Tasmanian Times

Economy

The irony that proves the point

Jack, in Comments on last week’s TT post: Turning politicians into corporate servants … by Dr Peter Willans

#28

I think the point about the USA being highly regulated is debatable. If the Fed ‘regulates’ the banks and financial institutes, yet share jobs and people between these institutions, there is little evidence of true independence and a capacity to regulate. I think this was the irony that proves the point that many (including yourself Davies) are making. Regulation is not regulation by name only and certainly not when infected by cronyism. The financial system annexed the regulators and government who were totally ineffective and ultimately complicit. It is a good example of how crony capitalism will prevail because the system has been changed and manipulated to allow such self interest to seem normal.

‘Lunatics taking over the asylum’ was never a more appropriate expression. In fact, the bankers lobbied to remove the regulations restricting banks speculating with money from ordinary accounts that had been in place since the Great Depression. Its removal under Clinton caused the funny money (created by such banks) to be pumped into the real estate market that was the cause of the crisis you mention i.e. it was the consequences of deregulation.

Frédéric Bastiat suggested that plunder results from both greed as well as misdirected good intentions and I think (from memory) his greatest objection to socialism was the fact that people play god and tend to enforce association and fraternity by unions. However, I’d like to think that we have come far enough for most people to identify some social goods that people can agree on. Identifying legal plunder will always be relative to what you feel constitutes a good. Free market and financial crony types may decide that what they do is moral and glorified (as the quote suggests). However, my perspective is that vaccination programs, a new hip for an old citizen, health care for the poor, education, ecologically sustainable development etc are investments and not plunder. We can’t afford them because we value other things more highly that we never question.

Interestingly, if you dig a bit deeper into that book I think it is the ‘suffering’ caused by plunder that is presented as the issue. Please correct me if I am wrong.

I won’t argue about Sweden past my prior points, which I think we might have at least some tacit agreement on. I did not suggest Hong Kong was never going to succeed, only that it is not by a free market policy alone that its success can be attributed. It is the oddest of all cases and the land rent tax is absolutely a critical difference.

I’m not a champion of any school of economics because I think human nature undermines any system where an elite benefit from control. I really do wish I had more faith, but it would be silly to ignore reality. Many systems might work if only the focus was upon the interests of people and the planet rather than for the self interest of the elite making loot. I do not believe that any system without a clear objective, direction, principle and ethic can deliver the type of economic system capable of dealing with the global issues we face today. I do not believe that human nature has proved itself worthy of no regulation.

In theory, you are right about many of your points but isn’t this the dilemma? Any school of economics does not adequately factor human nature, debt or rent tax on the use of natural resources at all. It avoids confronting the dilemma of what we should value the most and least. In doing so it fails to address what values we must have in order to possess a compass.

Overall, such ‘school’s of thought risk something more fundamental when we champion them. For the present battle ground is for the cognitive map of what the problem is at a far more fundamental level. People have to decide what is right, sensible, caring and desirable. These ‘schools’ provide the illusion that there is only a choice between A or B, take it or leave it. They also suggest that complex ethical and environmental problems are addressed by mindless market mechanisms that are set and forget. Like magic they will remove the toughest of human stains, if only you believe.

The question of whether the environment should be legally plundered by those who pay no rent for its use and in doing so cause suffering and damage the opportunity of future generations, is not a choice of adopting the Austrian or any other school of economics. It is a moral decision that only people can determine if provided with the right information unaffected by crony bias and manipulation. The choice is to live in a community within an environment first in the manner people see as fit, and to produce an economy to provide for this.

#33

It is a really good essay to look at if you would like to appreciate how the essential moral dynamic of politics, prudential regulation, law and the interest and self interests of the people have changed little in 163 years. In particular, rent seeking and the ability for some to legalise and legitimise plunder has stayed the same with the same motivation.

While the essay is is now used and claimed by various disciplines for different reasons (e.g. The Austrian School), what strikes me is this attempt to look for justice and a better system has largely ended in ruin due to the bitter reality of human nature. In a way, the book was prophetic and realistic about this. As the forward points out, Bastiat once looked to the American system as the ideal. He quite correctly concludes that Bastiat would have been mortified by the reality of the present day USA.

The rent seekers, plunderers and Robber Barons of today are those using and degrading natural resources, making profit from war, suffering (human and non human) and consuming the future. The irony is that it is mostly for nothing we would call truly productive, other than to expand an ever larger pool of funny money produced by the financial institutions that make spiralling costs, asset prices and debt possible. The ultimate stupidity is that the plunderers are now thought of to be ‘too big to fail’. But unless they do fail they will continue to take the earth down an unsustainable path.

The con job is that many (most?) people think that this is the way it really has to be and there are no alternatives. To many, Dracula has drunk too much of our blood now to be killed by a stake through his heart. Feed him more blood lest he die!

Here is the PDF:

http://mises.org/books/thelaw.pdf

Author Credits: [show_post_categories parent="no" parentcategory="writers" show = "category" hyperlink="yes"]
5 Comments

5 Comments

  1. Basil Fitch

    November 25, 2013 at 7:33 pm

    America’s $1 trillion Stimulus Package runs
    out this year.

    Economists fearful of meltdown, resulting in high unemployment – global financial crisis again!

    Hockey wants debt to rise in Aust. $500 billion so
    if GFC hits he will have enough to do a ‘K. Rudd
    Stimulus’ without going to govt. for more money.
    Also bulk up call for 15% GST rise! Basil

  2. davies

    November 25, 2013 at 12:16 pm

    There is no debate on whether the USA is highly regualted. It is. You can however argue how effective it is.

    Here is just one example of a study on the effect of over-regulation on the US economy. In a research paper that appeared in the June 2013 issue of The Journal of Economic Growth titled “Federal Regulation and Aggregate Economic Growth,” economists John Dawson (Appalachian State University) and John Seater (North Carolina State University) examine the relationship between the growth in regulations (measured by the pages of federal regulations) since 1949 and economic performance (measured by real GDP growth).

    The authors consider only the number of pages of federal regulations (which increased almost seven-fold from 19,335 pages in 1949 to 134,261 pages by 2005) as their measure of the burden of regulation. It was considered beyond their resources to attempt to calculate state-level regulations.

    But even without considering state-level regulations, the estimated adverse effect of increasing regulation on economic growth since 1949 has been staggering, here’s part of the conclusion:

    Regulation’s overall effect on output’s growth rate is negative and substantial.

    Federal regulations added over the past fifty years have reduced real output growth by about two percentage points on average [annually] over the period 1949-2005. That reduction in the growth rate has led to an accumulated reduction in GDP of about $38.8 trillion as of the end of 2011. That is, GDP at the end of 2011 would have been $53.9 trillion instead of $15.1 trillion if regulation had remained at its 1949 level.

    Ronald Bailey provides some excellent commentary on the study in a Reason article titled “Federal Regulations Have Made You 75 Percent Poorer,” where he makes an important calculation of how regulations affect us at the household level:

    As a result [of the increase in federal regulations], the average American household receives about $277,000 less annually than it would have gotten in the absence of six decades of accumulated regulations—a median household income of $330,000 instead of the $53,000 we get now.

    So the US is over-regulated and it is costing the average US household $277,000 per annum. It has reduced the US GDP by $38 Trillion per annum.

    That’s where your fairness has gone. Smothered in a torrent of red and green tape.

  3. john hayward

    November 24, 2013 at 8:48 pm

    Where Jack converges with Dr Willans is on the final triumph of Mammon worship over all other religion, even that of Jesuits .

    Tony’s homage to expatriate Rupert as a “home town hero” for his global contributions to journalism and self-aggrqandisement clearly indicates that our PM’s marking system is very simple – money = merit.

    It may be surreal, but it’s the one we voted in.

    John Hayward

  4. Jon Sumby

    November 24, 2013 at 7:20 pm

    Tony Fitzgerald, QC
    (More than 25 years ago, Tony Fitzgerald QC headed an inquiry into police corruption in Queensland.)

    ‘In practical terms, democracy for most Australians means little more than a periodic obligation to choose between two major parties which, according to the Commonwealth Parliament’s Education Office, “exist to represent the interests of different groups and individuals in society; their ultimate goal is to have members elected to represent these interests.” The public interest isn’t mentioned.

    Voters, most of whom aren’t members or supporters of any party, often have no real choice because one major party has so disgraced itself that it’s unelectable.
    Advertisement

    After each election, one or other oligarchy rules for a period, during which its power, including power to advance the interests of its adherents and supporters at the expense of the general community, is effectively unlimited.

    It’s “not nepotism, .. just the way the world works.” The arrogant, the ignorant and bullies thrive in the absence of enforceable rules.

    Political parties use common advertising techniques to “sell” themselves to voters. Although the internet is producing major changes, most political advertising is still conducted through the mass media, which is expensive.

    Public funding favours the major parties and obstructs others unless they’re extremely wealthy. Each of the major parties also has affluent supporters. There’s a risk that, over time, a significant imbalance in funding between the major parties will distort the electoral process as extremely wealthy individuals and corporations finance the party which represents their interests.

    The media causes another major distortion when it takes sides, which is a significant concern in Australia where media ownership is highly concentrated and some – for whatever reason – is ostentatiously biased.

    Advertising seeks to persuade. Propaganda seeks to deceive and is most effective when the truth is hidden.

    When in power, politicians routinely use spurious excuses to deny or restrict access to information: “Cabinet-in-confidence”, “commercial-in-confidence”, “operational matters”, etc.’

    Read more: http://www.brisbanetimes.com.au/queensland/power-and-the-inconvenience-of-truth-20131122-2y1et.html#ixzz2ldSylX00

  5. Jon Sumby

    November 24, 2013 at 2:51 pm

    One aspect is also perception. The wealth feel they are entitled to what they have and the poor are unworthy. This is particularly ingrained in the US and in Christian Capitalism. This attitude is also strong in Australia with regular media bashing of the unemployed.

    But again this attitude is pushed by conservative media in support of the powerbase of the wealthy.

    Here is a typical example:

    ‘I don’t throw around the term “hero” lightly, but it takes a special kind of person to look at a homeless man on the street — with no home to stay warm in, little access to a shower or clean clothes, and few possessions — and decide that he’s got it too good. But Fox Business host John Stossel bravely took up that mantle Thursday morning during a guest appearance on Fox & Friends, warning viewers about the perniciousness of giving money to the poor.’

    Watch the video at; http://thinkprogress.org/economy/2013/11/21/2977711/john-stossel-poor-people/

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