far only mixed gender infantry battalion was organized to patrol the relatively quiet borders with Jordan and Egypt.
There is another less appetizing way in which men will be men in the presence of women. General Dempsey, apparently with a straight face, suggested that allowing women into combat units may alleviate the military's serious problem with sexual harassment: "I have to believe, the more we can treat people equally, the more likely they are to treat each other equally." In other words, if we pretend that women are just smaller men, sexual harassment will go away.
Here is the political program: Inject sexual tension into combat units by mixing genders, which results in an explosion of sexual harassment; then blame the military and insist that it transform itself - not to fight the enemy and win wars - but to fight sexual harassment.
A rare voice of sanity was heard when Rep. Duncan Hunter (R, Calif) said, "The focus of our military needs to be maximizing combat effectiveness. The question here is whether this change will actually make our military better at operating in combat and killing the enemy, since that will be their job, too."
Should it be their job to kill or to be killed? Retired four-star general Volney Warner said that, "I remain convinced that women are better at giving life than taking it." What kind of society seeks to put its women, it's life givers, directly in harm's way - to endanger that which is most precious to it? The answer is a society that no longer knows what women are or why men fight to protect them. In turn, it asks men not to be men - not to be protectors. What is there left to defend in such a society?
President Obama said, "Today, every American can be proud that our military will grow even stronger with our mothers, wives, sisters and daughters playing a greater role in protecting this country we love." Instinctively, one feels that this sentence should say the opposite - that we can be proud that our military is protecting "our mothers, wives, sisters and daughters" by keeping them from harm, not by placing them in it. One reason this is a "country we love" is that we can keep our women safe here. Obama brings us only one step away from the idea that "our mothers, wives, sisters and daughters" should be the ones protecting our military. This is a proposal that the ancient Greek playwright and satirist Aristophanes could have had great fun with. "Honey, tell the kids that mommy will be late tonight. I've still got some killing to do."
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John Stuart Mill
It is to the lasting credit of John Stuart Mill that he formulated the basic ethical principle of the liberal society: people should be free to do as they please, so long as they cause no harm to others. But when do we cause harm to others? Mill believed that it is possible to cause harm to a person not only by performing an action which inflicts harm on him directly, but also by not performing an action that one ought to have performed to help him.
Of course everyone has long known that this is true in some circumstances. If the captain of a ship neglects to take the necessary measures to keep his ship from running aground, then by not performing certain actions he has caused harm to his employers, crew and passengers. He has an obligation to care for his ship because he has deliberately taken that obligation on himself by contract and is being paid to fulfill it. He has led others to rely on his performance of certain actions, and so he harms them by failing to perform those actions.
Mill’s view, however, goes far beyond that. It says that even where a person has not deliberately placed himself under any obligation to perform some action, it is still possible for him to cause harm by failing to do it. “There are also many positive acts for the benefit of others, which he may rightfully be compelled to perform; such as … saving a fellow-creature’s life, or interposing to protect the defenseless against ill-usage, things which whenever it is obviously a man’s duty to do, he may rightfully be made responsible to society for not doing. A person may cause evil to others not only by his actions but by his inaction, and in either case he is justly accountable to them for the injury.”
This view runs counter to the common law tradition of the English-speaking peoples. However, since Mill wrote, the idea has become widely accepted in the United States also, and in recent years many laws have been passed that effectively put it into practice. For example, this applies to almost all of the laws which are based on the idea of fairness, or, as it is called, social justice. If it be asked what is wrong with refusing to employ minorities or women or the elderly, i.e., practicing job discrimination, many people will reply that it is unfair, for it causes harm to those discriminated against. If it be asked what harm is done to them, a likely reply will be that it deprives them of an opportunity they ought to have. The employer has not shot or robbed or defrauded the individual; he has simply not given him or her a job. In Mill’s words, he has caused evil not by his actions, but by his inaction.
Similarly, if someone should inquire what is wrong with making jobs available at a low wage, say $2 an hour, he will be told that this is taking unfair advantage of the worker. If he asks why it is unfair, a typical answer will be that an individual cannot live and support a family on such a wage. It is not that the employer has harmed the worker directly, by theft or deception, but that he is not giving him what (according to the commentator) he needs. He is causing harm by what he is failing to do, namely, pay a wage of a particular amount.
Or again, if a seller is charging a much higher price for an article than people are accustomed to, or if the price is much higher than the item seems to be worth, the seller is frequently felt to be taking unfair advantage of the buyer (“ripping him off,” in the popular phrase), especially if the buyer is ignorant of the market price or needs the product urgently. The seller is not inflicting any direct injury on the person or property of the buyer, he is simply not helping him as much as it is felt he ought to help him, and this is taken as being equivalent to harming him directly.
Since some very significant laws and court decisions now rest on this view, it is a matter of importance to know whether it is sound or not. Is it the case, as Mill says, that we can cause harm to others by inaction, by failing to help them when we ought?
For one person to cause harm to another, two essential requirements must be fulfilled. The first is that the condition of the person who is believed to be harmed must be worse after than it was before. There must have been a deterioration in his situation. For that is what we mean by harm.
The second requirement is that causation must have taken place. The deterioration in the condition of the other person must be the result of the action or inaction of the first person if he is to be held responsible for it and punished because of it.
Deterioration and the Baseline
To harm a person is to make his condition worse. If Brown shoots Smith, it is clear that he has harmed him because it is clear that Smith’s condition is worse after being shot than it was beforehand. “Worse” implies a comparison, and the comparison in the first place is a temporal one, between the condition of the person after the harmful event has taken place and his condition immediately before it took place. The “baseline” or benchmark for the comparison is the moment just before the harmful action began.
The description of the person’s condition immediately before the harmful action took place must be complete. Sometimes the person’s condition is not static, but is in the process of changing, either for better or worse, and this process of change is interrupted by the harmful action of the other person. In that case the description of the harmed person’s condition must include the likelihood of the change continuing, so far as that can be estimated. Suppose for example that White injures Black while Black is on his way to be interviewed for a job, with the consequence that Black is prevented from obtaining the job. The description of Black’s condition just before he was injured includes a certain probability that he would have obtained the job; and so an account of the harm White has done to Black cannot be confined to the physical damage that he did to him but must also include the harm he did by depriving him of that probability that he would have obtained the job, if it is at all significant.
It is sometimes maintained that the baseline for comparison ought to be not the actual situation of the person in distress at the time the action of the other person started, but the hypothetical situation that the person in distress would be in but for the action or inaction of the other. If Brown encounters difficulties while swimming and Green throws him a rope, it may be said that Green is benefiting Brown because if Green had not thrown him a rope he would have drowned. But although this may be a convenient manner of speaking, philosophically it is a mistake to formulate it in this way. We can never be certain what would have happened. At most we can say what would have been more or less likely to happen, and that may be very far from what would actually have happened. The result of such a formulation is to make all benefits and all harms merely conjectural. Smith declares that he is going to commit suicide. Suppose that I would like to have the experience of killing someone, and I shoot Smith. Could I argue that I didn’t harm him, because if I hadn’t killed him he would have died anyway? Assuredly not.
Where it is necessary, that is, where there is good reason to believe that some significant change would have taken place in the person’s condition, everything that may be gained by formulating it in terms of what would have happened hypothetically can be gained equally well by a full description of the person’s actual condition at the time of the event in question. The idea that Brown would have drowned can be formulated equally well as the idea that he was in danger of drowning. This danger constitutes an integral part of his situation at the time Green threw him the rope, and in assessing the danger we take account of the degree of likelihood involved. It is not necessary to go beyond the actual condition provided it is fully described.
Since it is sometimes questioned whether an action has harmed or benefited a person, we may note that the same baseline applies in the case of a benefit as in that of a harm. We must compare the person’s condition after the action has taken place with what it was immediately before the action in question commenced. It is clear that if you give a gift of $1,000 to Robinson you have benefited him, because after you give him the money he has $1,000 more than he had beforehand. And again, the description of the person’s condition before the action commenced must be complete and must include the likelihood of any change that was in process continuing, so far as that can be estimated.
We mentioned above the case where Green, standing idly by a stream, notices that Brown, who is swimming, appears to be in serious difficulties and likely to drown. He throws Brown a rope, and with that Brown succeeds in making his way ashore. We assumed, as most people probably would, that Green has benefited Brown, because before Green threw him the rope he was in danger of drowning, while afterwards he was not. But such a case is more controversial than a reader unacquainted with modern liberal thought might suspect. The modern liberal tends to deny that Green has benefited Brown, because he believes that there should be a law requiring the Greens of this world to save the Browns.
Thomas Patrick Burke: No Harm: Ethical Principles for a Free Market
(New York, Paragon House, 1994)
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Notes on the Economy
Prof. Bill Dunkelberg
January 14, 2013
Minimum wage destroys jobs and opportunities to develop skills
The minimum wage is a major anti-jobs policy. Ten states have announced an increase in their minimum wage effective January 1, mostly because their legislation requires an adjustment to the Consumer Price Index inflation measure. Some political jurisdictions take it further, San Francisco has a minimum over $10 per hour and the state of Washington is above $9 on average. Supporters hail this as a victory for "fairness" and a benefit for poor people. This, it is alleged, will provide more income to support spending and stimulate the economy. If it works that well, why not make the minimum $50? This would provide someone working 2,000 hours a year an income of $100,000, eliminating poverty and stimulating the economy. Obviously, $50/hour would be detrimental to employment as is $7/hour, it's just a matter of degree.
The President of the Greater New York Chamber of Commerce suggested that the higher labor cost could be offset by eliminating waste in other aspects of the business. Really? So employers are wasting money that they could eliminate and add to the bottom line but they chose not to, to earn less than they could if waste was eliminated. But, with a higher minimum wage they will suddenly eliminate that waste to cover higher labor costs, adding nothing to the bottom line? This is the kind of absurd thinking that leads to bad policy.
As a poverty program, raising the minimum wage is like killing flies with a shotgun, not very well targeted. About 60% of the officially poor don't work, so the only thing raising the minimum wage does for them is to make it harder for them to get a job if they ever decide they want one. Workers must bring at least as much value to the firm as they are paid or the firm will fail and all jobs will be lost (no GM bailouts are available to our 6 million small employers that employ half of our private sector workforce). Raising the minimum wage raises the hurdle a worker must cross to justify being hired.
It is estimated that less than 15% of the total increase in wages resulting from an increase in the minimum will go to people below the poverty line and less than a third of those receiving the minimum wage are families below the poverty line. Most minimum wage workers are from above median income families. So, most of the people benefiting from the minimum wage are not the intended targets of the "anti-poverty" aspect of raising the minimum wage.
As a jobs program, raising the minimum wage is a real loser. Congress raised the minimum wage 10.6% in July, 2009 (know of anyone else getting a raise then?). In the ensuring 6 months, nearly 600,000 teen jobs disappeared, even with nearly 4% growth in the economy, this compared to a loss of 250,000 jobs in the first half of the year as GDP growth declined by 4%. Why? When you raise the price of anything, people take less of it, including labor. The unemployment rate for teens remains unacceptably high. Workers of all ages that are relatively unskilled are adversely impacted by this policy.
Another argument in favor of the minimum wage is that it is a stimulus, introducing new income and spending into the market. But was there more income to spend in 2009 when nearly 600,000 teen jobs were lost? Common sense says that every dollar a minimum wage worker receives must have come out of somebody else's pocket, either small business owners or their customers. The money for a higher minimum wage does not come from thin air.
Consider a community based pizza parlor selling 100 pies a day for 360 days at $10 each. Total revenue is $360,000. It employs 10 minimum wage workers earning $7 per hour, working 2000 hours a year, making labor costs $140,000. Assume rent, utilities, equipment, depreciation, insurance, supplies, licenses, and food costs come to $170,000 per year, leaving a profit of $50,000 for the owner and his/her family. Raising the minimum wage $1 would raise labor costs by $20,000 (paying more for the same amount of labor) and reduce profit to $30,000. The owner must either move into a smaller house or raise prices, which reduces the demand for pizza, resulting in the loss of a worker. So, the full increase in the wage cost of an increase in the minimum wage comes out of the pockets of customers or the owner's family, and the one person who loses a job. There was no net gain in income to increase spending in the community served as every dollar the minimum wage workers received came out of someone else's pocket in the community.
Supporters of raising the minimum cite poorly done studies by agenda driven "research" groups that allege to show that raising the minimum doesn't harm employment. This defies common sense and is not supported by good academic research. The Law of Demand always works: the higher the price of anything, the less that will be taken, and this includes labor.
Firms cannot pay a worker more than the value the worker brings to the firm. Raising the minimum denies more low skilled workers the opportunity to get a job and receive "on the job" training. The impact of raising the minimum wage in 2009 on teen employment makes it very clear that this is especially harmful for young teen workers looking for their first opportunity to have a job. Raising the cost of labor raises the incentive for employers to find ways to use less labor. Most minimum wage earners are not in poverty, yet their employment opportunities are impaired as well as those who are. This is but one of the poorly designed policies that are created by politicians who have little or no understanding of how business works. They promise higher legislated wages or other benefits to constituents who don't understand the true economic impact in order to gain votes.
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Geert Wilders: Speech to Swedish Free Press Society
Dear friends, I am very happy to be in your midst today. Thank you, Ingrid, for inviting me to address the Swedish Free Press Society. No demonstrator will prevent me to speak in Sweden.
I love Sweden and its people. One of my great heroes, Raoul Wallenberg, was a compatriot of yours. Wallenberg embodies all that is good and generous in the Swedish people. He defended the freedom and dignity of others. He protected those who had been marked for death by an evil ideology. And he gave his own life for it.
Recently, your minister for Integration, Erik Ullenhag, was in The Hague on the occasion of the 100th anniversary of Wallenberg's birthday. He abused the occasion to attack my party, the Dutch Party for Freedom.
Minister Ullenhag said that in Sweden a party like mine would never be given the opportunity to influence politics. I wonder what these remarks had to do with Wallenberg. But I know that Mr Ullenhag is wrong: Like the Netherlands, Sweden, too, and all the Western countries need a party defending freedom.
Because Sweden has the same problem as the Netherlands, Denmark and the rest of the Western world. We are all in the same boat. Our freedoms are in danger. Our political and often leftist media establishment turns a blind eye to the largest threat to liberty in our present age. This threat is called Islam.
Islam commands its followers to establish a worldwide Islamic state, where everyone has to live according to the Sharia, the barbaric law of Islam. And where Islam's opponents are being marked for death.
Aleksandr Solzhenitsyn used to say that the truth is "seldom sweet; it is almost invariably bitter." But the truth should be heard. The bitter truth that Islam is the largest threat to freedom today. And the unpleasant truth that Islam is already all around us.
The sign of Islam's presence is visible in all our European cities. To read further, click here.
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Report on Lectures in Europe, 2012
Thomas Patrick Burke
In September and October I gave lectures in Europe on my recent book, The Concept of Justice: Is Social Justice Just? (London, Continuum, 2011). It proved to be a rewarding experience, for it showed me, what I did not previously know, that there is a public even in "Old" Europe for the rejection of "social justice" and for the restoration of the justice that is genuine and true.
The first presentation was held at what might be considered an unlikely place, the European Parliament in Brussels, on September 25. The invitation came through the good offices of our own Patrick Barron, the well-known Austrian economist and columnist, who has spoken there on economic topics several times. He informed the United Kingdom Independence Party (UKIP) in Brussels, who have sponsored him, that I was available. This is a small but rapidly growing party based in Great Britain who are swimming against the tide of socialization by aiming to take the UK out of the European Union. This goal is more or less the opposite of that of the Parliament itself! They (UKIP) also want the citizens of the UK to be allowed to vote directly on their membership in the Union, rather than simply have it decided for them by their alleged representatives in Westminster. This is a view sufficiently radical to prepare UKIP to be open to the radical and kindred message of the Wynnewood Institute.
In Brussels, the parliament is housed in a sumptuous new building on which no expense seems to have been spared. About 25 to 30 members of the parliament with their aides came to the lecture, which was organized by Michael Jose, the party's secretary. It was a good audience! Michael added an excellent strong speech in support. The more mainstream parties object to the stance of UKIP that the national representatives are elected for the purpose of settling questions like sovereignty. But UKIP's position resembles that of the successful movement in the US early in the 20th century to elect the members of the Senate directly rather than have them be appointed by the state governments, as originally provided in the Constitution. The political classes of the EU have notoriously turned a blind eye to their publics' manifest desire for a vote. But the lesson of the US's 17th Amendment is that the voice of the people confers legitimacy.
UKIP seems to be the strongest political force in Europe, and perhaps even the only one, defending the idea of national sovereignty, which Wynnewood staunchly supports. In Michael Farage they have an eloquent and courageous leader. His videos on YouTube are nothing short of rivetting. If you are interested in the fate of Europe they are likely to give you hope against hope. UKIP has been much in the news lately. In Britain they have been growing in strength. A few days ago they did very well in a by-election, far better than expected. Some observers expect them in the next British election to beat out the Liberal Democrats and perhaps join the Conservatives in government.
From Brussels I traveled by train in a long journey across the continent to Prague, the Czech capital, home to a think tank which was created under the old communist regime in protest, the Civic Institute. This is an organization that has many similarities with the Wynnewood Institute. Its aim is to provide adults, students and voters with the philosophical and economic insights that support Western Civilization, the free society and free markets. They have a minimal budget, but paid for my accomodation unasked.
My presentation in Prague was arranged by Roman Joch, head of the Civic Institute. I met him some years ago in the U.S. at a meeting of the Philadelphia Society. He is very ably assisted by Matyas Zrno, who is also a councillor in the Czech parliament and government. I had never met Matyas (Matthias in English) but got to know him well during my visit, a delightful fellow. A difference between their institute and ours is that they have their premises in a monastery! But it is much older, going back to the days of the communist regime, when it was spiritually and intellectually nurtured by Roger Scruton. While I was still in Brussels, the current President of the Czech Republic, Vaclav Klaus, made a public statement in support of UKIP (and therefore implicitly of Wynnewood), which was reported with headlines in many newspapers.
Roman gave a short but strong speech supporting my message. The questions and discussion were even better than in Brussels, intellectually even more lively. After that, a good group of us adjourned to the Czech equivalent of a local pub, and the discussion went on, in a slightly more boisterous fashion, till late into the night. To catch my plane back home from Munich I had to take the overnight bus from Prague across the Bohemian Mountains -- not quite so riotous as their name in English might suggest!
While in Europe I received inquiries from other organizations, notably in Milan and Rome, but as it turned out there was not enough time for the travel that would be involved.
The warmth of support I experienced at both places, and the other expressions of interest I received, convinced me that Wynnewood has an audience in Europe if it wants to use it. I did not even touch institutions in Germany, where the overall political atmosphere is closer to ours. It also has suggested that perhaps something similar could be organized here in the U.S.
As a footnote, you may have noticed a short piece I sent out on Monday on "Coercion and the Measurement of Productivity." It was immediately picked up by Michael Jose and sent to UKIP's members in Europe and throughout the British Isles.
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Coercion and the Measurement of Productivity
The economic or exchange value of an item is given only by a voluntary exchange, not by one that is the result of force or fraud. If a customer buys a bag of sawdust for $30 because the seller assured him it was wheat, the $30 does not represent the genuine exchane value of sawdust. If I should succeed in persuading an acquaintance of mine to buy my house from me by the expedient of threatening to blow his car up, I may obtain money in place of the house, but the money is not a true measure of the economic value of the house. If a thug threatens to burn Smith's restaurant down unless Smith buys "protection" from him, this "protection" has no economic value, even though Smith pays a large sum for it. The concept of economic value has meaning only within the framework of a voluntary market system. Economic value represents the relationship between a voluntary supply and a voluntary demand.
Similarly, the concept of economic productivity has meaning only within the framework of a voluntary market, since a productive activity is one which results in the creation of economic value. An action is economically productive only to the extent that it produces something which other individuals desire. Neither the sale of the sawdust nor the protection afforded by the thug are economically productive.
It follows from this that various goods and services to which economic value and productivity are frequently attributed do not properly possess it. If government pays workers to produce some item which is not in demand in the market, and even more so if it then compels people by law to buy the product, no genuine economic value is created, and economic calculations based on any other assumption can only be misleading.
Throughout the United States, as in most other countries, a certain number of years of education are mandated by government. At the same time, most schools are owned by government and paid for by taxation. Public education is a not a voluntary exchange. It cannot be assumed, then, that the salaries paid to public school teachers out of taxes represent genuine economic value, or that the education the students receive has it either. Yet both educators and economists routinely make that assumption. Of course it seems reasonable to suppose that some of the education that government now provides would be provided privately if government did not, but it is only that portion of government expenditure which would otherwise be spent privately which represents genuine economic value.
Salaries paid within the context of a union contract are not simply the product of a voluntary exchange, but are imposed by the monopoly privileges of union legislation. Does the work for which these salaries are paid possess economic value? Possibly, if the firm makes a profit, but possibly not even then, if the profit comes from other areas of the firm's activities. Salaries which result from union contracts cannot be assumed to represent genuine economic value. Similar considerations apply to all employment which takes place as the result of legislation. In order to know what the true economic value of mandated employment is, we would need to calculate what the level of employment would be if the market were free.
In calculating the national income, economists customarily include all government expenditures except transfer payments, such as welfare or social security payments. It is recognized that transfer payments do not add to the nation's wealth, but it is assumed that all other governmental expenditures do, irrespective of their nature. If the U.S. government spends $40 million on a supercollider, or on the salaries of IRS agents, the assumption is made that this adds that amount to the nation's wealth. Yet economists recognize that such expenditures are anomalous, because there is no way to estimate their market value. What is the market value of a supercollider, or of the IRS? Instead of simply excluding government expenditures from the national income, however, the compromise solution is typically adopted of assuming that government output possesses economic value, and calculating it at cost, which would immediately be recognized as absurd if it were done with private business. It means that if government were to get as much work done by employing one person in place of two, its contribution to the national wealth would diminish, whereas if it spends more money on higher salaries, irrespective of the employees' actual accomplishments, its contribution to the national welfare increases. Common sense would suggest that exactly the reverse is the case. The distortions introduced into the market by economic legislation make rational economic calculation extremely difficult if not impossible, and the conclusions of economists based on such assumptions should be regarded with the greatest distrust.
Government always acts by coercion... Every time government steps beyond its task of providing protection from crime and uses the coercive power of the law to influence economic activity as such, the result is similar to that produced by the thug, or by my threat to blow up my acquaintance's car. What may appear on the surface to be genuine economic activity is actually not so, and to count it as if it were is to be snared by an illusion. This is true of all the chief macroeconomic variables: prices, employment, and output. A price resulting from coercion is not a true price, even though money be handed over, employment resulting from coercion is not true employment, even though some kind of work may be done; and products resulting from coercion do not constitute genuine output. All these measurements are systematically distorted and rendered unreliable by government intervention in the market.
In intervening in the market, however, government relies and must rely on just these measurements. When the Federal Reserve makes a decision to increase interest rates, or not to reduce them, because of the danger of inflation, it looks to a particular measurement of inflation, such as the Consumer Price Index. But this Index lumps together not only voluntary but coerced prices. Every figure government consults as the basis for its economic policies has been falsified by its own previous interventions. In attempting to direct the economy according to some policy, any policy whatever, then, government is essentially flying blind, yet it compels the entire nation to fly with it.
Economists who favor macroeconomics sometimes reply that for many purposes rough estimates can still be useful, and no doubt that is true. Yet at the present time government expenditures make up some 40 percent of the figure referred to as the Gross Domestic Product, and an analysis of the economy restricted to free prices and production might present a very different picture from the usual one.
Thomas Patrick Burke: No Harm: Ethical Principles for a Free Market
(New York, Paragon House, 1994)
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Lecture Delivered at the European Parliament, Brussels
September 18, 2012
On: The Concept of Justice: Is Social Justice Just?
(London and New York , Continuum, 2011)
Thomas Patrick Burke
Everybody knows the nations of Europe have a debt crisis. And everybody knows the United States has a financial crisis. But I am sorry to tell you there is another crisis which almost nobody knows, which is deeper and more serious than either debts or recessions, and which has in effect caused both of these crises. That is the crisis in our concept of justice. It is in crisis because, instead of having a single conception of justice, as Western civilization had from its earliest days, we now have two. They are what I will call ordinary justice, and what is called “social justice.” Many people assume these are in harmony with one another, that social justice is only an addition, or extension or new-and-improved version of ordinary justice. But the truth is, not only are they different from one another, but they are diametrically opposed to one another and in fact they are incompatible with one another. Furthermore, confusion about them is by no means the particular privilege of any one political party, but is almost universal in our society. I would like first to explain what these two conceptions are and why they are in such deep contradiction. And second, so far as time allows, to explain how the confusion between them has caused such havoc.
There is a simple distinction which lies at the heart of our problem. It does not require any abstruse philosophy, but is a matter of common sense, and at first you may feel surprised that I even take up your time with it. It is the difference between an action and a state of affairs. An action is something someone does. A state of affairs is not something someone does. An action can produce a state of affairs, but the distinction always remains between the action, which is the cause, and the state of affairs, which is its effect. A state of affairs is the way things are at some particular time and place. It is a static condition, the kind of thing we would describe as a fact or a situation. An action, by contrast, is an event, a transient happening, carried out by some person, usually for a purpose. Allow me to give you an example, which at the same time will begin to suggest its implications. A robbery is not a state of affairs but an action. Poverty is not an action but a state of affairs. The difference between actions and states of affairs is important because an ethical quality is always a quality of persons and their actions: it is first and foremost a quality of actions, and consequently a quality of the persons who perform the actions.
An action is the expression of a will, and an ethical judgment always implies a judgment on a will. It is in the will that ethical goodness resides, and ethical badness. An accidental event cannot, in any literal sense of the term, be either ethical or unethical. Accidental justice is never more than poetical. Accidental kindness is merely good fortune. Events that occur in the realm of nature, such as earthquakes and volcanic eruptions, since they are not the product of a will, lie inherently outside the domain of moral judgment. A moral judgment is always a verdict on the quality of a person. That quality resides in his will. A person is good or evil, selfish or unselfish, kind or unkind, generous or grasping, just or unjust, depending entirely on his will. That is what Aristotle is saying when he restricts ethical judgments only to the realm of the voluntary, not to the involuntary (ekousion, notakousion). That is a fundamental truth. Whatever is involuntary, whether it be a thought or an action or a state of affairs in society, does not belong in the category of the ethical.
It is a hallmark of ordinary justice that states of affairs can be just or unjust only to the extent that rational agents can be held to account for them. And rational beings can be held to account only for those states of affairs that issue directly or indirectly from their own will. In particular, the injustice of a state of affairs is either the direct result of an unjust action, or it involves the willful or negligent mistreatment of persons. Mistreatment comes in many forms. In some cases the injustice is deliberately intended; in other cases it arises by negligence or weakness of will; in other cases still it arises from a culpable ignorance, as when a drug addict turns a blind eye to the consequences of his addiction for his family. But in all these cases a state of affairs is being imputed or attributed to the will of an agent. In all these cases someone makes himself responsible for the consequences of his own behaviour. And in the end it is this concept of responsibility that is pivotal for understanding the concept of justice. Where there is injustice, there is somebody responsible for it. Where there is no one responsible, there cannot be injustice. Click here to read more...
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Notes on the Economy
Professor Bill Dunkelberg, Ph.D
More “Quantitative Easing” Will Only Help Big Banks, Not Employment
Several Federal Reserve regional bank presidents are lobbying for Quantitative Easing 3 (QE3) to stimulate employment growth (apparently inflation is not currently a concern!). When asked for details as to just how buying another trillion or so in financial assets will do this, much hand-waving occurs. With interest rates at historically low levels, it is reasonable to ask just how this will create new jobs. Who hasn’t taken out a mortgage already (refinancing is not much of a job creator at this point)? Would a 25 basis points reduction really spur a lot of new investment spending? I can’t imagine that loan committees would suddenly approve more loans if rates fell (or if the Fed stopped paying 25bp on excess reserves). Interest rates are in the denominator of the valuation equation, but it’s the numerators that don’t look good (expected cash flow, profits etc.) and the path that Washington has us on is a major contributor to this.
In a recent poll of the members of the National Federation of Independent Business on “Problems and Priorities” (done about every 5 years), it was no surprise to see rising health care costs in the top position, a place it has held for 25 years. But in second place was uncertainty about the economy and in fourth place was uncertainty about economic policy! More owners expect business conditions to be worse in 6 months than expect them to improve and about as many firms expect real sales volumes to fall as expect them to rise, a very weak situation. Only 5% of the owners think the current period a good one for business expansion, and plans to make capital outlays are historically very low. How is QE3 going to change this?
Here are a few relevant observations:
1. Over 60% of small business owners have no interest in a loan (and over 30% can get all the credit they want).
2. Expectations for sales growth and the economy are very poor and loans can’t be repaid without new revenue that the debt-financed investment (in equipment or workers) must produce.
3. Interest rates actually paid by small businesses have not responded proportionately to the sharp decline in Treasury yields (i.e. the Fed can’t get rates on Main Street to fall).The average rate reported on one year money by NFIB owners has averaged 6% for years even though the field on the 1 year Treasury has benn under 25bp.
So, the Fed is not “out of bullets”, there is no limit to the volume of assets it can buy (short of a supply constraint), the problem is that the bullets will not hit the target (employment), or as one colleague characterized it, the bullets are blanks. Large banks will benefit of course, not from “banking” but from “trading”. Small banks are disadvantaged in this game.
In the meantime, savers are taking a beating. Conservative, naïve savers who want to at least secure their capital are stuck with negative real returns and face the prospect of capital losses in the future if interest rates rise and they need to liquidate some of their Treasury bonds. Our national preoccupation with subsidizing debtors at the expense of savers is damaging to our long-term need for real investment and improved productivity. Our current fiscal/monetary policy mix is way out of whack, setting us up for who knows what kinds of problems in the future. Encouraging the Fed to distort this imbalance even further is counterproductive.
Clinton May Be “Back” But Not His Economy
As the press trumpets the return of Bill Clinton to the political spotlight, many partisan observers have revived the “raise taxes on the rich to improve the economy” mantra, citing the fact that Congress raised taxes on the “rich” in his first administration, a true fact, and that surpluses and record employment appeared late in his second term, also a true fact, but unrelated to the tax hike as “tax the rich” proponents would have us believe. Here are the major factors that contributed to the record level of employment in 2000 and the budget surpluses that appeared in the late 1990s:
1. The “DotCom” bubble generated hundreds of billions in capital gains tax revenue.
2. The “Y2K” calendar event triggered record spending on computers, software and related stuff along with a surge in “programmer” employment.
3. There was a “fiber optics” boom as well.
4. Surpluses appeared because employment rose to 64.5% of the adult population (more people paying taxes) as a result of these events, supplemented by capital gains tax revenues and corporate profit taxes.
5. “Deficits” were political poison in those days, and Newt and the Republicans controlled Congress and spending in Clinton's second term (and economists predicted "predicted deficits as far as the eye cansee ").
6. And finally, the “peace dividend” lowered military spending, a real boost.
In short, the fact that raising tax rates will slow economic activity was not refuted: if you tax anything, you get less of it. Other factors can overcome the negative impact of higher tax rates as was the case in the late 1990s.
The impact of these events was obvious in the small business sector (half of private GDP). A record 70% of the 350,000 National Federation of Independent Business member firms reported capital spending in the prior 6 months in the January, 2000 survey (compared to 54% today). The percent of owners with a job opening peaked at 34% in 2000 (compared to 15% today). A record 19% planned to create new jobs late in 1999 (compared to 5% today).
The employment and tax revenue implications of these data are clear: a good economy generates jobs and tax revenue. Raising tax rates reduces the attractiveness of a new hire or a new investment, as it increases the “after tax” return a business needs to earn to justify the expenditure (and repay any debt incurred to finance the expenditure). Without a “Y2K” event to provide an offsetting positive to the negative impact of higher tax rates, such a move is self-defeating. The best measure of the “tax” burden of government is its spending (including regulatory compliance costs). Perhaps reducing that burden (current and expected) would be a better policy move.
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The Only International Economic Policy that a Country Needs: "Mind your own business and set a good example"
By Patrick Barron
The international economic scene is dominated by state interventions at all levels. Daily we read of disputes over exchange rate manipulation, protectionist tariffs followed by retaliatory tariffs, highly regulated free trade blocs that erect trade barriers to non-bloc nations, bilateral trade agreements, and more. For instance, Great Britain is a member of the European Union (EU) but not of the European Monetary Union (EMU), meaning that it abides by all the regulations and pays all the assessments to remain a member of the EU in order to trade freely with the other members of the twenty-seven country EU. But it does not use the common currency, the euro, which is used by only seventeen of the EU members. British industry chafes at the many seemingly meaningless and bizarre regulations that raise the cost of British goods, just so Britain can trade freely within the EU. Some regulations are so onerous that some British manufactures will be put out of business. The pro-EU faction in Britain, such as the leadership of the three main parties--the Conservatives, Labour, and the Liberal Democrats--, recognizes the damage but proposes to lobby for special exemptions on a case by case basis. The anti-EU faction, led by the United Kingdom Independent Party (UKIP), wants Britain out of the EU entirely, arguing that the cost of membership is too great and that the loss of sovereignty is unconstitutional. The same debate can be seen within every EU nation to some degree.
By now everyone is aware of the euro debt crisis; that is, that many members of the EMU are massively in debt. Lower borrowing costs and the ability of members to monetize their debts through the European Central Bank (ECB) by way of their captive national central banks created incentives that proved too powerful for governments to resist, so they embarked on profligate spending programs at the governmental level and enjoyed, briefly, a property boom that has come crashing down. Their way out of this mess is unclear. Some economists propose raising taxes and cutting programs, commonly called "austerity". Others have called for these countries to leave the EMU, reinstate their own national currencies, and devalue against the euro, supposedly to restore "competitiveness". Others have called for outright default on their euro-denominated debt.
The common assumption behind any discussion of these debates and crises is that a country cannot stand alone in the world and needs to negotiate trade and monetary terms with its trading partners, who may require the country to adopt measures that are antithetical to its interests. Is this really the case? Is it possible for a nation to free itself from all international agreements, manage its own currency as its sees fit, and trade robustly with the rest of the world?
No Country Can Harm Another Economically Without That Country's Consent
In order to accept the wisdom of international non-interventionism in economic affairs, one must understand that no country (or bloc of countries, such as the EU) can harm another economically without that country's consent, meaning tacit compliance. In other words, a country can adopt its own trading and currency policies and need not be influenced or harmed by the actions of any other country. But first of all, we need to understand the definition of "harm".
In his book No Harm: Ethical Principles for a Free Market, Dr. Thomas Patrick Burke explains that harm consists only in physical harm or the threat of physical harm. It is not caused by discrimination or a demand for special trading terms. The most common example of real, physical harm is war. War destroys the assets of others. Likewise, blockades cause real harm, because the blockaded nation is threatened by the destruction of its outgoing or incoming goods. Because it does not choose to fight to break the blockade or is powerless to do so does not mean that it is not harmed. However, a refusal of one country to allow its citizens to trade with another--for example, the EU's recent restriction upon its members that prevents them from importing Iranian oil--does not harm Iran. An internal example would be for a person to refuse to trade with a local merchant, due to some personal disagreement. That merchant is not harmed by the trade the he does not enjoy. Dr. Burke explains that the victim of discrimination is left in the same position as before the act of discrimination and that no nation or individual can claim to be entitled to the trade of another.
In fact the discriminating nation or person causes himself some extra cost and, therefore, harms only himself. Consider that an individual most likely must travel further, pay more for goods, or purchase inferior goods that he refuses to buy from his local merchant with whom he is feuding. At the nation-state level the European Union harms its own citizens, for they must pay more for oil, buy inferior oil, or suffer some kind of inconvenience. Otherwise, why would they have purchased Iranian oil in the first place? One could even go so far as to say that the EU wages war against its own citizens and not against Iran, for, undoubtedly, there are police sanctions that the EU would employ against its members for violating the Iranian trade prohibition that must rest upon the threat of violence.
Regulatory and Monetary Interventions Harm only Those Who Impose Them
I will continue to use the EU case as illustrative of my thesis that a nation cannot be harmed except by its own consent. The EU has adopted many onerous regulations upon trade in goods and services with which its members must comply as a condition of EU membership. The EU has erected trade barriers for many goods and services against non-EU members. For example, the EU prohibits the importation of most agricultural products from Africa. Either there is an outright prohibition against importing African foodstuffs or the African nations cannot comply with complex and onerous regulations such as the prohibition against genetically engineered food. A country that wishes to trade with the EU either complies with EU demands or must find buyers elsewhere.
This practice does not fall into the Burkean definition of harm as regards Africa. It does, though, constitute harm to citizens of the EU. African countries are left in the same position as before; remember, no one and no nation has an entitlement to the trade of others. But we must assume that the EU prohibits African foodstuffs, because its citizens would have purchased them in the absence of the prohibition; otherwise, the prohibition would not be necessary. Therefore, the EU regulations and/or prohibitions against the importation of African foodstuffs harms only EU citizens themselves. The African nations are perfectly free to pursue sales elsewhere in the world, although it is true that their standard of living would have been higher without the EU regulations and prohibitions.
The same is true of currency interventions. America has complained for some time that China intervenes in its own currency markets to hold down the value of the yuan in order to increase export sales. The U.S. position wrongly claims that it is harmed, because domestic companies lose sales to cheaper Chinese goods. But this is wrong. Viewed from the standpoint of justice, domestic companies do not have an entitlement to domestic sales. And viewed from a practical standpoint, America enjoys an outright subsidy from China. China sells the US goods below cost and causes its own citizens to suffer higher prices; i.e., higher Chinese domestic prices are caused by its currency intervention that gives American importers more yuan than the free market rate, which is based upon purchasing power parity. As I explained in a previous essay, currency interventions to spur exports are paid by the exporting country's own citizens in the form of higher domestic prices. Should America foolishly prohibit the importation of Chinese goods, either by quotas or tariffs, it would cause harm only to its own citizens, who would be forced to pay higher prices, in addition to other economic dislocations.
The "only international economic policy that a country needs", (returning to the title of this essay), is to mind its own business and set a good example to the rest of the world. A just economic policy for a free and prosperous nation would be based upon the twin pillars of unilateral free trade and non-intervention into its own markets. This means a complete elimination of domestic regulations that attempt to set quality and safety standards, for the market will do that by itself, and complete abdication of manufacture and management of money. It does not need to join a trade bloc or negotiate trade terms with other nations. If a trade bloc such as the EU sets import standards different from one's own domestic standards, each exporting company can decide for itself if the rewards for meeting the importing bloc's standards warrant the extra cost. It is not an issue for the exporting nation's government to decide. Furthermore, the exporting nation does not have to concern itself about importing from a country or bloc of countries that refuses to accept the exporting nation's goods in return. After purchasing goods from the protectionist nation or bloc of nations, that nation's currency will find its way back into its economy in the form of export demand from some other nation that accepted the currency in payment for some other good or service or it will receive a capital investment. If the currency never finds its way back to the nation that adopted unilateral free trade and is held indefinitely in the coffers of some foreign bank or central bank, that nation has simply been on the receiving end of a gift. An analogy would be that of a friend or neighbor who sells you something and then never cashes your check.