Power & Market
Jeff Peshut answers the question that has been widely discussed in the media lately: Is There Really A Corporate Debt Bubble That’s Ready To Burst?
To unravel the mystery, Peshut compares movements in the Rothbard-Salerno TMS monetary aggregate with movements in corporate business debt from 1978 through 2017. At the end of 2017 corporate business debt stood at $29.1 billion or about $10 trillion above its post-crisis trough at the end of 2009. TMS reached its cyclical trough of $5.1 trillion at the end of 2006 and increased to $13.1 trillion, a breath-taking increase of 156.9%, by the end of 2017. For the sake of comparison, during the housing bubble TMS increased by “only” 70%, from $3.0 trillion to $5.1 trillion from 2000 to 2006. The year-over-year (YOY) rate of growth of TMS has precipitously fallen from over 7% in 2016 to less than 4% at the end of 2017. The huge increase in the money supply from 2009 onward would certainly lead us to suspect that there is a systemic overvaluation of asset markets that will sooner or later come to a bad end. But the trillion dollar question is, of course: When?
With respect to the corporate debt market, Peshut gives us a cogent ad informed forecast. He finds that in the last three complete credit cycles, from 1994 through 2009, the trough in the YOY growth rate of TMS has preceded the trough in the YOY growth rate of corporate business debt by about three years in each case. Given this three-year lag, even if TMS has already reached its trough, Peshut concludes that claims that the corporate debt bubble is about to pop are premature and the more likely scenario is that the bubble bursts in 2021 or 2022.
Austrian economists should take an interest in the so-called “replication crisis” in science, which is affecting primarily the field of psychology, but is likely under-recognized in other social sciences—and in economics in particular.
Over the last several, an increasing number of reports have highlighted the fact that scientists are frequently unable to replicate the results of prior experiments in psychology, even when those experimental or correlational studies were conducted and analyzed according to commonly accepted methods. The magnitude of the problem was made concrete in a 2015 Science paper by lead author Brian Nosek. Replication rates, in terms of statistical significance or effect size, were only between 25-50% (depending on the particular field of psychological study).
The doubts raised by Nosek and his collaborators are metastasizing to other human sciences, including medicine. Reports of poor research reproducibility are now appearing routinely in scientific journals. Interestingly , in the context of such a replication study pertaining to the social sciences and published this past August, it was discovered that scientists are able to predict a priori with a high degree of accuracy which particular result will be replicated and which will not!
A perhaps even more startling study was just published last month. Nosek submitted a very rich data set, taken from the 2012-2013 soccer season, to 29 different teams of statisticians for analysis. The question to be answered by the statisticians was whether a darker skin tone increased the likelihood that a player would receive a red card. The variability in the methods chosen and in the results obtained was astounding, especially since, at one point in the process, the teams of analysts were encouraged to compare notes and give each other feedback.
We interviewed Nosek on our podcast about his work. It was a fascinating conversation. As an empiricist, he remains hopeful that, perhaps through greater transparency, sharing of data, and collaboration among scientists, the replication crisis will resolve itself. And he expects that the resolution will occur while preserving the standard theoretical assumptions of empiricism.
I’m not so “optimistic,” and I suspect that the crisis will be protracted. But I am hopeful that, over time, social scientists will come to recognize and accept that certain types of knowledge can only be obtained by human judgment, rather than by measurement—provided that the judgment and reasoning proceed logically from a basis of reasonable assumptions. This is a good opportunity for Austrians to showcase their methodological alternative to the scientific world
Once again Donald Trump’s presidency has done a great job of highlighting the hypocrisy and delusion of the beltway bubble.
A recent story from the Daily Beast reports that Trump is frustrating advisers with his apathy towards the current trillion dollar deficits coming out of Washington.
Since the 2016 presidential campaign, Donald Trump’s aides and advisers have tried to convince him of the importance of tackling the national debt.
Sources close to the president say he has repeatedly shrugged it off, implying that he doesn’t have to worry about the money owed to America’s creditors—currently about $21 trillion—because he won’t be around to shoulder the blame when it becomes even more untenable.
The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the national debt in the not-too-distant future. In response, Trump noted that the data suggested the debt would reach a critical mass only after his possible second term in office.
“Yeah, but I won’t be here,” the president bluntly said, according to a source who was in the room when Trump made this comment during discussions on the debt.
Trump’s lack of concern for the debt should hardly be surprising. As a candidate, he boasted about his desire to preserve various entitlement programs while simultaneously promising significant increases in military spending – a promise he has delivered on. Left unsaid in the report is that the goal of at least some of Trump’s advisors was undoubtedly to encourage the president to embrace some form of tax increase. We know, for example, that Treasury Secretary Steve Mnuchin has encouraged Trump to embrace a VAT tax in the past, a policy that would be particularly damaging to America’s low and middle class.
What’s all the more comical, however, is the resulting jeering from DC pundits and political enemies acting as if Trump’s view on the debt is some radical new threat to American stability. On the contrast, all Trump is doing is being honest about the views held by almost everyone that has served in Washington the past several decades. While politicians from both parties love to give lip service to “fiscal responsibility”, the closest thing we’ve come to meaningful action on budgetary restraint was the budget sequestration of 2013. Of course those cuts to future spending increases (not to be confused with actual spending cuts) came into place simply because of the inaction of federal legislators and faced instant bipartisan condemnation.
This isn’t the first time that Trump’s truth telling over the debt has thrown opposing politicians and pundits into a tizzy. On the campaign trail, Trump was accused of threatening financial Armageddon when he suggested that America could default on its debt. What should be obvious to anyone who has paid even passive attention to American politics is that US default is inevitable. The only question is what form will it take.
One of the greatest myths in DC is that America has never defaulted on its debt, something repeated not long ago by Fed Chair Jerome Powell in a Congressional hearing. Of course this is simply absurd.
As James Grant and other financial historians have explained, the federal government has defaulted numerous times in its history, the most recent of which occurred when Richard Nixon closed the gold window. In that case, the out of control spending, led by the Vietnam war and LBJ’s Great Society, led the US to default on its obligations to foreign governments, repaying their loans with dollars valued at far less than the $35 per ounce they were promised.
This form of monetary default may be the future of the dollar, an outcome that Ron Paul has long warned us about.
Another option, one that Murray Rothbard advlocated, is simple debt repudiation. As he wrote in 1992, when US debt was a quaint $4 trillion:
I propose, then, a seemingly drastic but actually far less destructive way of paying off the public debt at a single blow: outright debt repudiation. Consider this question: why should the poor, battered citizens of Russia or Poland or the other ex-Communist countries be bound by the debts contracted by their former Communist masters? In the Communist situation, the injustice is clear: that citizens struggling for freedom and for a free-market economy should be taxed to pay for debts contracted by the monstrous former ruling class. But this injustice only differs by degree from "normal" public debt. For, conversely, why should the Communist government of the Soviet Union have been bound by debts contracted by the Czarist government they hated and overthrew? And why should we, struggling American citizens of today, be bound by debts created by a past ruling elite who contracted these debts at our expense? One of the cogent arguments against paying blacks "reparations" for past slavery is that we, the living, were not slaveholders. Similarly, we the living did not contract for either the past or the present debts incurred by the politicians and bureaucrats in Washington.
Rothbard goes on to suggest that a more traditional debt restructuring – similar to what Trump touched on during his campaign – could also be an option if outright repudiation was considered to be “too draconian.”
The government is an organization, so why not liquidate the assets of that organization and pay the creditors (the government bondholders) a pro-rata share of those assets? This solution would cost the taxpayer nothing....The United States government should be forced to disgorge its assets, sell them at auction, and then pay off the creditors accordingly....This combination of repudiation and privatization would go a long way to reducing the tax burden, establishing fiscal soundness, and desocializing the United States.
Peter Klein has also written on the absurd hyperventilating in the beltway when such an idea is ever suggested:
[T]he idea that the US can never restructure or even repudiate the national debt — that US Treasuries must always be treated as a unique and magical “risk-free” investment — is wildly speculative at best, preposterous at worst. Every other borrowing entity — individuals, business firms, and governments — has the option of renegotiating interest payments and even defaulting on loans. It is hardly an extraordinary event, even for sovereign borrowing — that’s why lenders charge a risk premium beyond the return they require to compensate for time preference.
There is lots of evidence on private, corporate, and sovereign defaults, and the results are hardly catastrophic. Depending on the circumstances, the benefits of reducing debt can exceed the costs of harming the borrower’s reputation and thus increasing the costs of future borrowing. Anyone who has been through a personal or corporate bankruptcy knows this.
At the end of the day Trump’s views on dismissal of US debt illustrate is another example of short-sighted economic thinking. It’s absurd, however, to treat this as some radical change from his more “dignified” and “respectable” predecessors. Instead, just like his views on tariffs, monetary policy, and defense spending, Trump’s real sin is simply being a continuation of the status quo on these issues
The difference is that Trump says out loud the part politicians are supposed to keep quiet.
In order to whip up opposition to Brexit, pro-EU activists have long relied on generating fear by suggesting that without EU membership, British trade will suffer, and export totals will collapse.
This, however, has always been an unconvincing argument because EU membership tends to restrict participation in global trade more than it enhances it. Even the EU admits that "growth in global demand is coming from outside Europe, noting that 90% of global economic growth in the next 10–15 years is expected to be generated outside Europe, a third of it in China alone."
Moreover, the importance of the EU as an export market for the EU has been declining in recent decades. 15 years ago, the EU accounted for over 50 percent of all UK exports. By 2015, the number had fallen to 44 percent, reflecting the shift toward markets outside of the EU.
Even the EU's core members like Germany know the real future of global trade lies outside the EU. As Alasdair MacLeod noted last year,
[W]ith respect to trade, Fortress Europe’s trade policies are increasingly disadvantageous to her. Germany now exports more to China than to any individual European country, benefiting big businesses. The power of the large German corporations, and their influence on the federal government, should not be under-estimated. She sees on her Eastern flank, of what used to be Prussian territory, a pan-Asian phoenix arising in the form of the Shanghai Cooperation Organisation (SCO), led by Russia and China. And it is growing.
Only this week, India and Pakistan also became full SCO members, taking the rapidly-industrialising membership to nearly half the world’s population. The Silk Road is sending goods to Europe, and will transport Mercedes, BMWs, and VWs the other way. Asian demand for German engineering and capital equipment is likely to become the largest market by far for the foreseeable future.
Really, by staying in the EU — which is obsessed with tightly regulating and controlling trade with countries outside the bloc — the UK is limiting its own ability to be flexible with the rest of the world.
These facts, however, are not readily apparent to the general public in the UK or elsewhere, and the idea that the UK will be somehow "isolated" without the EU continues to turn heads.
But how to help illustrate that Brexit really means more openness in trade?
There is an easy way to help with this, of course, and it would be the right thing to do with ou without Brexit: The US should immediately adopt a position of unilateral free trade with the United Kingdom.
The US, of course, should adopt unilateral free trade with everyone, but the UK is certainly an acceptable place to start.
I suggest the UK as a starting point because open trade with Britain is an easy sell, politically.
After all, opening up unfettered free trade with the UK would be an easy choice strategically. It would make the US an indispensable partner all the more, and solidify the UK as an important part of the North American economy.
Moreover, any claims that unilateral free trade with the UK is "enriching our enemies" would be laughable. The UK and the US have been at peace for more than 200 years. Unilateral free trade doesn't lead to "exploitation" of the US in any case, but even if it did, this would not be an issue of military importance.
From an economic standpoint, of course, unilateral free trade is always to the benefit of the country which adopts it. It would mean lower production costs and less expensive consumer goods for countless Americans and entrepreneurs. Even if the UK maintained tariffs on American goods, the end result would only mean more inexpensive goods for Americans, and more investment in the US by British companies who reap the rewards of selling more goods to Americans.
Claims that the US would be flooded with "cheap goods made by slave labor" — as some anti-China protectionists like to claim — would be obviously non-sensical, of course. British labor laws are similar to those in North America, and the cost of British labor is similar as well.
Moreover, when it comes to trading with the British, it is harder for protectionists and xenophobes to capitalize on nationalist impulses to push their agendas. Are we really to believe that we ought to fear exploitation by English-speaking high-income foreigners who, by the way, have an extensive history of investment in American industries?
Trump's Mishandling of the Brexit Situation
Unfortunately, for all his big talk about building strategic advantages for the US government, Trump has badly mismanaged the Brexit situation and will probably botch the opportunity to draw the UK further into a greater partnership with the US.
Instead of using Brexit as a means to build a better relationship with the UK at the expense of the EU's quasi-socialist bureaucrats, Trump has instead attempted to isolate the UK further in order to force UK acquiescence to Trump's economically-illiterate campaign against free trade.
This hurts American consumers and producers while also potentially helping politicians in both China and the EU. As Tomas Wright at Politico notes:
A post-Brexit Britain needs close relations with other major countries, and if the United States is difficult to deal with, it will find itself increasingly tempted into a closer economic partnership with China, one that will surely have political consequences. Trump’s antagonistic approach also plays into the hands the leftist leader of the opposition, Jeremy Corbyn, a persistent critic of a close U.S.-UK alliance who would likely leap at the chance to weaken the special relationship.
My personal position is that it is not important or in our best interests to engage in foreign policy posturing with China or any other country. Political neutrality and open commerce is always the best position. However, I do know that Trump and his allies think that playing games with China and the EU are important policy goals. And in this regard, the administration's anti-UK protectionism is counter-productive.
No doubt Trump's supporters will stick to their little narrative in which Trump is playing 4-D chess and has some grand plan that will both stick it to the EU and massively increase American exports to the UK at the same time.
This is a pipe dream, of course, but some people seem to actually believe it.
Were the Trump administration wiser, it would pursue unilateral free trade not just with the UK, but with the entire Anglosphere of Canada, Australia, and New Zealand. Both the economic and strategic benefits would be substantial.
Big Tech has long faced calls for more regulation, and as their companies have grown, so has the pressure. Now those demands are coming from within Silicon Valley itself. Apple CEO Tim Cook recently told Axios that, though he supports the free market, it’s only a matter of time before Big Tech is restricted. “We have to admit when the free market is not working. And it hasn’t worked here,” Cook said. “I think it’s inevitable that there will be some level of regulation.” Indeed, a newly released Axios poll found that 55 percent of Americans “fear the federal government won’t do enough to regulate big tech companies.” That figure is up 15 points over last year.
The problem is that, if implemented, such regulations would only entrench existing firms and hurt consumers.
As Axios notes, Big Tech regulation has become “a rare topic uniting Republicans, Democrats and Independents.” In August, Representative Steve King, Republican of Iowa, floated the idea of turning tech giants into public utilities. On the Left, writer Richard Eskow went even further by calling for companies like Amazon and Google to be nationalized. The young right-wing firebrand Charlie Kirk recently advocated that Google be classified as a monopoly and anti-trust law be brought to bear against it.
It’s understandable why so many across the political spectrum have an uneasiness about Big Tech. After all, it has an immense amount of power, especially in regard to stored information.
But increased regulation will only empower Big Tech and leave it less accountable than before. The “revolving door,” through which officials move between government and the private sector, allows businesses to heavily influence regulation. Sometimes they’ll even advocate that regulation be increased as a means of ensuring that the new regulations work to their advantage. When groups like Business for a Fair Minimum Wage, whose members already pay employees “well over the minimum wage,” advocate for an increase in the minimum wage, it’s not out of benevolence toward workers. They want to force their competitors to pay more in the hope of driving them out of business. In economics, this is known as regulatory capture, an idea developed by Nobel laureate George Stigler.
Another tactic is making the regulatory hurdle so high that it ensures new competition and smothers startups in the cradle. A startup in someone’s basement can’t afford an army of lawyers to navigate through reams of regulations like Google and Facebook can.
Historically, Big Tech has been hands-off when it comes to lobbying, but that’s starting to change and the numbers show it. In 2017, Google, Amazon, Facebook, and Apple spent over $50 million on lobbying, a 32 percent increase for Facebook and a 51 percent increase for Apple. In fairness, that’s much less than other industries spend on lobbying—but as talk of regulation increases, expect to see Big Tech kick up its lobbying even further and for its competition to get squelched.
In a free market, companies only have the power that consumers give them when they make their consumption choices. Google, Facebook, and Amazon are huge and powerful because so many choose to utilize their services. Economist Ludwig von Mises called this “consumer sovereignty,” writing, “The captain is the consumer. Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that.” No matter how large a business is, if it doesn’t give consumers what they want, it will eventually falter. Just look at Nokia. In 2007, the company controlled almost 50 percent of the world’s smartphone market. By 2013, that number had fallen to less than 5 percent. Such a drastic change in fortunes occurred because consumers chose to make it happen—and because other companies innovated more to attract them.
But if Big Tech becomes entrenched and protected from competition through regulation, the consumer’s power over them is diminished. It’s a recipe for decreased innovation and customer service. Big Tech is kept on its toes by the fear of becoming the next Nokia, which is why they spend tens of billions of dollars every year on research and development. There will be far less incentive to do so if they know that they’re safe from potential upstarts supplanting them.
Big Tech has big problems, but increased regulation will only lead to more lobbying, less competition, and less innovation. Consumers have given Big Tech its power, and as long as there are competition and alternatives, they also have the power to take it away. Let’s hang on to that control rather than demanding that the government exercise it for us.
Republished with permission from the author.
The trade policies of both the USA and the EU seem to be based on the contradictory philosophy that unrestricted trade is beneficial within its borders, even if across internal borders, but not with parties outside those borders.
But this makes no sense. From the point of view of trade, the voluntary exchange of goods, why are the borders between USA and Mexico, and Greece and Turkey, different from the borders between Missouri and Kansas, and France and Germany?
The difference is political and arbitrary.
If protectionism works, which is the policy applied on the USA's and the EU's 'external' borders, then it should work for other borders at well. But instead the 'internal' policy is free trade, and it's considered as obvious for the latter as restricted trade for the former.
Protectionists may produce an argument that 'within USA' is different, since it is within a country. While likely based on a romantic fiction of the (federal) nation, there is significant coordination of policy that facilitate trade between states. That's exactly the core of the European Union as a trade union between countries with different languages, cultures, and political traditions. Countries within the EU are at least as similar and dissimilar as the USA and Canada. Or as the USA and the EU. The differences that can be identified are differences that are caused by policy, which makes them highly suspect as possible rationales or reasons for (specific and different) policy. The question remains, why is protectionism good for some borders, and free trade for others?
It really comes down only to this: politics is able to produce emotionally compelling reasons, based on simplistic identity claims and 'us vs. them', for completely contradictory policies for different instances of the same phenomenon (political borders).
No politician in his right mind would claim that Washington, DC, should adopt a protectionist trade policy with respect to the 50 states. He would be laughed at. But saying the same about, say, the US and Canada is considered very different. And this is the case also for the EU, where it would be political suicide (although not as much [because EU is younger and not yet as politically integrated?]) to state there should be protectionism between Germany and France or between Sweden and Denmark. But it's the 'obvious' and correct policy for the waters between Greece (EU) and Turkey (not EU).
But think about it: if a trade policy is beneficial across some (political) borders, shouldn't it be beneficial across all such borders? The answer is rather obviously 'yes'.
Except in politics, where 'yes' and 'no' are irrelevant--what matters is that a story can be told that, for the time being, may gather support from the electorate. Often by pointing to a threat--always by some 'them'. Canadians are not us; Turks are not us. But Midwesterners and Manhattanites are the same, just like Germans and French are the same?
Originally posted on Twitter @PerBylund
After a week of insisting that a meeting with Putin on the sidelines of the G20 meeting in Argentina was going to happen, President Trump at the last minute sent out a Tweet explaining that due to a Russia/Ukraine dispute in the Sea of Azov he would no longer be willing to meet his Russian counterpart.
According to Trump, the meeting had to be canceled because the Russians seized three Ukrainian naval vessels in Russian waters that refused to follow instructions from the Russian military. But as Pat Buchanan wrote in a recent column: how is this little dispute thousands of miles away any of our business?
Unfortunately it is “our business” because of President Obama’s foolish idea to overthrow a democratically-elected, pro-Russia government in Ukraine in favor of what his Administration believed would be a “pro-Western” and “pro-NATO” replacement. In short, the Obama Administration did openly to Ukraine what his Democratic Party claims without proof the Russians did to the United States: meddled in a vote.
US interventionism in Ukraine led to the 2014 coup and many dead Ukrainians. Crimea’s majority-Russian population held a referendum and decided to re-join Russia rather than remain in a “pro-West” Ukraine that immediately began discriminating against them. Why would anyone object to people opting out of abusive relationships?
What is most disappointing about President Trump’s foreign policy is that it didn’t have to be this way. He ran on a platform of America first, ending foreign wars, NATO skepticism, and better relations with Russia. Americans voted for this policy. He had a mandate, a rejection of Obama’s destructive interventionism.
But he lost his nerve.
Instead of being the president who ships lethal weapons to the Ukrainian regime, instead of being the president who insists that Crimea remain in Ukraine, instead of being the president who continues policies the American people clearly rejected at the ballot box, Trump could have blamed the Ukraine/Russia mess on the failed Obama foreign policy and charted a very different course. What flag flies over Crimea is none of our business. We are not the policemen of the world and candidate Trump seemed to have understood that.
But now Trump’s in a trap. He was foolish enough to believe that Beltway foreign policy “experts” have a clue about what really is American national interest. Just this week he told the Washington Post, in response to three US soldiers being killed by a roadside bomb in Afghanistan, that he has to keep US troops fighting in the longest war in US history because the “experts” tell him there is no alternative.
He said, “virtually every expert that I have and speak to say if we don’t go there, they’re going to be fighting over here. And I’ve heard it over and over again.”
That is the same bunkum the neocons sold us as they lied us into Iraq! We’ve got to fight Saddam over there or he’d soon be in our streets. These “experts” are worthless, yet for some reason President Trump cannot break free of them.
Well here’s some unsolicited advice to the president: Listen to the people who elected you, who are tired of the US as the world’s police force. Let Ukraine and Russia work out their own problems. Give all your “experts” a pink slip and start over with a real pro-American foreign policy: non-interventionism.
[Editors Note: After days of rioting in the streets of Paris, French President Emmanuel Macron was forced to backtrack today on proposed gas taxes. While this episode demonstrated the unpopularity of trying to raise taxes in the name of fighting climate change, Mises Institute Senior Fellow Robert Murphy recently noted at IER that this is only the start for "climate interventionists."]
Say what you will about the climate policy discussions at Vox, but they don’t mince words. They come right out and tell you how much they want to micromanage every last detail of your life. Vox’s resident expert, David Roberts, recently interviewed policy wonk and author Hal Harvey, to discuss which areas of society government should regulate in the name of slowing climate change. Everything was on the table—ranging from building codes to auto fuel efficiency to diet to family size—with the only debate being over the relative results from the various interventions.
Among other results, this peek into the interventionist mentality should serve as a wake-up call for the few writers who keep charmingly calling on libertarians and conservatives to strike a carbon tax deal with progressive leftists. As the Roberts/Harvey discussion says quite plainly, a carbon tax is just one arrow in the quiver of those championing aggressive government intervention to slow climate change.
A Carbon Tax Is Not Enough
Let me validate the carbon tax claim first. Here’s the key exchange from the Vox interview:
David Roberts: These days, people across the political spectrum are talking about carbon pricing. How does it fit into the larger effort?
Hal Harvey: The thing about carbon pricing is, it’s helpful, but it’s not dispositive. There are a number of sectors that are impervious to a carbon price, or close to impervious.
A carbon price works when it’s part of a package that includes R&D and performance standards. It does not work in isolation. It helps, but it doesn’t do nearly as much as is required.
Harvey elsewhere in the interview explicitly criticizes the standard “market solution” rhetoric behind a carbon tax when he says:
[Government-mandated performance standards] have a bad rep from an age-old and completely upside-down debate about “command-and-control” policy. But we use performance standards all the time, and they work really well. Our buildings don’t burn down very much; they used to burn down all the time. Our meat’s not poisoned; it used to be poisoned, or you couldn’t tell. And so forth. If you just tell somebody, this is the minimum performance required, guess what? Engineers are really good at meeting it cost-effectively.
In addition to their (naïve) promises of revenue neutrality, those pushing for a carbon tax swap deal also promise conservatives and libertarians that a “price on carbon” would allow for the dismantling of the existing top-down regulations. Yet we now have several lines of evidence to show just how naïve this hope is: (1) Harvey in the quotation above throws them under the bus. (2) The recent Curbelo carbon tax bill contained no *meaningful* regulatory relief. (3) Economist Paul Krugman is fine with outright bans on new (and existing?) coal-fired power plants, and (4) the people at Vox have said for yearsthat a carbon tax would only work in conjunction with other anti-emission government policies. Notice that I am not scouring obscure subreddit threads to find Marxists posting from a hipster café, I am quoting from quite mainstream sources who are openly declaring that putting “a price on carbon” will not do enough to reduce emissions.
The Interventionist Mentality
The reader should also realize that Roberts and Harvey don’t merely consider fuel economy standards and building efficiency codes when it comes to “command and control” regulations. Everything is on the table, and the only reason to refrain from pursuing certain strategies is the dilution of political capital. The following excerpt illustrates:
David Roberts: The book also has nothing about behavior change — no turning off lights or going vegetarian. Do you find that lever unrealistic?
Hal Harvey: It’s a policy design book, and there aren’t many policies that have people change their diet. Michael Bloomberg taxed sugar, so there’s one. But we’re not gonna have the tons-of-barbecue-per-capita tax in North Carolina…
We have limited political bandwidth. If you’re serious about change, you have to identify the decision makers that can innovate the most tons the fastest….There are 7.5 billion decision makers on diet. There are 250 utility commissioners in America — and utility commissioners control half the carbon in America.
Trying to invoke behavior change on something as personal as eating en masse is morally sound, it’s ecologically a good idea, but as a carbon strategy, it doesn’t scratch the surface.
Indeed, even when they give a nod to basic human rights, Roberts and Harvey sound creepy. Consider this exchange:
David Roberts: Paul Hawken’s Drawdown Project looked at options for reducing greenhouse gases and found that educating girls and family planning were the two most potent.
Hal Harvey: When I was at the Hewlett Foundation, we sponsored a study by the National Center for Atmospheric Research that asked the question: Globally, if you met unmet need for contraceptives — that is to say, no coercion whatsoever — what would it cost and what would the carbon impact be?
We found large-scale abatement at less than a dollar a ton. So I’m completely in favor of that. [Bold added.]
It’s the part in bold that is chilling. For starters, I point out that this is the one area of life—the decision on how many children to have—where Harvey apparently feels that the government should not be using coercion to alter people’s behavior; coercive interventions in every other arena—from building design to diet to urban transit—were only tempered by pragmatic considerations.
Beyond that, the reason Harvey had to stress that his approach would be voluntary is that historically, this wasn’t taken for granted. There is a long and sordid history of wiser-than-thou social planners forcibly restricting how many children others could have, all in the name of some higher social good.
Indeed, Vox’s founder—Ezra Klein—recently got himself into an awkward spot when the website originally promoted his discussion with Bill Gates using the following tweet:
Vox quickly deleted the tweet after outrage and advertised the interview in a more sensitive manner, but the whole episode offered another peek into the interventionist mindset.
On these pages I have tirelessly pushed back against the small but vocal group of pundits and scholars who call on conservatives and libertarians to accept a carbon “tax swap deal” with leftist progressives. Beyond their failure to appreciate some of the technical nuances in the tax literature, these pleas overlook the simple fact that the mainstream thought leaders among the wonkish progressives have long since moved beyond the idea of a simple “price on carbon.” Every aspect of our lives, from our cars to our meals to our family sizes, affects global emissions—and therefore the interventionists want every tool at their disposal to control others.
The foundation of any and every civilization, including our own, is private ownership of the means of production. Whoever wishes to criticize modern civilization, therefore, begins with private property.
—Ludwig von Mises.
Civility is the word of the moment.
New stories lament the breakdown of civility in American society, while reports of Antifa street violence in cities like Portland raise uncomfortable memories for older Americans of 1960s riots. Editorial after editorial decries the loss of social cohesion and friendliness across the country, even within families. Pundits and politicians insist we must restore civility in politics. Otherwise we face a bleak and intensifying cold civil war: progressive vs. conservative, urban vs. rural, #metoo vs. Brett Kavanaugh, elites vs. populists, and Never Trumpers vs. Deplorables.
Yet how do they propose to accomplish this? More politics, more elections, and more top-down edicts from Congress and the Supreme Court.
Hillary Clinton, for instance, suggests civility will be restored only following successful midterm elections that places Democrats in control of Congress. And why not? The political world is all she knows, and the political world yields winners and losers, victors and vanquished. In her utterly politicized worldview, things will settle down only when the right people—her people—control US politics. Hers is a zero-sum world, always ruled by the political gang in power.
We hardly should expect an America so wracked by politics to remain civil.
But Ludwig von Mises understood a different world, one organized around property and trade rather than the state. To him, private property was the basis of any civilized society. Without that foundation, without property and a concomitant system of mutual exchange, he knew humans were destined to devolve into poverty, war, and anti-intellectual savagery. Property gives us prosperity, and therefore material abundance to live civilized lives beyond mere the subsistence that marked most of human history. Property rights give us the ability to accumulate capital, to invest in higher productivity, and to have a greater degree of certainty regarding the future.
Civility cannot be sheared from the broader concept of civilization itself. Both words share the same Latin root civilis, which means relating to citizenship or public life. But it also means relating to others with courtesy, manners, and affability. If civilization is the sum total of a society and its culture, civility—or the lack thereof—is its building block, the positive or negative social traits exhibited by people in that society.
Lew Rockwell, our Founder and Chairman, has a long career fighting for both civilization and civility. Along the way he met some of the brightest lights of our time or any time: Neil McCaffrey, Henry Hazlitt, Leonard Read, Percy and Bettina Greaves, Ayn Rand, Ludwig and Margit Mises, Ron and Carol Paul, and Murray and Joey Rothbard among them.
So I'm sure you'll enjoy my recent interview with him. With the help of Mrs. Mises, whom Murray Rothbard called a “one-woman Mises industry,” Lew Rockwell set about saving the work and name of the 20th century’s greatest economist from obscurity. Today Mises is known around the world, and cited even by his harshest critics as a champion of laissez-faire who fearlessly challenged the supposedly scientific case for socialism.
Don’t miss David Gordon’s review of Kirkpatrick Sale’s remarkable book Human Scale Revisited: A New Look at the Classic Case for a Decentralized Future. Sale is no libertarian, and even an anti-materialist, but he understands the risks posed by consolidated political power. Thus he thinks the 20th century’s trend toward larger and larger centralized states, prevalent both in once-confederated Europe and America, has been harmful to community, peace, and human flourishing.
To Sale’s credit, he is one of many thinkers from around the political spectrum challenging the accepted wisdom that political globalism and political universalism are per se beneficial. Just as Mises elevated self-determination to a defining principle of liberalism, progressives, conservatives, and libertarians increasingly see subsidiarity and decentralization as defining characteristics for a peaceful future.
Speaking of peace, on behalf of everyone at the Mises Institute let me wish each of you a very Merry Christmas, a Happy Hanukkah, and a peaceful, happy New Year. All of us want peace and prosperity for the world; all of us share a (true)liberal worldview, and all of us understand how non-interventionism in both the economy and world affairs is key to a better future. Let us all commit to making the world a better place next year through our own contributions.
We have big plans at the Mises Institute for 2019—unique, outside-the-box speakers at events, new podcasts, a new entrepreneurs platform, and new opportunities to earn academic credentials from the Institute—and we hope you’ll be part of them.
This article first appeared in the November/December issue of The Austrian.