On the Wrong Side of History

June 28, 2010

Fear is the kryptonite of liberty. A fearful person, thinking he or she has no alternative, reaches out for any solution that promises to control what they find threatening. Often, my students initially embrace government-based solutions to problems before they understand how the market process works. For instance, they may support increased healthcare regulation fearing that market processes are incapable of solving the healthcare problem. Further, like most people, students support a clean environment. Initially they are likely to believe that more government regulation is the only way to get there. Yet, at the same time, students seem to me to be naturally inclined toward liberty. When freedom-based solutions are presented, they are quite receptive.

With that in mind, listening to some libertarians comment on the Gulf of Mexico BP disaster is painful to me. They sound more like Rush Limbaugh than  principle-based advocates of liberty. My students, at least, would soundly reject their inflammatory rhetoric.

Lew Rockwell is the chairman of the Ludwig von Mises Institute. His web site, one of the most visited libertarian websites in the world, is well worth visiting daily. Recently, Lew wrote:

A wildlife biologist visiting my town is “saving birds” in the oil spill, as he did after the Exxon Valdez leak. When the media is around, he and his colleagues are seen carefully cleaning birds, though this is virtually always futile. When the media are absent, they simply twist the poor animals necks, since they are dying. The whole business costs about $5,000 per bird.

I’m not sure how Lew would know this. Surely, Lew has not spending his days observing this wildlife biologist. Lew’s post was informal, but I can’t help but wonder on what basis he calculated the $5000 per bird? Has Lew learned that the government is paying the biologist $5000 a bird? If not, why does Rockwell need to disparage the efforts of the biologist?

Sadly, Lew’s biting remarks might have been influenced by the great libertarian teacher Murray Rothbard.  In July 1989, Rothbard wrote of the Exxon Valdez oil spill in Alaska. Rothbard’s essay was recently republished at Rockwell’s site. In the essay, Rothbard observed,

The problem, of course, is that environmentalists don’t give a tinker’s dam about paying for external costs. They have their own agenda, scarcely hidden any more. Look at all their bellyaching about the poor birds, and the sea otters, and the salmon, etc. Look at their whining, too, about the beauty of the pristine blue water now befouled with black or brown oil slicks.

(Well, hell, maybe a coating of black on blue waters provides an interesting new esthetic experience; after all, once you’ve seen one chunk of blue water, you’ve seen them all.) The environmentalists are in pursuit of their own perverse and anti-human value-scale, in which every creature, animal, fish, or bird, heck even blue water, ranks higher than the wants and needs of human beings. The environmentalists welcome this trumped up “crisis,” because they want to shut down the Alaska pipeline, which supplies a large chunk of domestic American oil; they want to reverse the Industrial Revolution, and get back to pristine “nature,” with its chronic starvation, rampant disease, and short, ugly, and brutish life span.

Now, protecting the environment is hardly “perverse and anti-human,” and lumping all environmentalists into one category is a straw man tactic. Ironically, notice the win-lose mentality in Murrays’s critique of what he claims is the win-lose belief of environmentalists: “Every creature, animal, fish, or bird, heck even blue water, ranks higher than the wants and needs of human beings.” Even if environmentalists did take Murray’s straw man position, Murray’s implied position—that the needs of human beings trump everything else and are separable from the needs of the environment—is equally absurd. Can it really be that the interests of human beings are separate from the interests of the environment?

Suppose that with more offshore oil drilling and more tolerance for pollution the price of oil could be reduced to $.50 a gallon. Should we sign up for the deal? Would human beings really win while the environment lost, or would both human beings and the environment ultimately lose?  Murray is implying that a utilitarian deal, where energy prices are reduced, is a free-market position. Those who have read Murray’s writings know that he took a profound position against utilitarianism. Yet, somehow, Murray seems to have had a blind spot here.

Albert Einstein wrote:

A human being is part of a whole, called by us the Universe, a part limited in time and space. He experiences himself, his thoughts and feelings, as something separated from the rest a kind of optical delusion of his consciousness. This delusion is a kind of prison for us, restricting us to our personal desires and to affection for a few persons nearest us. Our task must be to free ourselves from this prison by widening our circles of compassion to embrace all living creatures and the whole of nature in its beauty.

Einstein was neither an economist nor a libertarian, but do his words offer us guidance? Einstein offered us an elegant pointer to what both quantum physicists and the perennial spiritual wisdom teach—namely, there is order (invisible to our senses) which connects everything. This order, which quantum physicist David Bohm called the implicate order is as important to our understanding of freedom as is Hayek’s spontaneous order.

A study of history readily demonstrates that over time human beings have been following Einstein’s advice. The decision in Western civilization to move away from the tribe and, instead, to organize society around the rule of law is a reflection of a decision in our minds to widen our circle of concern and compassion. In tribal societies, those outside your own tribe are considered others unworthy of your respect. In contrast, societies organized by the rule of law usually become more inclusive as fewer individuals are seen as outsiders or others. Indeed, the free market—by fostering trade and specialization—forces an awareness of our inherent interconnectedness and, indeed, an understanding that there are in reality no separate interests. Can a business succeed long-term if it cheats its customers? The answer is “yes” only if the government protects it from competition.

At Rockwell’s site, Jim Davies recently wrote:

I was very disappointed to hear how the D.C. Mafia had subjected BP to what the possibly vertebrate Joe Barton (R-TX) called a “shakedown” for $20B to compensate those hurt by its oil spill, but had also made the company agree not to cap that sum (meaning the bill may be higher yet) and to let a government nominee administer the payments (meaning it is almost sure to be higher yet). Coupled with yet more apologies outside the White House, and inside Congress to the monotonously loathsome Henry Waxman (D-CA), this looked like an abject capitulation; for it has not yet been established that BP is even to blame for the spill, and the law – which government wrote – limits its liability anyway to $75 million. That was the basis on which BP hunted for oil, and on which its owners invested their money. Now that it has voluntarily exceeded that limit by a factor of at least 267, who can ever trust its word again?

Looking past the name-calling, there is much that a libertarian should find repellant in the comments of Davies. As I have observed in this blog, the law wrongfully limits liability to $75 million, but the cap is set aside in cases of “gross negligence or willful misconduct.” I would not want to be a BP lawyer arguing that neither negligence or misconduct occurred in this case. But more importantly, to defend the limit on liability is to defend special privilege. Suppose the government passed a law that automobile drivers from Auburn, Alabama, would be subject to only $75 of damages for any accident that they caused. Suppose an Auburn driver caused a catastrophic  accident. Would a libertarian conclude that the government is unfairly shaking-down the Auburn driver if it demanded more than $75 from the driver? In the Deepwater Horizon disaster, the government’s liability limit allowed BP to behave recklessly. It is puzzling why a libertarian would not be stressing the heart of the matter.

According to a May 2010 NBC/Wall Street Journal poll, “more than 80% see problems with America’s two-party system—with 31% believing it’s seriously broken and that America needs a third party.” As I have written many times in this blog, the growing public dissatisfaction with politicians is not necessarily salutary for advocates of liberty. We are likely see a splintering of the political process; unprincipled populists of all ideologies are likely to gain ground as segments of the public embrace ad-hoc fear-based solutions. Further reduction in our liberty is the most likely result.

Decades from now, when liberty is again on the ascendancy, we may be emerging from years of relative economic deprivation and from the hardships caused by war. We will have had to suffer through the pain of seeing that win-lose solutions posed by unprincipled populists do not work. Human beings will be ready to understand that all living things are inherently connected. We will know that win-lose solutions to problems are antithetical to the cause of liberty.

As advocates of free markets—where win-win transactions are the normal occurrence—libertarians should now be advocates of win-win solutions, not win-lose solutions. It would be tragic if libertarians—who have been on the right side of history on so many issues—were to be on the wrong side of history now.


The Coming Scuttling of Free Trade

March 4, 2008

It was 1949. Abraham Levitt and his two sons, William and Alfred, were about to sell their first ranch homes in the nation’s first suburb of Levittown, Long Island. The homes sold for $7,990 and were built on the site of a former potato farm. Thousand of middle class New York City residents eagerly lined up to buy what for them was a fabulous home with new appliances and green space.

On the prairies of America it was another story. Many areas were just, for the first time, receiving electricity. Not every home had indoor plumbing. Life was hard and living standards were comparatively harsh on the rural farms of America. But, it was these same hard working farmers who grew the food that eventually ended up in the new supermarkets that served the residents of Levittown.

Suppose in 1948, a resident of Long Island had argued as follows: Levittown should not be built. We are growing potatoes here on Long Island. If it is built, we will start importing potatoes from North Dakota and that just isn’t right. If we import potatoes, Long Island farmers will lose their livelihood.

The argument might continue with the assertion that competition from North Dakota farmers just isn’t fair. In North Dakota, living standards and environmental standards are less than our standards. Some families out there still use candles and outhouses. Labor is cheap; their children wake-up early to do farm work before they go to school. How can a Long Island farmer compete?

Precisely! Long Island famers couldn’t compete. That is why Levittown came into being. Long Island land was more suited for Levittown homes than it was for potato farms. Of course, there was never a possibility that North Dakota potatoes could have been banned from Long Island because no state can interfere with trade between states.

But nations can and do interfere with trade between nations. Yesterday, at the university where I teach, we were interviewing a candidate for a faculty position. During his presentation, a colleague explained why she was for free trade—but only if it is fair trade. Trade is not fair, she explained, when countries have lax environmental standards, pay their workers lower wages, do not provide health-care benefits, etc.

As I listened to her passionate denunciation of free trade, my mind flashed back to the Democratic debate last week. Both Obama and Clinton threatened to scuttle NAFTA if the agreement was not renegotiated to put in place stricter environmental standards etc.

The standard of living in much of Mexico is not much better than the standard of living was in North Dakota in 1949. To expect Mexico to adopt the environmental standards that the United States has in 2008, before their standard of living matches the standard of living of the United States in 2008, is far from fair. It will never happen. And if now, in 2008, the Mexican government did impose such environmental standards, the standard of living of their people would never reach that of the United States.

Many farms are now abandoned on the North Dakota prairie. Why? Rising standards of living in the cities attracted farmers. In a world of free trade, the lax environmental standards and the sweatshop factories that we see in many countries will also vanish just as soon as rising living standards increase the demand for a cleaner and safer way of life.

In a protectionist’s world, living standards fall. Falling living standards, in turn, increase the amount of environmental damage. Poor people worry about feeding their children; they do not worry about meeting American environmental standards. More than that, a poor world breeds war, and war is the ultimate environmental catastrophe.

Here is the bad news. To have both Clinton and Obama promising protectionism is a harbinger of a political trend. An intensifying debate that focuses on limiting free trade is a leading indicator of difficult economic times. Why? Bull markets call forth feelings of inclusiveness—a brotherhood of man so to speak. Bear markets call forth feelings of exclusiveness—with corresponding feelings of nationalistic pride.

Difficult economic times are coming. Fear increases during difficult economic times, and fear demands scapegoats. Politicians will be all too eager to supply scapegoats. Bet on free trade to be an early one.

2008 and Beyond: “I Can’t Afford That”

January 7, 2008

In a poignant and understated opinion piece, called “The Courage to Choose” Minyan Peter helps us understand why 2008 and beyond are likely to be a very difficult years. Peter writes:

I believe that in time, historians will define the last twenty years in America as the “Age of Aspiration” where, thanks to unprecedented levels of credit, Americans could become anything they wanted.

Well, I, for one, believe that our Age of Aspiration is ending. And, with its conclusion, we must, for the first time in almost a generation, begin to reconcile our wants with our means. We must choose what to do without, rather than what more to do with.

Peter goes on to observe:

We are going to have to separate what is most important from least, and act accordingly. Where life was once limitless, it will now be constrained.

And, like it or not, all of us will need to return to our vocabulary a simple phrase that I believe has been lost over the past twenty years: “I can’t afford that.”

Unfortunately, social trends do not reverse easily. This “age of aspiration” that Minyan Peter describes could also be called an “age of entitlement.” The illusion of unconstrained choices is a mindset that will not be easily reversed. Collectively as a society, we do not currently have “the courage to choose.” Given that, it is easy to forecast certain social trends for 2008 and beyond.

  1. More and more bailouts will be demanded by individuals, households, and organizations that have lived beyond their means. The demand for housing bailouts has only just begun and will begin to spread to credit card and other consumer debt.
  2. Governments, at all levels, have lived well beyond their means. Because they have coercive power, they will be the last to say, “I cannot afford that.” Thus, it is almost a certainty that taxes will go up.
  3. More and more dangerous populists, like Mike Huckabee, will seek office. Populists are especially dangerous because they are without any identifiable principles. This makes them especially prone to totalitarianism. As the economic situation worsens and fear goes up, in years to come, politicians like Mike Huckabee will seem like relatively benign candidates.
  4. At the same time, because more of the population will be willing to look at root causes, more principled candidates, like Ron Paul, will seek office. Unfortunately, for the foreseeable future, support for unprincipled populists will exceed support for principled candidates. Polarization will increase.
  5. Demand that income be redistributed from the “rich” will increase. The crowd that populists pander to will reason: “After all they must have attained their money unfairly and it’s only right that that money be redistributed to those who need it more.”
  6. For the foreseeable future (next five years), we will move further away from our framework as a constitutional republic, which was founded with defined and limited powers granted to government.
  7. As the social mood deteriorates, the threat of more ruinous foreign adventures will increase. Recently in New Hampshire, John McCain said that the United States military could remain in Iraq for “maybe a hundred years.”
  8. Demands to limit cheap, foreign imports will increase. In the short-term, there is little chance that trade liberalization will be reversed; but in the coming years, the populist threat of ruinous tariffs and quotas will increase.
  9. Demands that something be done about energy prices will increase. This will provide political cover for continued subsidization of ethanol and other forms of energy, such as nuclear, which are not viable on the free-market. This subsidization will further raise energy prices; drain capital away from viable, emerging, alternative energy sources; raise food prices; and create even more environmental disasters, like the current draining of aquifers in the mid-west.

    Do Crops Need Brawndo?

    December 6, 2007

    In the satirical film Idiocracy, which is set 500 years in the future, a Gatorade-type product has completely replaced water. Water is now used only in toilets. Indeed, the product called Brawndo has replaced all other foods on the government’s food pyramid chart.

    Crops in this future world are watered with Brawndo. Naturally, they are dying. The public, though, sees no connection between the dying plants and Brawndo. As more plants die, these future Americans simply use more Brawndo and mindlessly repeat: “It’s got what plants crave. Plants need electrolytes.” In this future world, the public’s faith in Brawndo is absolute.

    How far away is such a world? Maybe not so far.

    In the past few years, there have been many deadly outbreaks of E. coli 0157 bacteria on fresh, leafy, green vegetables such as spinach and lettuce. Rather than addressing the root cause, the USDA (United States Department of Agriculture) instead has proposed rules which are their equivalent of using more Brawndo.

    The E. coli outbreaks have more to do with unsafe practices on many farms, rather than anything inherently risky in growing or eating leafy greens. Michael Pollan, writing in the New York Times, traces the E. coli outbreak to feedlot farming practices:

    The lethal strain of E. coli known as 0157:H7, responsible for this latest outbreak of food poisoning, was unknown before 1982; it is believed to have evolved in the gut of feedlot cattle. These are animals that stand around in their manure all day long, eating a diet of grain that happens to turn a cow’s rumen into an ideal habitat for E. coli 0157:H7. (The bug can’t survive long in cattle living on grass.) Industrial animal agriculture produces more than a billion tons of manure every year, manure that, besides being full of nasty microbes like E. coli 0157:H7 (not to mention high concentrations of the pharmaceuticals animals must receive so they can tolerate the feedlot lifestyle), often ends up in places it shouldn’t be…

    So how does the USDA respond? They have proposed rules that will concentrate farm production further in the hands of large farms that use unsafe practices. Pollan writes:

    Heavy burdens of regulation always fall heaviest on the smallest operations and invariably wind up benefiting the biggest players in an industry, the ones who can spread the costs over a larger output of goods. A result is that regulating food safety tends to accelerate the sort of industrialization that made food safety a problem in the first place.

    According to the Cornucopia Institute, the new rules “include growing practices that discourage biodiversity and sustainable/organic farming practices, deplete soil fertility, and create “sterile” fields—methods that have not been scientifically proven to actually reduce E. coli 0157 bacteria but are certain to reduce biodiversity, harm wildlife, and burden family-scale farms.”

    For example, the proposed new rules may require testing for pathogens at every harvest. Large farms that grow one crop, which they harvest only several times a year, will incur proportionally less expense to meet that requirement than small family farms that continually harvest many types of greens.

    According to the Cornucopia, these rules “discourage the development of microbial life in the soil.” In doing so, Cornucopia observes that the risk is increased: “In fact, sustainable farming methods that promote microbial life in soil have shown to reduce E. coli 0157 because it has to compete with other microbes and is therefore less likely to thrive.”

    Simply put, policies that encourage more food centralization create more problems and put us all at risk—not only from E. coli outbreaks, but also from disruptions to our food supply caused by known and unknown risks.

    Ethanol, the Aral Sea, and the Looming American Environmental Disaster

    November 16, 2007

    Consider the Aral Sea. The Aral Sea—once the fourth largest inland body of water in the world—is now a vast wasteland that has shrunk to less than 25% of its former size.

    The Aral Sea in Uzbekistan (formerly part of the Soviet Union) stands as a tragic monument to environmental carnage that frequently occurs under socialism. How could this have happened? Was it a change in weather? No, the destruction of the Aral Sea was the consequence of the Soviet decision to divert waters that flowed into the Aral Sea for farming.

    With the lessons of the Aral Sea in mind, let us reflect on the looming environmental catastrophe that is beginning to build in the United States. Like the Aral Sea disaster, our own central planners think they know best how water should be used. In our case, it is for the production of ethanol.

    Ethanol is a fuel that would not exist in the United States without billions of dollars of taxpayer subsidies. Robert Bryce, writing in Slate, clearly explains why. Simply put, the production of ethanol uses more energy than it produces. Bryce writes:

    David Pimentel, a professor of ecology at Cornell University who has been studying grain alcohol for 20 years, and Tad Patzek, an engineering professor at the University of California, Berkeley, co-wrote a recent report that estimates that making ethanol from corn requires 29 percent more fossil energy than the ethanol fuel itself actually contains…

    In addition to their findings on corn, they determined that making ethanol from switch grass requires 50 percent more fossil energy than the ethanol yields, wood biomass 57 percent more, and sunflowers 118 percent more. The best yield comes from soybeans, but they, too, are a net loser, requiring 27 percent more fossil energy than the biodiesel fuel produced. In other words, more ethanol production will increase America’s total energy consumption, not decrease it.

    Ok, but let’s face it—we’ve all been overloaded with reports of government boondoggles that benefit some at the expense of all. Why should we be especially concerned about ethanol?

    Corn is a plant that needs a lot of fertilizer. The excess fertilizer is poisoning aquifers in the Corn Belt states. Nitrates that come from the runoff are especially toxic to children and pregnant woman.

    But that is just the tip of the iceberg. All throughout the Corn Belt, ethanol plants have been opening. Besides polluting the ground water they are draining aquifers at alarming rates.

    Here is just one example. The water aquifer in southwestern Minnesota is mostly ancient clay sea beds. The region doesn’t get a lot of rainfall; and in any case, recharging clay aquifers is not a process that nature easily accomplishes. In Granite Falls, Minnesota, one ethanol plant, Granite Falls Energy, drained the town aquifer by nearly half in less than a year.

    Let’s be clear here. Without the billions of dollars of subsidies paid each year for corn and ethanol production, there would have been no Granite Falls Energy. Nor would there have been any other ethanol plants draining aquifers in states such as Minnesota, Nebraska, and Iowa.

    How long it will take for an environmental catastrophe of the size of the Aral Sea to occur is not easily predicted. Such a disaster in the United States is beyond our imagination. Although it may be beyond our imagination, that is not very reassuring. We can be sure of one thing—no country is immune from the consequences of the follies of socialism.

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