Masters of Destiny, Pawns of Fate

The utilitarian economist…does not ask a man to renounce his well-being for the benefit of society. He advises him to recognize what his rightly understood interests are. In his eyes, God’s magnificence does not manifest itself in busy interference with sundry affairs of princes and politicians, but in endowing his creatures with reason and the urge toward the pursuit of happiness.

Ludwig von Mises brings up an excellent point in Human Action.  The Marxists argue that everything is subjective, that there is no such thing as the pursuit of truth for its own sake. There are always interests behind the motives of progress or human actions.

This ties in with the Hegelian notion that the world turns and progresses independent of human will and action. Progress creates itself independent of human beings. Human beings are  merely vessels to be used by the Weltgeist.  Marx goes further with this idea and posits that class wars are inevitable and inexorable.

Yet Mises points out the absurdity of such claims with a simple anecdote. The Marxists would say that all scientific and technological advances were driven by the desire for profits. Bacteriological research created by demand from the agricultural and food service industry to improve the quality of cheeses and wines, etc. The research was not driven by a desire to improve the medical sciences and cure people of diseases.

Mises argues that human action cannot be so narrow in its motive nor in its goals. History teaches us that many useful inventions were discovered by accident.  We may have designed a particular technology with one goal in mind but have it applied to whole other fields of utility. Likewise, we cannot know the benefits or harms of an invention until it is created.

A Precedent to Peace

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As onlookers on the deterioration of the Arab Spring, one cannot help but question the premise that democracy is a precondition for peace. Can democracy really be the remedy to centuries of warfare? Has the Arab Spring failed as we see more uprisings now under supposedly “democratic” governments than we did last year?

In Fareed Zakaria’s book The Future of Freedom: Illiberal Democracy at Home and Abroad, he outlines a brief history of liberty in the first chapter. Very unique and specific circumstances led to the creation of modern democracy, a complex amalgam of feudalist heritage, enlightenment philosophy and capitalism. Freedom and a variety of situations, property rights, the rule of law, the separation of church and state, checks and balances and a whole other host of prerequisites – yet not one single aspect alone can make a successful modern democracy.

Is order then a prerequisite for the alleged democratic peace? If so, there is some hope for the secular apparatuses ingrained in some Middle Eastern countries which supposedly combat Islamist extremism. For instance, in Turkey and Egypt, it is the secular military which feels some preordained duty to restore order after uprisings and protests in the leadership, whenever the religion creeps back into politics. The Asian tigers are also interesting case studies when examining evidence that proves authoritarian order, much like feudalism, can give birth to free societies.

Now when we speak of order, the image of dictatorial rule troubles the Western mind and such a prescription for the world peace seems a hard price to pay. This author thinks it a far cry to praise any sort of oppressive regime. However, we must find a way to describe this perplexing trade-off of religious freedom for political freedom in Middle Eastern countries (which may in some cases, not even guarantee freedom at all!). While modern democracy is certainly not a one-size-fits-all solution, freedom is freedom irrespective of state structure or oversight. The dilemma for these countries is that they have not yet understood how to check and balance one set of freedoms against another. And so, the revolution marches on and the national army continues to intervene to restore some measure of order until the people decide what they want.

In this respect, there might be some hope for these countries. Foreign policy aside, there will always be some measure of order in these Arab Spring countries and there will always be some sort of resistance to that order for the sake of change – whether productive or not.

As Mises points out, it would be naive to think that the world progresses independent of human action in the Hegelian or Fukuyaman sense. A man’s interests are rarely identical with his class, however much the Marxists wish it so. What is useful for us to know is Fukuyama’s admittance that little intellectual or emotional appeal can be found in Islamic fundamentalism by the majority of Muslims. They will have to learn on their own how to preserve their private beliefs, while building progressive state institutions  which embrace democratic values – independent of foreign intervention (with the exception of extreme cases where crimes against humanity are committed). Their modern states are young, so they will need more time to develop.

In the meantime, what should the onlookers do to soften order’s blow? As in the case of European and Asian countries, the government must be amenable to democratic change. The United Nations has done a poor job of fostering a culture of liberty within its mandate. Particularly in the last few years, we have seen every attempt by this body to cater to the whims and wishes of dictatorial countries in order to make them “feel more included”, with the reasoning that their inclusion is more important than changing their hearts and minds.

This borders oxymoronic, since the institution was originally created to combat such atrocities as were seen in the World Wars from ever happening again. It is why the human rights regime was developed. It is why international tribunals were called to order. It is why the UN Security Council was formed: To combat those tyrannies in the world which impinged on the sanctity of human life, dignity, and liberty. Such a cosmopolitan culture has fallen by the wayside into abuse and disuse. Until our League of Nations 2.0 can return to such values in a meaningful way, then we cannot hope for peace in the Middle East, nor anywhere where the chains of oppression turn our fellow man into cattle.

Invisible Hand, Invisible Consequences

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On minimum wage:

You cannot make a man worth a given amount by making it illegal to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situations would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. -Henry Hazlitt

As you can tell, I have finished reading Economics in One Lesson. While a purposefully simplistic work, it evoked two questions in my mind concerning the betterment of humankind through free market economics. To take a lesson from Mises (who I am also perusing) and Fukuyama, the answer to these questions lies in the praxeology (human action) and thymos.

1. Is it possible for taxes to be lowered after a war, particularly in the case whether either the reparations costs are so high or the debt has increased exponentially due to war manufacturing?

There has been a case before where taxes were lowered in the United States post-World War II and revenues increased to make up the difference. There were concerns of unemployment as male soldiers sought to gain back their jobs from the female workers who had replaced them. However, unemployment was short-term because humans are, by nature, productive beings. The US experienced a golden age of commerce.

Well, you might say, the United States was not bludgeoned half to death as Europe in terms of reconstruction. Fine, let’s take West Germany, where Berlin alone was bombed multiple times by Churchill’s Air Force. Chancellor Adenaur and his Minister of Economics Erhard cut taxes down to 18% and introduced currency reform. What followed was the Wirtschaftswunder –  the rapid reconstruction and development of West Germany.

But the skeptic might claim that these are both useless examples because both of these countries had skilled workers in developed economies. Recuperation was inevitable!

One final example: South Korea. While the recovery was delayed by some five years and tariff barriers were raised in the 1960s, the Park government gave tax breaks to businesses and brought up interest rates to bring up savings, leading to an ample supply of credit and capital. At the same time, South Korea began to develop its labour force, responding to global manufacturing demand for its exports. Money and manufacturing led to the further specialization of South Korea into the ICT industry, where it continues to be a leader to this day. So it is possible to have tax cuts and higher revenues in a post-war world!

2. What does Hazlitt think about dumping – the act whereby a country floods a developed or developing market with cheaper goods (and theoretically, destroys all hope of that country ever developing its industry and improving its economic welfare)?

Given Hazlitt’s anti-tariff attitude, I think he would wholeheartedly embrace the Walmart effect of cheaper goods flooding a given country’s market. Consumers have more purchasing power, the manufacturing workers receive profits, and more jobs are created because consumers can spend more. The only short-term fall-out is the temporary unemployment of manufacturing workers as other countries gain a competitive advantage and these skilled workers must find new jobs. However, developed economies are sufficiently diversified as to make absorption amenable.

But what about the effects on a developing country with no developed industry? Well, the same effects occur, but the unemployment is a little more sharply felt. However, in a purely free market world, there should be no such thing as an unproductive worker. If cheaper manufactured goods obliterate  a given industry, then the people of the developing country must simply find another good to develop: agriculture, mining, services, etc. Unfortunately, countries with high unemployment rates love to use this opportunity to beg for more foreign aid, the blank welfare cheque to much of the developing world. If aid were cut off for these countries, they would be forced to produce.

Countries that are rich now were not always rich. There are even some poor countries now who were once rich. In a free market world, it is entirely possible for a poor country to become rich, but not possible for a poor country to stay poor.

Summer Reading

A new look. A new start. Perhaps some new perspectives to add to these dormant pages.

While I conjure up some more verbose reflections on the meaning of life and the pursuit of happiness, perhaps my summer reading list will give you some sense of what’s distilling the cobwebs of my mind.

  1. Economics in One Lesson, Henry Hazlitt
  2. The Ascent of Money, Niall Ferguson
  3. Human Action, Ludwig Von Mises
  4. Winner Take All: China’s Race for Resources and What It Means For the World, Dambisa Moyo
  5. Fearful Symmetry: The Rise and Fall of Canada’s Founding Values, Brian Lee Crowley
  6. Margaret Thatcher: The Autobiography
  7. The Origins of the Political Order, Francis Fukuyama
  8. One Hundred Years of Solitude, Gabriel García Márquez
  9. The Secret Agent, Joseph Conrad
  10. A Room With A View, E.M. Forster