War

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Why Government Stimulus Doesn’t Work

August 3, 2010 in Economics by Greg | 1 comment

The broken window fallacy helps explain the unintended consequences of government stimulus. In 1850, French political economist Frédéric Bastiat wrote about this misconception in an essay entitled Ce qu’on voit et ce qu’on ne voit pas or “That Which Is Seen, and That Which Is Not Seen.”¹ Below is a short video that explains this fallacy.

In 1946, noted economic journalist Henry Hazlitt wrote about the seeming “benefits” of this type of destruction:

So we have finished with the broken window. An elementary fallacy. Anybody, one would think, would be able to avoid it after a few moments’ thought. Yet the broken window fallacy, under a hundred disguises, is the most persistent in the history of economics. It is more rampant now than at any time in the past. It is solemnly reaffirmed every day by great captains of industry, by chambers of commerce, by labor union leaders, by editorial writers and newspaper columnists and radio commentators, by learned statisticians using the most refined techniques, by professors of economics in our best universities. In their various ways they all dilate upon the advantages of destruction.

Though some of them would disdain to say that there are net benefits in small acts of destruction, they see almost endless benefits in enormous acts of destruction. They tell us how much better off economically we all are in war than in peace.²

Some 64 years later, the illusion of the broken window continues to be used in government public relations.

Sources:

“The Broken Window”. Ludwig von Mises Institute. 2 Nov 2009.↩
Economics in One Lesson. New York: Pocket Books, 1952.↩

Wikileaks and American Empire

July 28, 2010 in Foreign Policy by Greg | 5 comments

Recently, Wikileaks released a document set called the Afghan War Diary. The documents purportedly provide insight into the continuing growth of the American empire. Andrew J. Bacevich, professor of history and international relations at Boston University, countered:

Based on initial press reports, the leaking of “90,000 classified documents” related to the Afghanistan war doesn’t really tell us much that we don’t already know. Our Afghan partners are less than reliable. Nation-building is a painstakingly slow enterprise. At least some Pakistanis are playing a double game. NATO forces continue to kill non-combatants, despite universal acknowledgment that doing so alienates the people whose affections we are desperate to win. The insurgents are on the march. Who, if anyone, is likely to find any of this news? Does it come as a shocking revelation to learn that U. S. special operations forces are conducting secret raids aimed at eliminating Taliban leaders? . . .

For months on end, Washington has fixated on this question: what, oh what, are we to do about Afghanistan? Implicit in the question are at least two assumptions: first, that something must be done; and, second, that if the United States and its allies can just devise the right approach (or assign the right general), then surely something can be done.

Both assumptions are highly dubious. To indulge them is to avoid the question that should rightly claim Washington’s attention: What exactly is the point of the Afghanistan war? The point cannot be to “prevent another 9/11,” since violent anti-Western jihadists are by no means confined to or even concentrated in Afghanistan. Even if we were to “win” in Afghanistan tomorrow, the jihadist threat would persist. If anything, staying in Afghanistan probably exacerbates that threat. So tell me again: why exactly are we there?¹

A day later, Francis Shore provided his own insight into American hegemony in the region:

Wikileaks and American Empire »»

“The New Republic: The Significance of the Wikileaks”. 26 Jul 2010. NPR; hereafter Significance of the Wikileaks.↩

John T. Flynn on American Fascism

July 20, 2010 in Fascism by Greg | 3 comments

The growth of fascism in America was noted by Robert Higgs in the post Participatory Fascism. Prior to this, American journalist John T. Flynn – like Friedrich A. von Hayek – warned near the conclusion of WWII how this state of events might transpire:

Fascism will come at the hands of perfectly authentic Americans, as violently against Hitler and Mussolini as the next one, but who are convinced that the present economic system is washed up and that the present political system in America has outlived its usefulness and who wish to commit this country to the rule of the bureaucratic state; interfering in the affairs of the states and cities; taking part in the management of industry and finance and agriculture; assuming the role of great national banker and investor, borrowing billions every year and spending them on all sorts of projects through which such a government can paralyze opposition and command public support; marshaling great armies and navies at crushing costs to support the industry of war and preparation for war which will become our greatest industry; and adding to all this the most romantic adventures in global planning, regeneration, and domination all to be done under the authority of a powerfully centralized government in which the executive will hold in effect all the powers with Congress reduced to the role of a debating society. There is your fascist. And the sooner America realizes this dreadful fact the sooner it will arm itself to make an end of American fascism masquerading under the guise of the champion of democracy.¹

Flynn predicted the ominous effect of unlimited government spending over time:

Continuing this policy will no longer run with the great current of desire in America. Regulating business, cutting in as the partner of industry, repressing the labor unions that were encouraged to action, satisfying the aged who were lured on to dream of abundance—all this will present a problem that will call for such drastic impositions upon every section of the population that nothing short of a totalitarian government supported by the weapons of ruthless coercion and the will to use them will bring compliance from the people. We shall presently be presented with the final crisis—the necessity of taking the last few steps of the last mile to fascism in some generated crisis, of ending the prologue and running up the curtain on the swelling theme—or of calling off the whole wretched business in some costly, yet inescapable, convulsion.²

What were Flynn’s intentions? According to Ronald Radosh,

John T. Flynn on American Fascism »»

As We Go Marching. New York: Doubleday and Company, Inc., 1942. 252-253.↩
Ibid. 257.↩

Roman Empire and Inflation

April 20, 2010 in Money by Greg | 2 comments

Joseph R. Peden’s article Inflation and the Fall of the Roman Empire is a fascinating read as it recounts the inflationary policies of Roman emperors over a series of centuries.¹ He started this lecture by stating:

I’ve been asked to speak on the theme of Roman history, particularly the problem of inflation and its impact. My analysis is based on the premise that monetary policy cannot be studied, or understood, in isolation from the overall policies of the state. Monetary, fiscal, military, political and economic issues are all very much intertwined. And the reason they are all so intertwined is, in part, due to the fact that the state, any state, normally seeks to monopolize the supply of money within its own territory.

Monetary policy therefore always serves, even if it serves badly, the perceived needs of the rulers of the state. If it also happens to enhance the prosperity and progress of the masses of the people, that is a secondary benefit; but its first aim is to serve the needs of the rulers, not the ruled. And this point is central, I believe, to an understanding of the course of monetary policy in the late Roman Empire.

He then went on to explain some of the various causes of inflation:

What were the causes of this inflation? First of all, war; the soldiers’ pay rose from 225 denarii during the time of Augustus to 300 denarii in the time of Domitian, about a hundred years later. A century after Domitian, in the time of Septimius, it had gone from 300 to 500 denarii; and in the time of Caracalla, about 10 years later, it had gone to 750 denarii. In other words, the cost of the army was also rising in the terms of the coinage; so, as the coinage became more worthless, the cost of the army had to be increased. The advance in the soldier’s pay in the rest of the 3rd century and into the 4th century is not known, we don’t have figures. And one reason is that the soldiers were increasingly paid in terms of requisitions of supplies and goods in kind. They were literally given food, clothing, shelter and other commodities in lieu of pay – and this applied also to the civil service.

When one Roman emperor refused to pay a donative on his accession – this was a bonus given to the soldiers on the accession of the emperor – he was simply murdered by his troops. The Romans had had this kind of problem even in the days of the Republic: if the soldiers don’t get paid they rather resent it. What we find is that the donatives had been given on the accession of a new emperor from the time of Augustus on; then they began to be given in the 3rd century every five years. By the time of Diocletian, donatives were given every year, so that the soldiers’ donatives had in fact become part of their basic salary.

Roman Empire and Inflation »»

Mr. Peden was one of the founding figures of the modern libertarian movement. A close confidant of Murray Rothbard and member of his inner circle (the Circle Bastiat), Peden went on to publish the Libertarian Forum from 1969-1982. His writing has appeared in the Libertarian Forum the Journal of Libertarian Studies, and he served on the editorial staff of Literature of Liberty. A Ph. D. in Roman/Christian and Medieval History, Peden studied medieval money and medieval institutions, as well as opposition to government education in US and Europe. He taught European history at Baruch College (City University of New York) for almost 30 years. He died on February 12, 1996.↩

Why Jaredites Fell

February 28, 2010 in Book of Mormon by Greg | 11 comments

In the Book of Mormon, the Jaredites were a group of people named after their leader Jared. Their history is almost exclusively found in the book of Ether.

According to this record, they were led from the “great tower” – presumably the tower of Babel, mentioned in Genesis 11:1-9 – to a “land of promise”, somewhere in the Americas. Like the Nephites who came after them, they grew to a large population but were eventually destroyed by internecine warfare.

Without making direct reference to the Gadianton Robbers, in 1940 J. Reuben Clark, Jr. summarized the fall of the Jaredite nation in this manner:

We are not given the step-by-step backsliding of this Jareditic civilization till it reached the social and governmental chaos the record sets out, but those steps seem wholly clear from the results. Put into modern terms, we can understand them. First there was a forsaking of the righteous life, and the working of wickedness; then must have come the extortion and oppression of the poor by the rich; then retaliation and reprisal by the poor against the rich; then would come a cry to share the wealth which should belong to all; then the easy belief that society owed every man a living whether he worked or not; then the keeping of a great body of idlers; then when community revenues failed to do this, as they always have failed and always will fail, a self-helping by one to the goods of his neighbor; and finally when the neighbor resisted, as resist he must, or starve with his family, then death to the neighbor and all that belonged to him. This was the decreed “fulness of iniquity.”

Then came the end; the Jaredites were wiped out in accordance with “the everlasting decree of God.” A nation had been born; it had grown to maturity; then to a powerful manhood; had then gone on to sin, decay, and destruction, and all because its people had refused to heed the promises and commandments of Him who is their Creator and Father, all because the people who possessed the land had failed “to serve the God of the land, who is Jesus Christ.” (Ether 2:12.)¹