Money, Banking, and the Federal Reserve

June 12, 2009

“The bold effort the present central bank had made to control the government … are but premonitions of the fate that await the American people, should they be deluded into a perpetuation of this institution or the establishment of another like it.” – President Andrew Jackson,
upon abolition of the Second Bank of the United States.

Have you ever wondered just why it is that green pieces of paper, of all things, are used as payment for goods and services? Have you ever wondered what it means for these green pieces of paper to lose their “value?” Just where does the “value” of these pieces of paper come from in the first place?

The nature of money has been so distorted over the course of the last one hundred years that even the meaning of the word “dollar” itself has been almost completely lost to history.

In the early sixteenth century, some of the first gold coins were minted by the Count of Schlick, from the Bohemian city of Joachimsthal. The unit weight denoting the amount of gold in each of these coins came to be known as the “Joachimsthaler,” later abbreviated as “thaler.” This abbreviation was then translated into “dollar” when the currency was adopted in Spain. The word “dollar” itself, then, refers to a specific unit weight of gold, and is no different than any other word that refers to a measurement of unit weight—just like the words ounce, pound, or gram, it refers to a measurement of something–in this case, gold. So how did the word “dollar” come from referring to a unit weight of gold to referring simply to a green piece of paper, and why have the origins of the word been so forgotten?

In order to explain this it is first necessary to back up and explain what money itself actually is; that is, what its economic function is, as well as how and why it arises in society.

In his Theory of Money and Credit, economist Ludwig von Mises explained why money historically never did, and logically could not possibly, arise by government fiat or decree. Rather, it arises inevitably as a result of natural economic forces that exist in a state of barter.

Suppose, in a primitive barter economy, that Bob has eggs which he wishes to exchange for milk. The milkman, Joe, however, is only willing to exchange his milk for wheat. A third individual, George, has wheat, which he is willing to trade for eggs. Bob cannot directly exchange his eggs for Joe’s milk, but he can accomplish his tradeindirectly, by exchanging his eggs for George’s wheat and then trading that wheat for the milkman’s milk.

The wheat, in this example, has performed the function of a medium of exchange. Notice what has happened in just this one simple exchange, however: the wheat was used in two transactions—first, as a medium of exchange; and second, for its own sake. Wheat is now demanded in this primitive barter economy both as a medium of exchange as well as for its own sake. The obvious tendency, then, is for the demand for any good that is used as a medium of exchange to increase, thereby making it increasingly more desirable for use as a medium for further exchanges. A particular good is chosen as a medium of exchange for its high demand, and much like a snowball rolling down a hill, every use of that good as a medium for exchange further increases the demand that made it desirable as a medium of exchange in the first place. Eventually, a good is accepted as a medium of exchange so often that it becomes valued more as a medium of exchange than it is actually valued for its own sake. It is at this point that the good in question becomes not just a medium for particular exchanges, but a widely-accepted “money.”

Historically, gold has been the good most frequently established as a money commodity through free market exchange. There are several notable reasons for this: first, it is highly durable–it does not fall apart, and it cannot be damaged by fire or water. Second, it is highly divisible into small quantities, to be used for small purchases; and yet, its value is not so low that anyone would ever have to carry a wheelbarrow full of gold around in order to make larger purchases. Three, it is of uniform quality–that is, any given ounce of gold is identical to any other ounce. These qualities all boil down to the fact that the market establishes as money whatever is most convenient for that particular society to use as money, and gold’s many positive qualities make it extremely convenient for use as a money commodity.

“For more than two thousand years gold’s natural qualities made it man’s universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper.” ~ Hans F. Sennholz

Throughout history, however, people have also found it convenient to keep their money stored in a warehouse, for security–thus the origin of banking in human society. The earliest banks were simply warehouses which offered to store people’s gold in safe deposit. These banks made their earnings the same way any other warehouse does: by collecting fees from depositors, and from loaning out their own capital. When a person deposited a given quantity of gold into such a warehouse, he was in return given a receipt stating the amount of gold he held in deposit. These paper receipts increasingly came to be used as a medium of exchange instead of the gold itself— andthis was the origin of the use of pieces of paper as a medium of exchange. Thus, a note that said “20 dollars” was a warehouse receipt, literally, for 20 dollars of gold. It is important to recognize that the value of these notes was not in any way intrinsic to the paper; it existed only because these notes were, in fact, redeemable in something that was of actual exchange value: gold.

This is the answer to our first question, then–how the word “dollar” went from referring to a specific unit weight of gold to referring to mere pieces of paper. However, we have not yet yet answered our second question–how the word came to be divorced from its original meaning.

The first answer lies in understanding the nature of what is called fractional-reserve banking.

These early warehouse banks came to notice that (say) if they were holding $10,000 of gold in deposit in a given month, only (say) 4/5ths of this total–$8,000–was withdrawn over that period of time. Realizing that, unlike (say) a furniture warehouse, they had no obligation to give any person his own gold back upon demand, but only to give back the amount that was demanded, they did not have to keep all $10,000 in reserve at all times. The warehouse bankers realized that they could write an additional (say) $4,000 in dollar receipts and then loan them out, with a low statistical probability of anyone finding out that there were now a total of $14,000 in receipts and only $10,000 worth of gold actually in the bank. This is the origin of the name “fractional-reserve” banking; only a “fraction” of the gold receipts in circulation are actually backed by “reserves” of gold in a fractional-reserve bank.

However, if there are more notes stating that they are “redeemable in gold at all times” than there is actually gold held in the bank, this statement is nothing but outright fraud, as these notes are not in fact reedemable in gold at all times—rather, they are only redeemable so long as no more than 4/5ths of those with gold deposits in the bank actually redeem their gold in any given month. If everyone with a note that said “redeemable in gold at all times” came to redeem their gold at once, the fractional-reserve bank could only redeem the gold of 4/5ths of those who came—the other 1/5th would simply be out of luck. Thus the early warehouse bankers committed fraud against their depositors, and made profit off of the interest from loans of completely fraudulent receipts.

And so, in the early 20th century in America, those who the banks were committing fraud against figured out the scheme. They realized that, if they were the last to make it to the warehouse, it would be they who would be ripped off by the fraudulent practice of fractional-reserve banking and left without their gold. And thus came the “bank runs” earlier in the last century, as everyone scrambled to the banks to try to get their gold first, so as to not be in the unlucky 1/5th of those with deposits in the bank who would not be able to redeem their receipts in actual gold. [Note the crucially important point that these bank runs are the main reason economists today oppose free banking. But these bank runs were not caused by free banking—they were a problem created by fractional reserve banking, an inherently fraudulent system that is in fact innately opposed to the principles of free banking.]

And what was the banker’s solution to this problem?

The Federal Reserve system.

Instead of condemning the practice of writing notes not backed by gold and then profiting off of interest from loans of unbacked, fraudulent receipts, the solution the bankers proposed was instead of get rid of all the gold from the banks, and operate solely on unbacked receipts. This way, bank runs would be eliminated not because the fraud would be put to an end, but because there would be nothing for anyone to run to the bank for, since the receipts would no longer be redeemable in anything of actual exchange value.

Despite the fact that American history had already seen two central banking systems come and go, each leaving harm and hyperinflation in its wake–the second of which was the Second Bank of the United States, which Andrew Jackson referred to as a “den of vipers and thieves” and whose abolition he made the central focus of his presidency; and despite the fact that Article 1, Section 10 of the U.S. Constitution says, “No state shall emit bills of credit, or make any thing but gold and silver coin a tender in payment of debts,”–the Federal Reserve Act of 1913 was passed, establishing not a federal department (as that name would seem to imply), but instead a private banking monopoly that isn’t even audited by the federal government.

President Herbert Hoover himself, after realizing what the Federal Reserve Act of 1913 actually created, had this to say about his own signing of the bill: “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated [in the Federal Reserve System]. The growth of the nation, therefore, and all our activities are in the hands of a few men…We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world—no longer a government by free opinion, no longer a government by conviction, but a government by the opinion and duress of small groups of dominant men.”

So what are the functions of the Federal Reserve system? The Federal Reserve has no legitimate economic function whatsoever, as its single function is to print new money into the economy, increasing the total money supply–and unlike an increase in the output of physical goods, no net gain comes to society by an increase in the money supply. As explained in this and the next four paragraphs, increasing the money supply brings harm to society as a whole; not benefit.

The justification for the Federal Reserve system was provided in the 1920s by John Maynard Keynes, a Fabian Socialist who has had a great influence on American macroeconomics, and who had this to say about the merits of State-monopoly banking: “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Keynes saw the sole merit of State-monopoly banking in the fact that it provided politicians with the means to secretly confiscate wealth from citizens and destroy the value of the currency, thus leading to the eventual destruction of the capitalist system itself. The Fabian Socialists’ philosophy, by the way, was that socialism would better be achieved by gradually introducing socialist policies into an economy step-by-step than it would by violent revolution. Clearly, as evidenced by the above quote, this was Keynes’ idea. Incidentally, the fifth plank of the Communist Manifesto? “Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”

When the Federal Reserve prints new paper bills into the economy, the forces of supply and demand act on them just as they do on any other commodity in existence: an increased supply relative to demand brings the overall “price,” or purchasing power, of the dollar down. Thus, anyone who saves, invests, or lives on a fixed income has purchasing power stolen from him through this process–and this purchasing power is in turn effectually transferred to whoever first receives the newly printed dollar bills. Thus the first economic effect of the Federal Reserve is to destroy the value of the currency it prints, punishing the poor as well as anyone who tries to protect his own financial security and further the development of the economy by saving money or investing it in private enterprise.

The second effect of the Federal Reserve printing new money into the economy out of thin air is to cause banks to have more credit in their reserves. As a result of this, banks will lower their interest rates in order to encourage people to take more loans out of their newly increased supply of money.

Now, entrepreneurs and businessmen are trained to keep a careful eye on various measurements of activity in the economy. In a free financial market not dominated by a government-established private monopoly, the interest rate would only lower for one reason: because more people are putting off present consumption in order to save for the future–thereby putting more money in the bank–thereby causing the bank to lower their interest rates in order to encourage loans of this extra money. Entrepreneurs would respond to the interest rate, then, by attempting to coordinate their investments with the time preferences of consumers that interest rates reveal. A high interest rate is a signal that very few individuals are putting off present consumption in order to save for the future; hence, entrepreneurs would respond by redirecting their investments away from capital goods such as housing, and towards consumption goods such as gas, food, and other leisure items. But when the interest rate is lowered this would normally be a signal that individuals are putting off their present consumption in order to save for the future. Hence, entrepreneurs would respond by taking investments out of consumption goods, and into long-term investments and capital goods like automobiles and housing.

When the Federal Reserve increases the money supply by printing fresh dollar bills out of thin air, however, entrepreneurs cannot tell whether and to what degree the interest rate was lowered by this, and not changes in the relative time preferences of consumers; hence, they have little choice but to assume the latter and respond by redirecting investments away from consumption goods and into capital goods. The result of this, if the interest rate was lowered by the Federal Reserve and not by changes in individual’s time preferences, is malinvestment. There is more investment, more development of capital goods (i.e. housing) than consumers need and are able to buy; and because of this there is less investment in the consumption goods that consumers do need.

Once the Federal Reserve finally stops artificially lowering the interest rate by printing new money, it becomes apparent that the over-investment in capital goods is unsustainable–and hence comes the inevitable “bust” end of the business cycle. At the same time, it also becomes apparent that there was too little investment in the consumption goods that people actually do want to buy. Thus, once the Federal Reserve has created a misallocation of capital, the coming recession is something that neither can, nor should, be avoided. It is a necessary readjustment of investment and capital allocation, and the sooner it is allowed to occur (and not prolonged by stimulus packages, bailouts, or continued inflation), the sooner the economy can readjust to the reality that the Federal Reserve’s inflation had previously obscured, and the sooner it can continue developing in tune with consumer’s actual (as opposed to illusory) wants and needs.

Thus the printing of money unbacked by gold or anything else of value by the Federal Reserve damages the economy both by destroying the value of the currency and by dis-coordinating the activities and time preferences of investors and consumers. The Federal Reserve system, fraudulent and unconstitutional, both drains wealth from those who save, invest, or live on a fixed income, and dis-coordinates the development of the economy by artificially lowering the interest rate, redirecting investment away from much-needed consumer goods and into unnecessary and superfluous capital goods; including, for example, unwanted housing; and creating the cycle of booms and busts we see our economy continually going through. The present crisis, with the coupling of rising prices across the board (inflation as a result of freshly printed unbacked dollars rippling through the economy) with excessive investment in capital goods (i.e. the housing boom and bust) is an obvious result of Federal Reserve policies. This is why a stimulus bill, which can only be funded by the Federal Reserve printing yet more new dollars into the economy, will do nothing but prolong and worsen the coming depression.* This is also why the abolition of the Federal Reserve system (and with it, the fraudulent practice of fractional-reserve banking)–as well as a return to the Constitutional idea of commodity money that can’t be deceptively manipulated by politicians–is the only long-term solution to the problems faced by a modern economy.

“With the exception only of the period during which the gold standard was in effect, virtually all governments throughout history have used their exclusive power to issue money as a method to defraud and plunder the people.” – Economist Friedrich von Hayek

“Let me issue and control a nation’s money supply,
and I care not who writes its laws.”
– Mayer Amschel Rothschild

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Why Do They Hate Us?: The Suppressed History of U.S. Brutality Against the Middle East

May 22, 2009

“I know that I can never again raise my voice against the violence of the oppressed in the ghettos without having first spoken clearly to the greatest purveyor of violence in the world today: my own government. For the sake of this government, for the sake of the hundreds of thousands trembling under our violence, and for the sake of justice, I cannot remain silent.” – Martin Luther King, Jr.

Iran, 1953:

The CIA overthrows the democratically-elected Iranian Prime Minister Mohammad Mossadegh, a man who put his heart into trying to improve living conditions for the Iranian people. His main campaign promise was to put a stop to the corruption of the Anglo-Iranian Oil Company (AIOC). The AIOC had been cheating Iran out of the agreement it had made to split fifty percent of its profits with them, by preventing the Iranians from seeing their financial records and then under-reporting profits—thereby having to split only the under-reported sum with them, while keeping the entirety of what went unreported for themselves. This corrupt company’s dominance in Iran was such that even the water fountains near the company’s base were labeled “not for Iranians.” Thus, in order to protect its oil profits from the righteously indignant Iranians, the CIA replaced Mossadegh with the Shah, Reza Pahlavi—a brutal tyrant who put Iran under one of the most repressive reigns of terror the world has ever seen, lasting for a full twenty-five years. Hundreds or perhaps even thousands of civilians were murdered on the single day of September 8, 1978—still known to this day as “Black Friday” in Iran. By 1976, Amnesty International had concluded that the Shah’s security force, SAVAK, had “the worst human rights record on the planet,” and that the torture techniques the CIA had taught SAVAK were “beyond belief.” At least ten and probably more than twelve thousand innocent people had been murdered by the CIA-installed Shah, and innumerable others tortured and killed by the CIA-trained SAVAK, by the time the Iranian people finally rose up and overthrew Pahlavi in the Iranian Revolution of 1979.

Further Reading:

All the Shah’s Men, Stephen Kinzer.

[The terrorists] hate . . . our freedom to vote and assemble and disagree with each other.” –  George W. Bush, State of the Union Address; January 29, 2002

Iraq, 1959—1963:

The CIA wanted to assassinate then-lraqi Prime Minister General Abd al-Karim Qasim, who was buying weapons from the Soviet Union and putting communists in positions of power in Iraq. To that end, the agency hired Saddam Hussein, then 22, along with five other men. The hit failed because Saddam fired too soon, killing Qasim’s driver but only wounding Qasim himself. Qasim finally met his end in the Ba’ath party coup d’etat on Iraq in 1963. After that coup, the CIA provided the Ba’athists (still including Saddam Hussein) with a list of suspected communists, who the Ba’athists then rounded up and executed en masse. A former CIA official told the United Press International’s Richard Sale, “Four thousand communists got killed.”

“If the U.S. really believes that supporting terrorists makes you as guilty as the terrorists themselves, then it would have to put on trial most of its military and political leadership over the last handful of administrations, and more.” – Peter McClaren

Iraq, 1980—1988:

In early 1980, the Iranian government began protesting the secularism of the government of Iraq, instigating border clashes and encouraging Iraq’s Shiite and Kurdish populations to rise up against Saddam Hussein. On August 5, 1980, Hussein was welcomed to the Saudi Arabian capital city of Riyadh by Saudi officials who saw Hussein’s then-formidable army as a buttress against the expansionist policies of Iran. Saudi leaders advised Saddam to bring the fight into Iran—transmitting the “green light*” to go ahead with the invasion from President Jimmy Carter. (* In April 1981, then-Secretary of State Alexander Haig visited the Middle East, publishing a debriefing paper for President Ronald Reagan in which he corroborated this, reporting: “It was interesting to confirm that President Carter did in fact give the Iraqis the green light to launch the war against Iran, through Prince [now King] Fahd.”)

The Iran-Iraq war then began when Saddam Hussein launched a full-scale invasion of Iran in September 22 of 1980. According to an affidavit by former National Security Council official Howard Teicher, from 1982 (when President Ronald Reagan signed the National Security Decision Directive authorizing it) on, the White House “supported the Iraqi war effort by supplying the Iraqis with billions of dollars of credits, providing U.S. military intelligence and advice to the Iraqis, and closely monitoring third country arms sales to Iraq to make sure that Iraq had the military weaponry required.” Over the course of the Reagan and Bush Administrations, Saddam Hussein was sold sixty Hughes MD, five hundred “Defender” helicopters, eight Bell Textron AB 212 military helicopters, and infra-red sensors and thermal imaging scanners which were transferred illegally through a Dutch proxy company. The US Department of Commerce also licensed seventy biological exports to Hussein between 1985 and 1989, including at least twenty-one batches of lethal strains of anthrax, and several other toxins and bacteria, including E. coli and botulins. In total, several million dollars worth of equipment was provided illegally to Saddam Hussein by the U.S. Then-Secretary of Defense Donald Rumsfeld. Rumsfeld travelled to Baghdad to meet with Saddam twice—once in 1983, and again in 1984. Howard Teicher, who travelled to Iraq with Rumsfeld both times, described the meetings: “Here was the U.S. government coming hat-in-hands to Saddam Hussein, and saying: ‘We respect you. How can we help you? Let us help you.'”

The U.S. had already received reports confirming that Saddam Hussein was using the chemical weapons the U.S. was supplying him with to gas innocent Kurds and Iranians when these meetings between Rumsfeld and Hussein took place. In 1984, for instance, the State Department arranged for the sale of 45 Bell 214ST helicopters to Iraq; four years later, the Los Angeles Times reported that “American-built helicopters” were being used to gas Kurdish civilians. There was never a single drawdown in the amount of equipment supplied to Saddam even in spite of all of these reports. In March of 1988, almost seven thousand Kurds were gassed to death by Hussein’s troops; and in response, according to a report in the International Herald Tribute, the U.S. State Department attempted to place the blame for this gassing on the Iranians, even though there was no evidence whatsoever of any Iranian involvement. [Note that members of the Bush Administration would later use the claim that “Saddam gassed his own people!” to support their invasion of Iraq.] Although the beginning of the Gulf War in 1990 marked the end of U.S. support of Saddam Hussein, U.S. corporations nonetheless continued to trade with Iraq through foreign subsidiaries. Among those who profited from such trade was Dick Cheney himself. Cheney became CEO of Halliburton in 1995; and accoding to the Washignton Post, two Halliburton subsidiaries sold more than $73 million in oil production equipment to Iraq under Cheney’s command.

Further Reading:

Spider’s Web: How the White House Illegally Armed Iraq, Alan Friedman

“It is also a fact that America is too democratic at home to be autocratic abroad. This limits America’s capacity for military intimidation. The pursuit of power is not a goal that commands popular passion, except in conditions of a sudden threat or challenge to the public’s sense of domestic well-being. Democracy is inimical to imperial mobilization.” – Zbigniew Brzezinski, Obama’s chief foreign policy adviser

Iran, 1988:

On July 3, 1988, USS Vinceness shot down Iran Air Flight 655 (IR655), killing 290 innocent civilian from six different nations—including 66 children. The US navy initially claimed that they mistakenly identified the passenger liner as an Iranian fighter, and denied that they were inside Iranian territorial waters—even though the US government’s investigations found that both IR655 and the USS Vincennes were inside Iran’s own territorial waters at the time of the attack. Further, the official investigation by the International Civilian Aviation Organization found that the US Navy guided missile cruiser’s attempts to contact Iran Air 655 were sent on the wrong frequency and addressed to a non-existent “Iranian F-14”. Instead of admitting its monstrous mistake and issuing an apology, the US Government awarded the people responsible for the atrocity with medals for “heroic achievement”.

Further Reading:

The Iran Agenda: The Real Story of U.S. Policy, Reese Erlich

We are not hated because we practice democracy, value freedom, or uphold human rights. We are hated because our government denies these things to people in Third World countries. The hatred we have sown has come back to haunt us in the form of terrorism. Instead of sending our sons and daughters around the world to kill Arabs so we can have the oil under their sand, we should send them to rebuild their infrastructure, supply clean water, and feed starving children… In short, we should do good instead of evil. Who would try to stop us? Who would hate us? Who would want to bomb us? That is the truth the American people need to hear.” – Lieutenant Colonel Robert Bowman, National Catholic Reporter; October 2, 1998

Iraq, 1991 & 2003; Afghanistan, 2001; and various others:

Depleted Uranium (DU) is a radioactive substance left over after enriched uranium is separated from natural uranium in the process by which fuel for nuclear reactors is produced. Due to its incredibly high density, DU, when added to ammunition and the ballasts of cruise missiles, bestows either bullet or missile with a tremendous ability to pierce armor. But DU can also injure and kill civilians who are not targets of the weapon’s fire. When a DU-containing weapon hits its target, a large amount of kinetic energy is dissipated as heat, which results in large amounts of smoke containing a high concentration of DU particles—which, if inhaled or ingested, are severely toxic. Depleted uranium remains radioactive for more than four billion years before decaying, and particles of uranium become trapped permanently in the lungs of a person who breathes in smoke lingering after DU fire. Once trapped in a person’s lungs, DU particles begin to cause damage to the surrounding lung tissue, exposing it to eight hundred times the annual radiation dosage permitted by federal regulations for body exposure to radiation. Particles can also be swallowed or ingested, travelling to the kidneys or reproductive organs and causing damage from there. Depleted Uranium meets the United States government’s own definition of “weapon of mass destruction.”

As of May 2002, of the nearly seven hundred thousand troops who served during the recognized conflict phase of the Gulf War (1990-1991), in which depleted uranium was used heavily, almost one hundred sixty thousand veterans have been awarded disability for health effects collectively known as Gulf War Syndrome. Says Dr. Mona al-Jibowei, Dean of the science faculty at Baghdad University: “[At least] the allied soldiers went home after being exposed to depleted uranium. Iraq has lived with its devastating effects for the past 12 years.” Iraq is not the only place in the Middle East the United States has used DU. An estimated 900 tons of DU were released in the initial 2001 invasion of Afghanistan—according to the White House’s website, a total of twenty-four thousand bombs were used just in the first year of operations in Afghanistan, suggesting that a minimum of three thousand tons of DU was dispersed into the Afghan atmosphere in only the first twelve months of conflict. These statistics barely scratch the surface of the extent to which the U.S. has used depleted uranium in the Middle East, and the DU dropped during the initial bombing of Afghanistan in 2001 alone is expected to be the cause of as many as nine million Afghan deaths from cancer over the next decade.

One of the most devastating effects of Depleted Uranium is to damage a person’s DNA, leading to severe birth defects in his children. In 1989, before any DU had ever touched Iraq, there were eleven birth defects per hundred thousand births, and an average of about thirty deaths from cancer per year. Now that DU has been used on Iraq by the United States twice, there are one hundred and six birth defects per hundred thousands births, and an average of six hundred deaths from cancer per year. The birth defects caused by Depleted Uranium radiation are by no means trivial. Children are born with hideously misshapen bodies, facial deformities that include features entirely missing, massive tumors. . . and whatever the hell this is, it’s one of the most disgusting things I’ve seen in my entire life. Although it is a matter of public record that the U.S. made extensive use of DU weapons in the 1991 Gulf War, 2001 invasion of Afghanistan, and 2003 invasion of Iraq, the Pentagon refuses to acknowledge that it has used DU anywhere, or that DU would pose any danger even if it had. Were the Pentagon to acknowledge its use of radiation poisoning, demands would immediately be made for it to clean up the horrific mess it has left behind.

Free Online Documentary: Depleted Uranium: The Invisible War

“After the Americans destroyed our village and killed many of us, we also lost our houses and have nothing to eat. However, we would have endured these miseries and even accepted them, if the Americans had not sentenced us all to death. [But] when I saw my deformed grandson, I realized that all my hopes of the future have vanished for good, different from the hopelessness of the Russian barbarism, even though at that time I lost my older son Shafiqullah. This time, however, we are [a] part of the invisible genocide brought on us by America, a silent death from which I know we will not escape.” – displaced Afghan citizen Jooma Khan, of Laghman province, in an interview in March of 2003

Iraq, 1990-2002:

The UN Food and Agriculture Organization (FAO) reported in December 1995, that more than one million Iraqis died—567,000 of them children—as a direct consequence of the United-States supported U.N. economic sanctions on Iraq. An April 1997 nutritional survey, carried out by UNICEF with the participation of the World Food Program (WFP) and Iraq’s Minister of Health, indicated that in Central and Southern Iraq, 28% of Iraq’s three million children were at risk of death from acute malnutrition. UNICEF reported later that more than four thousand children under the age of five were dying every single month from hunger and disease. More children have died in Iraq as a direct result of these U.S.-supported sanctions than the combined total of both atomic bombs on Japan and the ethnic cleansing of Yugoslavia. The World Health Organization (WHO) reported a six-fold increase in the mortality rate for children under five, an explosive rise in the incidence of endemic infections such as cholera and typhoid, and a marked increase in the incidence of measles, poliomyelitis, and tetanus. Malaria reached epidemic levels. The WHO also stated that the majority of all Iraq had “subsisted on a semi-starvation diet for these past several years [because of U.S. sanctions].” Children born after the Gulf War, hardly involved in the politics of sanctions, were forced nonetheless to suffer in silence without access to pain killers, drugs, antibiotics, or hope. Some childhood cancers had reached an 80% cure rate prior to the sanctions; thanks to the sanctions, without access to cancer-fighting drugs the survival rate for children with these cancers dropped to 0%.

In the face of this overwhelming atrocity, it would seem natural to assume that U.S. policymakers saw these innocent deaths as a regrettable consequence of the sanctions, not their purpose.  However, recent documentation demonstrates beyond doubt that the U.S. intentionally destroyed Iraq’s water system even in spite of knowing full well in advance the effects it would have on innocent Iraqi civilians and children. Madeleine Albright, U.S. Ambassador to the United Nations at the time, was confronted with these statistics in an interview on 60 Minutes on May 10, 1996. When Lesley Stahl pointed out that “half a million children have died . . . more than died in Hiroshima,” Albright replied: “I think the price is worth it.”

Further Reading:

Iraq Under Siege: The Deadly Impact of U.S. Sanctions, Anthony Arnove

“The road to safety begins by ending aggression, but reciprocal treatment is part of justice. The [attacks] that have taken place . . . are only reactions to your . . . destruction and killing of our kinfolk in Afghanistan, Iraq, and Palestine. Reciprocal treatment is fair, and the one who starts injustice bears greater blame. . . the killing of the Russians was in response to their invasion of Afghanistan and Chechnya; the killing of Europeans was in response to their invasion of Iraq and Afghanistan; and the killing of Americans on the day of New York was in response to their invasion of the Arabian Peninsula.” – Osama bin Laden, in a taped message released in November of 2002.

All over the world:

Before reading this article, try to answer this question: How many military bases does the United States have in other countries?

(a) 100; (b) 300; (c) 700; or (d) 1,000.

Further Reading:

Nemesis: The Last Days of the American Republic, Chalmers Johnson

“America is a Nation with a mission – and that mission comes from our most basic beliefs. We have no desire to dominate, and we have no ambitions of empire. Our aim is peace.” – George W. Bush

Sudan, 1998:

On August 20th, President Clinton bombed the Al-Shifa plant in northern Khartoum, the capital of Sudan, on the pretext that the factory was believed to have been used in the manufacture of chemical weapons. In reality it was nothing of the sort. The al-Shifa pharmaceutical plant supplied as much as seventy percent of the medicines used in Sudan, roughly half of those used in Afghanistan, and ninety percent of those used for malaria in the entire region—its number one cause of death. The majority of those in Sudan and even Afghanistan suffering from malaria were left to die, with no other source for the medicines they needed. Under-Secretary of State Thomas Pickering explained that “the physical evidence [for the manufacture of chemical weapons at the al-Shifa facility] is a soil sample; analysis of it shows the presence of a chemical whose simple name is EMPTA, a known precursor for the nerve agent VX.” However, the Organization for the Prohibition of Chemical Weapons reported that EMPTA could in fact be used for “legitimate commercial purposes,” such as fungicides and anti-microbial agents; in other words, if it was present in the sample, its presence did not necessarily indicate the development of any nerve agents. Several experts in chemical warfare also reported that “there are agricultural insecticide[s] . . . that can easily be mistaken for EMPTA.” The soil sample, the only supposed evidence of chemical processing at the facility, was never released so that the presence of EMPTA could be verified by anyone outside the U.S. government. The export manager for the factory, Alamaddin al-Shibli, went so far as to claim it impossible for the soil sample to even exist, stating: “There’s no way to take a sample of soil from this factory, according to [its] construction. It’s either concrete or cement or carpet.” Thus, it seems likely that the story about the soil sample could well have been fabricated, and never even existed in the first place—but even if it did, it would scarcely have been justification for the United States to destroy the entire facility and leave the majority of Sudan and Afghanistan without medical care.

Two days after the bombing, the Sudanese government issued an official complaint to the United Nations Security Council, stating: “The allegations . . . that [the factory] producted chemical weapons for terrorist purposes are devoid of truth; the U.S. government has no evidence for this.” The Sudanese minister of information, Dr. Ghazi Saleheddin, said that “[the U.S. government has] not produced any convincing evidence. It’s not enough to produce soil which could have been made up in the United States itself, and to claim that the soil contains toxic agents. For a factory to produce toxic agents, you need special facilities, special preparations, special storage areas and preparations facilities. You can’t keep things to yourself and keep claiming you have the final proof without allowing people to verify your claims.” The Sudanese government continued pressing for “a fact-finding mission to come from the U.S. Administration,” reiterating that “it is not difficult to investigate; the factory is there; it has been closed from the day it was bombarded.” CNN’s Mike Hanna reported that the Sudanese government had been “giving the media every access to the site. Certainly, the Sudanese government is going out of its way to insist that it has nothing to hide, and it continues to call for that international investigation team to come inspect this missile site, and determine, once and for all, exactly what was produced here.” President Bashir, while being sure to make clear that he had “no animosity towards the American people,” called Clinton “a war criminal of the first degree,” pointing out in addition that if the facility had been manufacturing chemical weapons, bombing it would have directly endangered the lives of thousands of innocent civilians. Germany’s ambassador to Sudan from 1996 to 2000, Werner Daum, said that “several tens of thousands” woudl be “a reasonable guess” as to the number of Sudanese civilians who died from treatable illnesses thanks to the medicinal shortage created by the destruction of the facility.

(To Be Continued . . . )


Why the “Stimulus” Will Only Make the Recession Worse, & Why Government Should Not Attempt to Prevent Bankruptcy

May 3, 2009

1.

The “stimulus” package is based on the Keynesian premise that spending creates wealth. In reality, however, only production creates wealth; spending merely transfers it. Goods are created when matter is physically altered, and wealth–as opposed to goods no one wants or needs–requires that what is produced by those alterations is actually valued by consumers. Keynesian economics holds that government spending can create wealth when factors of production are idle–that is, when people are out of work and factories have unused capacity. The Keynesian reasoning is that if unemployed people were working and factories’ idle machinery was put to use, more goods would be created. While this is certainly true, the Keynesians completely overlook the fact that there is a reason why those factors of production are idle, and it isn’t that everyone except government officials following Keynesian economics have lost their minds. Increasing the material output of goods is only productive in terms of the creation of genuine wealth if consumers are willing to pay a price for those goods that is higher than the manufacturer’s cost of producing them. The idea of the “stimulus” gimmick is to trick both sides of transactions into thinking that this is the case when it isn’t: first, trick consumers into thinking they can afford to buy more than they really can; then, trick producers into thinking they are making a profit from their sales (to people who can’t afford the goods in the first place) without realizing they are actually producing at a loss. The result of this is that the material output of goods will, in fact, increase, while the creation of wealth–what actually matters–suffers.

On the demand side: Right now I am trying to spend less because I can’t afford as much as I could (or rather, as much as I was fooled by inflation into thinking I could) before the crisis. The Keynesian response to this is to cause yet more inflation–to give me paper money printed out of thin air in order to fool me into thinking once again that I can afford to purchase more than I actually can. On the supply side: car manufacturers have left their machinery idle, because they have judged that they can’t make a profit by using them to produce more cars. The Keynesian response to this is once again yet more inflation; give them paper money printed out of thin air in order to fool them into thinking they are making a profit when they really aren’t, thus tricking them into producing more cars.

This double-fakery does not produce any new wealth. It does not make anyone more prosperous, although it does temporarily create the illusion of doing so by causing a nominal increase in everyone’s revenues. Once the inflation caused by the process sets in, however, this illusion of prosperity disappears–and it becomes obvious that the scheme has accomplished nothing but to squander everyone’s real wealth. Consumers can’t really afford to buy new cars, even though the scheme fools them into thinking they can because their incomes have risen in nominal terms; and likewise, car manufacturers aren’t making higher profits in real terms than they were before, even though the scheme fools into thinking so because their profits have risen in nominal terms. Consumers are deceived into making purchases that they can’t actually afford, and producers are deceived into producing at a loss. As the newly printed dollars circulate through the economy, the cost of living and the costs of production begin to rise: and once this effect inevitably sets in, the fact that no one has actually been made more prosperous by the Keynesian scheme becomes obvious.

It is important to recognize that wealth is a subjective term–that is, it is relative to the scale of values of the individual concerned. Suppose for example that my scale of values is such that even though I would like to stay in my current apartment and purchase both a new computer and a new TV, after I pay my rent I can only afford one or the other. AndI would consider myself more prosperous living in my current apartment with only a new computer than I would moving into a smaller apartment so that I could afford both a new computer and a new TV.

Thus, my scale of values looks as follows:

1. Current apartment; new computer; new TV.

2. Current apartment; new computer.

3. Smaller apartment; new computer; new TV.

After the “stimulus” puts inflated currency into my pockets, I am fooled into thinking that I can actually afford to stay in my current apartment and buy both a new computer and a new TV. So I do so, thinking that the Keynesian scheme has made me more prosperous, because I think I can now afford to stay at position 1 on my scale of values instead of position 2. But eventually, inflation sets in; prices begin to rise, and I find that I can no longer afford to pay my rent–so I have to pack up my new TV and computer and move into a smaller apartment. I am now on position 3 of my scale of values instead of position 2. Had the “stimulus” not hoodwinked me into thinking that I could afford both a new computer and a new TV when I really couldn’t, I would’ve purchased only the new computer, and I would have remained able to afford the rent on my old apartment–thereby remaining as prosperous on my own personal scale of values as I possibly could given my real income. I would have remained on position 2, which is all that my real wealth allows me to sustain. But because I was tricked by the Keynesian scheme into buying both the TV and the computer, I am now positioned lower on my own scale of values than I would have been otherwise–I am now at position 3. I am less prosperous. Thus the scheme temporarily fooled me into thinking that I was at position 1, and then dropped me down to position 3, when in the absence of the scheme I could have simply remained at position 2. Of course, in reality the effects of the scheme are not so simple and clear cut. On the basis of a given nominal salary, an individual typically sustains a higher level of consumption–more eating out, golfing, going out to movies, and so on–than he would have had inflation not made him think he had more money than he really did; and in the end the individual is made less prosperous by this process without even retaining anything tangible in the end, in the way that I at least retained my new TV and computer at the end of this example. So, I use this particular example even though it is slightly unrealistic to show that even if individuals retain wealth after the effects of this scheme have run their course, they are still left worse off in the end than they otherwise would have been. These same principles apply to businesses, as well. If they are deceived by the “stimulus” into putting their idle machinery to use, they end up worse off in the end than they would have been otherwise. Just as my rent payment rose due to inflation, so too do business’ costs of production begin rising, as well as the interest payments on their loans. In the end, even if the scheme does accomplish its goal of increasing the material output of goods, wealth has merely been squandered, leaving everyone less prosperous than they otherwise would have been.

Another important point which Keynesians completely ignore by advocating this double-fakery scheme as a response to consumers saving their incomes instead of spending it is that savings actually do eventually get spent. The critical question is of the nature of the spending that is done–is money being spent on production, or consumption? As far as the creation of new wealth is concerned, money that is spent on consumption is a dead end; it represents no net benefit to society. You buy bread; you eat it. The bread is gone, and there is nothing left to show for it. But if you invest the money, it is spent on production–say, to pay wages to the bakery’s employees, who use it to buy bread for themselves. Money is spent to buy bread that is ultimately eaten in both cases; the question is whether it goes towards feeding a worker who is making more bread than he eats (he is being hired at a profit, and spending less than his income), therefore representing a net gain to society–or whether it goes towards bread that is simply consumed, therefore representing no net gain to society. To be clear, there is nothing wrong with consumption–we produce things, after all, because we want to consume them. But Keynesian policies are premised on the absurd notion that savings are simply “stuffed under a mattress” without being spent, when in reality most savings are invested in future production and therefore represent a beneficial and desirable contribution to the economy. Thus the “stimulus” does not only squander wealth and leave everyone off less prosperous than before, it does so at the expense of savings and investment that would have benefitted the economy had the “stimulus” scheme not squandered that wealth.

This crisis was created by too much consumption, too much debt, and malinvestment. What is needed for recovery is not for the delusion created by a “stimulus” to fake consumers into thinking that their incomes are higher than they really are while faking producers into thinking that they are producing at a profit when they aren’t–but for the economy to be allowed to readjust to external reality. Most crucially, this means allowing the liquidation of malinvestments businesses were fooled by prior inflation into thinking they could afford. Encouraging more inflation in order to retain the illusion that those investments still represent a profitable allocation of capital is the exact opposite of recovery; in fact, it is an expansion of the very thing that created the problem to begin with–and it will accomplish nothing except to make the corrections and readjustments to reality that inevitably must occur in some form another more painful than they would otherwise have to be. Liquidation, the single most important ingredient in the recovery and readjustment to reality of an economy hampered by inflation, is the very thing that a “stimulus” package prevents.

2.

Although the purpose of a bankruptcy proceeding is to allow creditors to collect as much of the money they are owed by a bankrupt company as possible, debtors benefit from bankruptcy proceedings as well, because after they pay off the part of their debt they are able to, what is left over is extinguished and they are allowed to go on with their lives. In a bankrupcty proceeding, creditors decide in collaboration with a bankruptcy court whether it is better to shut the bankrupt business down and liquidate its investments, or continue its operation under new and more efficient management. Creditors have greater financial incentives than anyone else to insure that the decision they make will maximize the long-term prosperity of everyone involved. Thus, if they judge that the business can still make a profit under better management (indicating that it is a productive allocation of society’s scare capital and labor), they will decide to have the business taken over by more efficient management. Only if they judge that the business can not continue to make a profit (and therefore is not a productive allocation of society’s scare capital and labor) will they decide that it is better for the bankrupt business to shut down and liquidate its investments. This process removes capital and labor from businesses which are managing them poorly and redirects them to businesses which are efficiently using them to satisfy consumers. This allows the labor and capital structures of society to be redrawn in alignment with the wants and needs of consumers–that is, in alignment with external reality. The only thing that interference in this process can accomplish is to allocate capital and labor less efficiently than otherwise, in a way that is not best suited to fulfilling the desires of consumers–thereby making the economy’s inevitable and necessary readjustment to external reality that much more prolonged and painful.

An economy in which rapid bankrupcty proceedings are practiced is one which is predominated by growing businesses, since incompetent businesses are stamped out, their labor and capital reallocated to businesses that are satisfying more consumers and can therefore make better use of them. Hence, even if particular workers are occasionally displaced by a bankrupcty, workers as a whole benefit greatly from the existence of an economy in which bankrupcty proceedings are practiced. Everyone else benefits because the process removes capital and labor from those who are mismanaging them, and puts them in the hands of those judged by creditors as most capable of putting them to productive use satisfying consumers.

It is counter-productive, wasteful, and immoral for any government to ever try to prevent bankrupcties. Bailouts deny the legitimate right of the creditors to collect what they are owed by the bankrupt company. To force innocent third parties to pay for a bankruptcy company’s failure represents a vile form of corporatism; it allows companies poorly managing capital and labor to stay in control of society’s scarce resources, and lowers the prosperity of the entire society as a whole. The institution of bankruptcy is an essential feature of a just and prosperous society, and it is most needed as a readjustment to the capital structure of society after the government has created misallocations of capital by increasing the money supply. Bailouts and “stimulus” packages are thus not only unjust and immoral, they represent a continuation of the very practices that caused the problem to begin with.


Education Beyond the Bounds of Bureaucracy

April 9, 2009

“Children who know how to think for themselves spoil the harmony of the collective society that is coming, where everyone will be interdependent. Independent, self-reliant people will be a counterproductive anachronism in the collectivist society of the future.” — John Dewey, 19th century Socialist party member and educational philosopher whose ideas are still studied by teachers today.

Education is not a one-size-fits-all product. Every single child is unique, with his own particular talents, interests, strengths, and weaknesses. It is well-recognized for example that different children have different methods by which they learn the most efficiently. Some are kinesthetic learners, learning much more quickly and easily in an environment in which they can practice what they are being taught hands-on. Others are auditory learners, learning much more quickly and easily through class discussion and reading aloud. Still yet others are visual learners, learning much more quickly and easily when they can see what it is they are trying to learn either in writing or on video or in visual charts and graphs. But the State education camps do not–indeed, can not–accomodate each child’s unique pace and style of learning. Children of all methods and speeds of learning are stuffed into one room, forced to learn at the method and speed of the lowest-common-demoninator in the class. The quickest are deprived of the opportunity to excel, and the slowest are deprived of the attention they need.

Some children, although they do excel in one or more areas (say, math and science), have absolutely no interest whatsoever in some other area (say, history). In the State education camps, however, they are not allowed to proceed in the areas that interest them; instead, they are forced to continue memorizing dry facts (the dates of various events; the abbreviations of various chemicals) in those subjects in which they have no interest. What benefit does a future journalist gain from being forced to memorize the periodic table of elements? What benefit does a future engineer gain from being forced to write an essay on To Kill a Mockingbird? What benefit does a future mechanic gain from any of it? And what benefit does society gain from being compelled to spend thousands of dollars subsidizing this?

In the State-education camps, children of all temperaments are forced into the same classes together; and thus, bullying is an experience shared by everyone who has been forced through the system. Nonathletic and overweight students are forced into the same gym classes as the more athletic ones; and for many children, it is no exaggeration to say that these are the worst years of their lives–some become so overwhelmed that they end up committing suicide or carrying weapons to school. The State’s education camps thus breed violence and hatred among a large number of children, and provide many of them with the setting for the most miserable years of their lives. Just last week (April of 2009), for instance, bullying led an eleven-year-old to suicide. GLSEN reported that this was at least the fourth suicide linked to bullying already this year.

“Is it not ironic that in a planned society of controlled workers given compulsory assignments, where religious expression is suppressed, the press controlled, and all media of communication censored, where a puppet government is encouraged but denied any real authority, where great attention is given to efficiency and character reports, and attendance at cultural assemblies is mandatory, where it is avowed that all will be administered to each according to his needs and performance required from each according to his abilities, and where those who flee are tracked down, returned, and punished for trying to escape–in other words, in the typical American high school–that we attempt to teach ‘the democratic system’?” – Royce Van Norman

In a society that has risen to untold levels of prosperity thanks entirely to one single economic factor–a consistently increasing specialization in the division of its labor–how does it make any sense to force each unique child through the exact same educational mold, indifferent to that child’s interests, talents, pace and method of learning? Shouldn’t the greatest degree of specialization be encouraged as early as possible, for the benefit of both the student and society as a whole? Shouldn’t each student be allowed to develop as far as he possibly can in his own subjects of interest–even at the detriment of subjects in which he has no interest? Shouldn’t each student be allowed to learn in his own particular way, and at his own particular speed? Wouldn’t society as a whole benefit as much as the individual student from a system which allowed the student to flourish in his own peculiar talents and interests, at his own distinct pace and in his own preferred method?

In an educational model imposed from the top-down by a faceless federal bureaucracy in the style of a Soviet monopoly, a one-size-fits-all education is indeed the only possible option. But imagine the prospects of a system where dozens or more schools, each free to set their own curriculum and offer any combination of classes they chose, competed in order to attract the attendance of students. Some schools would focus on english, literature, and journalism. Others would concentrate on science and mathematics. Still others might offer training in various trades–one might offer training in computer-repair skills and programming; another might offer training in such trades as welding and carpentry. Free to openly compete with each other to try to attract customers, and recognizing that their very existence depended entirely on the continued voluntary support of those customers, schools would be on a constant search for any and every innovation that could increase the satisfaction of parents and/or students. One obvious consequence of such a system would be that students who made no effort to learn, or disrupted class for other students, would not be tolerated for a moment–no school would want to lose the business of several students just because they tolerated a single disruptive one; and so, any report of bullying would be taken seriously and punished severely. Bullying and harassment would no longer be routine experiences that most children would have to suffer through.

A few hypothetical innovations that private enterprise schools might employ: students could be separated into separate classes based on their preferred learning method, whether visual or auditory. Visually-oriented students might learn the day’s lesson with graphs, charts, and written notes; auditory-oriented students with a lecture, and recorded audio instead of notes. Schools would likely put an end to the practice of grouping all children by age, opting to group them instead by their proficiency as well as their characteristic style and pace of learning. Some schools might remove sports from their curriculum in order to put more emphasis on education; others would retain them and use sporting events as an additional source of funding. While some schools might continue offering their education for nine-months out of the year, with two months out for summer and another month out between Christmas and other holidays, others could simultaneously offer their education year-round, offering three-week breaks every nine and thereby spreading its breaks more evenly throughout the year instead of concentrating them all during the summer. There would no longer be a debate over which of these systems should be imposed on the entire educational system from the bureaucracy down. Any other system or program demanded by a justifiably large number of customers would inevitably be offered by some entrepreneur seeing the opportunity to establish a new market or niche–and everyone would be free to make his own decision as to which system or set of programs he would prefer.

Likewise, there would no longer be any debate over such things as whether prayer should be allowed, or whether intelligent design or evolution should be offered. Each school would be free to set its own policy, and each student would be free to patronize the school of his choice. In regards to the allowance of prayer, each school would be free to either allow all religious expression, disallow expression of any religion, or even officially endorse a particular religious denomination and only take in students of that particular religion or lack thereof. Religious students who wished to get their education alongside fellow students of the same religion would be free to do so, and nonreligious students who wished to get their education as far away from religion as possible would be free to do so as well.

Given the freedom to innovatively compete, schools would find creative solutions to these problems that a federal bureaucracy never would have dreamed of. In response to the evolution-creation debate, one possible innovation might be to allow ninth and tenth graders to choose between an evolution or intelligent design class, and then bring both groups together in the eleventh and twelth grades for debate classes in which each group would try to defend its own position from the other. In such a hypothetical system, each student would understand both evolutionary and creationist ideas more thoroughly from both sides. But innovations such as these are never even discussed in regards to the public schools, much less implemented–and they never will be, because state-education camps don’t face a single one of the economic incentives that are so fundamental to the operation of a voluntarily financed, private enterprise school.

Of course, in all likelihood schools as a routine would publish statistics on the post-graduate successes of its students, in order to attract students through statistical demonstration of its proficiency in preparing individuals for sucessful careers. I personally find it unlikely that creationism would long be taught within such a system, because the number of people willing to voluntarily purchase creationist courses would drop rather significantly if and when statistics found graduates of creationist classes having little or no success in scientific fields. Individuals actually seeking a successful career in science would gravitate towards the courses whose graduates had the highest success rates; and programs teaching evolution would, in my humble opinion, fill this role rather quickly. Regardless, this issue would remain open for free market enterprise to decide. Besides, even if creationism is in fact wrong, the minds of devout religious creationists are unlikely to be changed by using the State to force those individuals into classes teaching evolution. Respect for individual choice and tolerance of opposing viewpoints are more important than shoving a particular viewpoint down people’s throats—particularly when the minds being thus forced aren’t planning on changing any time soon anyway. Individuals have the right to pursue their own happiness—and if that involves the voluntary purchase and attendance of courses on creationism, then so be it.

A state-education camp that is assured of subsidies and state teachers who are assured of being paid whether children are learning and parents are satisfied or not has no incentive whatsoever to improve its quality, cut its own wastes, please parents–or hell, even to teach children. The Supreme Court has ruled that the public schools that people are forced to subsidize through taxes in fact have “no duty to educate individual children.” Compare this to private schools like Sylva Learning Center that give a refundable promise to teach in two months what the public schools can’t teach in ten–for half the price.

Of course, some percentage of the children forced through the state system have no desire or intention whatsoever to learn anything–and yet society is forced to pay approximately $10,000 in taxes to drag them through the system anyway, so that they can accomplish absolutely nothing apart from making life more difficult for teachers and lessening the quality of education and amount of attention on all the other children in the system who are actually trying to make an effort. These children still end up dropping out of school and getting a job in manual labor despite their mandated “education.” This process is counter-productive in every conceivable way—it wastes taxpayer money; it wastes teacher’s time; it wastes the time of the rebellious and uncooperative children; and it lessens the level of individual attention (and, therefore, quality of education) for all the children in the system actually making an effort to learn. In a private enterprise system, it would be no loss that such children would not be forced through the system at taxpayer expense for twelve entire years—and it would be clear to those children that, education or none, their future is entirely in their own hands. Thus, every child attending a given class in a private enterprise system would have strong incentive to make the best effort he possibly could to learn and not be disruptive; and the school in question would have strong direct incentives to punish and prevent such practices as bullying, drug dealing, and harassment. That every single one of these incentives is absent from the state-education camps is surely accountable for the omnipresence in these camps of drug dealing and harassment. Society as a whole will be better off when those who actually want to learn are able to get the best and most personal education possible, while those who don’t and aren’t willing to make an effort aren’t forced with thousands of taxpayer dollars to pollute the entire system for everyone.

Children would not be the only group to benefit from a private enterprise in education. Teachers, in fact, would benefit greatly as well. One of the greatest reasons teachers’ wages are so low is because the massive waste allowed by the absence of profit-and-loss incentives in the public system has to be spread out across all of the state’s employees, thus lowering wages for all teachers all across the board. The first economic incentive a private enterprise school would face would be to lower its costs by cutting any wasteful or unnecessary expenditure. These lowered costs of operation would then be passed on to teachers, as schools competed to hire the most efficient staff possible by attempting to offer the best teachers higher wages than their competitors. Teachers with high success rates and good reports from ex-students would be more valued, and as such the school at which they were employeed would offer them the high wage justified by their proficiency. Teachers with low success rates and poor reports from ex-students would soon be let go or fired. Thus, free market schools would select and rewards its teachers for merit just as every other sector in the free market selects rewards its employees for merit. The profit-and-loss system would give schools the incentive to fire bad teachers, offer raises to better ones in order to prevent competing schools from attracting them with the offer of a higher salary, and cut wasteful spending wherever possible. This would also thus provide teachers with a direct incentive to teach as efficiently as possible and try to make their lessons interesting enough to keep their students’ attention; in other words, to ensure the success of their students in whatever way possible. Hence, the first effect of free enterprise in education would be to raise teachers’ wages across the board, as wasteful spending was cut and schools competed with each other for the best teachers; and the second effect would be for teachers’ wages to increase or decrease in direct proportion to their actual success in teaching, providing teachers with an actual incentive to increase their proficiency and give special attention and focus to each individual student. That every single one of these incentives is absent from the state-education camps is surely accountable for the overwhelming failure of these camps to educate American children in even such basic skills as reading and elementary arithmetic.

Now to provide an answers to a few simple objections.

1. “There are parents out there who just don’t care. They do not care if their kid gets an education; they do not care if their kids skip school. Some parent would rather them stay at home, stay in the yard, or work.”

First off, in a system in which parents actually had to purchase their child’s education (directly, instead of indirectly through taxation), parents would most definitely care if their children were skipping the education that they were having to pay for. Second, most parents plan to rely at least to some degree on their children to take care of them in old age. Third, not many parents enjoy the prospect of keeping their children “up” unnecessarily. Thus, only if a parent didn’t want his children to be able to leave home and become self-sufficient, didn’t plan on relying on them at all in old age, and planned on keeping them up at home himself for an indefinite period of time would he not want them to get an education that would lend itself to a successful career. Only if all these motives are found to fail might there be a need for negligence laws against failing to provide one’s children with an adequate education, and a free enterprise educational system would have room for such laws just as there already are negligence laws against failing to provide one’s child with sufficient food, water, and clothing, in the absence of government-operated, mandatory restaurants and clothing stores. Regardless, such laws may actually prove unnecessary. In early-eighteen-hundreds America, for instance, before public education had even been introduced, private educational attendance in Boston was recorded at 96% by a committee organized to study the issue.

This country was far more literate before education became a state province than it is today. In fact, if education had remained private, any proposal to turn it over to the state would shock all lovers of freedom. But now, Americans [have become] inured to the intellectual serfdom of state education. —Joseph Sobran

2. “In a private enterprise system, only the rich would be able to afford education.”

Even right now, with the limited market that private schools receive, the majority of them cost less than the public schools. It is crucial to realize that the state schools are not free; they are simply funded through taxation instead of voluntary payment. It costs $10,000 to send a single child through public high school. Private high schools, by comparison, average between $5,000 and $7,000 for a better education over the same period of time. And if private enterprise schools replaced the public schools, their greatly expanded market would provide them with a financial incentive to offer their services even cheaper. Is it better business to sell a service for $10,000 and attract 150 customers, or to sell that same service for $4,000 and attract 500? In this example, the school in question would increase its total income by half a million dollars by cutting its tuition by more than half. And in a free enterprise system, private schools would most likely operate on an even greater economy of scale than this, and would thus quickly lower prices even below these hypothetical rates. Here is a link to one of many studies demonstrating that the actual price of public schools is twice that of the average private school, and approximately equal to even the most elitist, expensive private schools in existence.

Chris Cardiff, of the National Center for Independent Education, has calculated that if every single one of the 16 million poor and lower-middle-class children in America were provided with a $1500 scholarship to a private school, the cost would come to $24 billion. This is less than 8% of what is currently spent on public schooling nationwide. Even on top of a tax burden surpassing 40%, Americans already donate more than $216 billion dollars to charity each year–and an additional $37 billion is raised in addition to this in private donations to higher education. Raising the mere $24 billion needed for the education of the poor in higher-quality private schools would be no problem at all, especially once Americans received the $316 billion dollar tax cut that would accompany the abolishment of government-operated schooling. The business community itself, because it benefits from the existence of a market of well-educated workers, would be likely to donate to schools that taught students skills that made them into valuable workers. Many businesses already have to spend a great deal in order to educate their workers themselves; so, in a private enterprise system, these resources would simply be redirected to the private sector. What about children in isolated, rural areas? A full education from kindergarten through college is already available through correspondence, video, and the Internet; and if this avenue was proven useful, like anything else proven useful in the free market, it would expand. All of these factors and more would increase the ability of poor and/or rurally isolated students to get an affordable, high-quality education.

“Many companies have moved operations to places with cheap, relatively poorly educated labor. What may be crucial, they say, is the dependability of a labor force and how well it can be managed and trained, and not its general educational level, although a small cadre of highly educated creative people is essential to innovation and growth.” — Thomas B Sticht, president and senior scientist, Applied Behavioral and Cognitive Sciences, Inc; Oct 23, 1989

Beyond the fact that private schools would offer affordable and effective education to a wide market, it must also be recognized that every citizen does not actually need an entire high school education. Manual labor is an economic necessity, and there is little justification for forcing every single manual laborer through twelve years of the same science and history classes, with taxes appropriated from other citizens. As a final example: in New York, an entirely private and completely free education was offered to students by a group of teachers working in an abandoned store under the name, “Harlem Prep.” These teachers offered their curriculum to the poor black students that the state system had failed and discarded as hopeless. After four years of Harlem Prep’s program, over ninety percent of these poor students, who had previously been rejected by the public school system, went on to receive a college diploma and then hold successful careers. How did the public school system respond to this? By shutting Harlem Prep down.

3. “But we’ve always had public schools!”

Not so. Mr. Matthew J. Brouillette, President of the Commonwealth Foundation in Harrisburg, Pennsylvania and former Director of Education Policy for the Mackinac Center for Public Policy, writes: “From the outset of the first settlements in the New World, Americans founded and successfully maintained a de-centralized network of schools, up through [the late eighteen hundreds]. Early America was arguably the freest civil society that has ever existed. This freedom extended to education, which meant that parents were responsible for, and had complete control of, their children’s schooling. There were no accrediting agencies, no regulatory boards, and no teacher certification requirements. Parents could choose whatever kind of school or education they wanted for their children, and no one was forced to pay for education they did not use or approve of.”

National compulsory attendance laws for public schools were not established in America until the late eighteen hundreds. The Commissioner of Education who passed these laws—William Tory Harris—had this to say about his accomplishment, in 1908: “The great purpose of school can be realized better in dark, airless, ugly places . . . Our schools have been scientifically designed to prevent over-education from happening . . . The average American [should be] content with their humble role in life, because they’re not tempted to think about any other role. Ninety-nine [students] out of a hundred are automata, careful to walk in prescribed paths, careful to follow the prescribed custom. This is not an accident, but the result of substantial education—which, scientifically defined, is the subsumption of the individual.” Harris, in these quotes, clearly expressed his pride at the fact that the public education system was succeeding in its goals of stifling private initiative and independent thought, turning its students into “automata.”

This article so far has contained only a small amount of speculation on something for which there are literally an infinitude of possibilities. In reality, a fully free market in education, subject to the same innovative forces that gave society such things as electricity, cell phones, the ipod, and laptop computers, would develop innovations far more creative and effective than I could ever try to imagine or speculate about in a simple short essay. “It’s time to admit,” Albert Shanker, President of the American Federation of Teachers writes, “that public education operates like a planned economy, a bureaucratic system in which everybody’s role is spelled out in advance and there are few incentives for innovation and productivity. It’s no surprise that our school system doesn’t improve: it more resembles the communist economy than our own.”


Democracy or Freedom?

March 30, 2009

Could any decent moral principle ever justify a mob banding together and telling you that if you want to remain on your own property, you must “consent” (although that word doesn’t actually apply, since consent implies the right to refuse–and they aren’t offering you that) to the orders given to you by their organization, or else they will band together to lock you in a cage—and that your only other option is to abandon your property, quit your job, leave behind your family, and relocate outside the bounds of the arbitrarily defined geographical area that gang claims dominion over? If any individual approached you on his own and demanded, “Either submit to my commands or relocate outside of the lines I’ve randomly drawn on this map, or else I’m going to lock you in the cage,” you would immediately dismiss him as a lunatic. So why do we pretend that it is morally legitimate for individuals to do precisely this very thing simply because they have banded together as a mob? Certainly a mob doesn’t gain more rights than the individuals composing it just because a majority of that mob (not even the whole thing!) got together in a room to raise their hands and write someone’s name on a piece of paper. . . . so why do we continue to pretend democracy is a morally justifiable system?

Nineteenth-century lawyer, political philosopher, and slave abolitionist Lysander Spooner summarized the ethical problem with democratic “representation” (sic) succinctly, in the late 1870s: ”It is self-evident that no number of men, by conspiring, and calling themselves a government, can acquire any rights whatever over other men, or other men’s property, which they did not have before as individuals. And whenever any number of men, calling themselves a government, do anything to another man, or to his property, which they had no right to do as individuals, they thereby declare themselves trespassers, robbers, and murderers, according to the nature of their acts.” Voltairine de Cleyre, echoing his words in 1890, wrote: ”[A] body of voters can not give into your charge any rights but their own; by no possible jugglery of logic can they delegate the exercise of any function which they themselves do not control. If any individual on earth has a right to delegate his powers to whomsoever he chooses, then every other individual has an equal right to do the same; and if each has an equal right, then none can choose an agent for another without that other’s consent. Therefore, if the power of government resides in the whole people, and out of that whole all but one elected you as their representative, you would still have no authority whatever to act for the one. The individuals composing the minority who did not appoint you have just the same rights and powers as those composing the majority who did; and if they prefer not to delegate them at all, then neither you, nor any one, has any authority whatever to coerce them into accepting you, or any one else, as their ’representative.’”

The formula here is simple: If you don’t have the right to murder me, then you don’t have the right to hire a hitman to murder me. Holding an election in which a majority “voted” in favor of my murder would give no moral legitimacy whatsoever to the hitman’s attempt on my life. Likewise, if you don’t have the right to steal from me or conscript me into a war, then you don’t have the right to force a politician on me to steal from me or conscript me into a war, either. A “democratic election” would give no more moral legitimacy to that politician’s theft of my property and time than it would have to the hitman’s theft of my life.

To rephrase the points made by Spooner and de Cleyre in modern language: men have the right to choose rulers for themselves, and to delegate their rights to life, liberty, and property to others if they so choose—but they have no right to impose rulers or “representatives” on non-consenting individuals. Politicians are only human beings; thus, they are not exempt from the ethical law by which we are morally required to guide our own conduct: namely, the obligation not to initiate force or fraud against the person or property of any non-consenting, noncriminal individuals. In this respect, politicians possess no rights which are not possessed by their citizens—and those citizens, likewise, have no right to delegate to politicians rights that they themselves do not possess. Governments therefore have no right to take any actions that would be illegitimate were they performed by a citizen of that government. And yet, as even apologists for democratic government admit, “almost everything that governments do would be crimes if committed by individuals.” This approving quote is from lawyer Dan Evans. Here’s a question Mr. Evans should ponder: Since when is government not composed of individuals? Does an act does cease to be a crime simply because the individual committing it calls himself a representative of “government?”

It is worth taking a moment here to point out that, strictly speaking, no such thing as “government” actually exists. The ever-insightful Voltairine de Cleyre clearly acknowledged this fact in the eighteenth century when she wrote: “Try to approach God, and you are doomed always to confer with an agent, a mere representative—a priest. But government is just as unreal, just as fictional, and just as as imaginary as God. Try it, if you don’t believe it—seek through the legislative halls of America and see if you can find the “Government.” In the end you will be doomed to confer with a mere agent, just as in the case before. The politician is a representative of that abstract entity known as “Government” in the same sense and to the same degree that the priest is a representative of that abstract entity known as “God.” Each pretends to represent some venerated fiction in hopes of awing you into respecting him enough to hand over a tithe—and just as the priest always handles your money only in the name of God, so the politician always handles it only in the name of Government.” So does an act does cease to be a crime simply because the individual committing it calls himself a representative of that unapproachable fiction we refer to by the word “government?”

“Man,” to continue this series of quotes with another one from Lysander Spooner, “is no less a slave because he is allowed to choose a new master once in a given term of years.” But democracy does not even allow a citizen to choose his own masters—it merely grants him but one voice out of thousands or even millions over who his new masters will be. Thus, Spooner’s statement could be updated to read: “Man is no less a slave because he is given the right to squeal amidst screams over who his new masters will be.” To the Americans forced to shell over thousands of dollars each year for “agricultural subsidies” in which farmers are paid to throw away perfectly good food, it makes no difference that the decision to give those farmers money stolen from American citizens was made through the democratic process. The rights of an individual forced off of his own property are no less being violated because a majority votes for it and then calls it “imminent domain.” The one million innocent Iraqis murdered in the invasion of Iraq and two million more displaced from their homes are no more grateful for their deaths and displacements because the invading country decided to do so by vote. The six million Jews slaughtered in Nazi Germany were no better off because Adolf Hitler was democratically elected by a majority of Germany’s voting population. None of these victims of democracy were any better off because they were allowed to write a name on a piece of paper before becoming victims of theft, force, and murder. This can all be summarized as follows: “Democracy” is not freedom; it is not justice—it is, in fact, nothing more and nothing less than rule by the fleeting whims of the voting majority of a mob.