Thursday, September 23, 2010

Response to Krugman – “The Angry Rich”

Paul Krugman recently clawed an NYT piece entitled, “The Angry Rich.” In his puffy I-don’t-know-where-money-comes-from-so-I’ll-critique-it-in-order-to acquire-some-of-it-myself tone, the tyrannical pop culture Nobel Laureate advances the idea that wealthy people are entirely unjustified in their anger toward the government – anger arising from the “modestly higher taxes” which are headed their way.

The Princeton Prince assures us that the landed gentry is being much too noisy and wholly inappropriate, for in a proper society there should be no brouhaha coming from that direction – they go golfing, after all. Only the poor are justified in their complaints, because they are “underprivileged.” The woman who finds herself with a healthy bank account should bend over, drop the overpriced designer skirt, and take it for the collective.

In Krugman’s world, resources belong with those who don’t yet have them – so long as they’re Americans. If we discover a woman with a nice house and fancy car, and a man with torn jeans, a ’98 Taurus, and five children forced to share only one Xbox between the lot of them, Krugman will ensure that the privileged woman gives of herself freely… for she has much to give. If he’s lucky, maybe the man will then be blessed with a sixth child, and then have even further claim to the labors of others. To be fair, Krugman wouldn’t force the woman to strip down entirely – only 39% of her marginal assets need be removed. She can leave her Prada heels on, if she so pleases.

The right to property, whether speaking of one’s own body or the product thereof, is of no concern to Krugman. To people like him, property is rightly owned by the collective – again, so long as that collective is American. Of course, the property wasn’t produced by the collective, but that doesn’t seem to matter. From each according to her ability, to each according to his need… and there’s a lot of need.

But upon any academic examination of “need,” one will find the term to be almost meaningless. What is needed by humans? Some food, some water, some shelter, and an Xbox. Americans, even the poorest of them, already have these things. The strict needs of 99.99999% of Americans are met. The fact that, beyond these needs, many Americans don’t have the job they want, the car they want, or enough cash to spend both on movie nights and fresh vegetables from the fertile fields of Italy doesn’t make them “in need.” Rather, they are, like all humans both rich and poor, simply “in want” – a perpetual condition that no increase in marginal tax rates will alleviate.

If Krugman really cared for the poor, for those truly in “need,” he would be eyeing the comfy $30,000 made by blue-collar Americans. That kind of income is WAY more than anyone needs, but it’s not enough for what everyone wants – and that is what truly bothers Krugman. Indeed, there are starving children in Africa, and starving not in the sense that their Twinkies have run out, but starving in the sense that they’re dying and will soon be rotting in the streets (made even more tragic by the fact that they’re then unable to continue plowing the fields and sewing the blue collars for the “poor” Americans). Poor is relative, and anyone who has traveled even a week abroad knows that Americans are not poor – even the poor ones. Krugman is not advocating for those in poverty, he’s advocating for those in wealth… but those who just don’t have as much wealth as Krugman arbitrarily deems appropriate for his utopian hive.

Krugman’s festering antagonism towards those who produce vast quantities of valuable things –value being evidenced by the fact that others are willing to voluntarily exchange their own wealth in return – is, frankly, pathetic. Citing Oliver Wendell Holmes, Krugman asserts that “taxes are what we pay for civilized society.” I’ll cite myself here and suggest that forced servitude, aka taxation, is precisely anti-civil. A society is civilized to the extent that force is avoided. The very march of civilization has been a prolonged and noble struggle against force – it’s wrong to murder, it’s wrong to steal, it’s wrong to enslave… but it’s just fine to partially enslave so long as Oliver Wendell Holmes stamps it with approval? Force is the antithesis of civility, not its beacon.

Here’s a little hint for you, Krugman. Perhaps the rich aren’t angry just because their marginal tax rate is going from 37.5% to 39%. Perhaps they’re angry because they’re increasingly realizing that almost the entire 39% they’re forced at gunpoint to surrender to your preferred collectivist regime ends up not as the tuition for underprivileged youth, but as the piggy bank for the most wasteful, inefficient, lying, cheating, corrupt, militaristic empire that has ever existed in the history of the Earth. I’m sure the wealthy would gladly part with more of their income if they could hope to receive something of value in return. The fact that you have to wrest it from them under threat of imprisonment is indicative of the nature of your operation. Pizza Hut doesn’t have to point a gun to your head, because what they serve is good.

Yet, perhaps the rich do owe their pound of flesh to the hive… how ought we determine the proper amount of flesh? How much of herself must the wealthy woman surrender to you, Krugman, before you’re satisfied with her sacrifice? To how many hours of her day are you entitled? Why must she go without 39% of the product of her body, merely because a bunch of men in Washington deem it so? Is it because other people voted those men into power? Being in power, as they are, are they entitled perhaps to 50% of the woman’s efforts, so long as the majority – along with Oliver Wendell Holmes – agrees? What about 80%? And yes, slippery slope arguments are legitimate when you’re pushing people down a hill… so could, perhaps, the majority rightly vote away 100% of the lady’s efforts so long as it was “for a good cause?” Does any cause justify enslavement? Does the cause of alleviating starving cannibals justify the pushing of a fat, tasty man down a hill? No? What if the cannibals have hungry children and a mortgage?

And why is it that the wealthy be forced to give the product of their labor to the less wealthy in America, but the less wealthy in America need not be forced to hand over their goods to the truly poor in Mexico? And why should the Mexicans get cars when the Nigerians have no food? What right does the Nigerian have to three meals when the Chinese peasant hasn’t but two?

There are people suffering, are there not? Is there not someone in need who could send their child to school for the mere price of your laptop, Mr. Krugman? How many Somalis-worth does your apartment cost per month? That photo of you in the New York Times – what ludicrous sum was paid to the photographer? Is it really equitable to have such a pompous and wholly unnecessary visage printed when hundreds of children have starved to death in the time it takes to enduringly wade through your hypocritical editorial?

Your concern for the poor ends, Krugman, when you force others to be charitable in your place. It ends when you advocate the enslavement of those who produce more than they consume in order to coddle those who consume more than they produce. It ends when you decide it’s okay to point a gun at someone so long as they earn over 250,000 shreds of fiat toilet paper per year. It ends when you forget that anyone owning a house, a car, refrigeration, cable television, a cell phone, a waste disposal system, running water, soap, and an Xbox is living at some level of luxury, by any objective measure of humanity.

So long as you have food to spare, don’t steal it from your neighbor… and if you ever run out of food to spare, try producing something of value, for once, and then feel free to donate it to a deserving individual. I would praise you for that, for you would then be a man, instead of a shivering, lecherous coward crouched behind the force of government while waiving your transparent flag of feigned philanthropy. Article page

Sunday, September 19, 2010

A Troubling Affinity for Localism

For a long time, the people with whom I most closely related on issues of economics and politics were those who understood and advocated free trade in every aspect of life. Free trade, we agreed, was not only legitimate for moral reasons (i.e. it’s wrong to point a gun at someone and force them not to exchange their labor or property with someone else), but also for economic reasons (i.e. more wealth tends to be produced under circumstances of freedom). Thus, my ideological comrades were very supportive of such things as outsourcing, international trade and finance, and multi-national corporations.

Yet, as I’ve become more involved with the liberty movement, I’m increasingly observing those who, for some reason, advocate free trade while at the same time encouraging each other to “buy local.” Go local, buy local, is the motto. This has concerned me, because such talk tends to come from the leftist hippie-commune types – those who ardently oppose international trade and capitalism – those anti-Wal-Mart crusaders who believe the proper role of business is to make as little profit as possible, hire as many people as seek to be hired, and grow only to the extent that their carbon footprint remains neutral. So, why are my uber-capitalist colleagues now advocating the “buy local” message right along with the hippies? What has happened?

To avoid broad generalizations, I’ll point out that those most likely to advocate localism tend to be those who promote precious metals as real money (a label I would happily affix to myself, if asked). Proof of this theory is even stamped on many of the AOCS silver coins – go local, buy local. Why is it that these unapologetic capitalists, who have come so far to understand the evils of fiat currency, suddenly about-face and stamp leftist rhetoric on the very foundation of freedom – sound money?

I don’t really have an answer to this question, but my guess is that these types of people have become acutely aware of the fact that the larger a company grows, the further it slides into bed with the state. This sentiment is certainly true… the lobbying, the special favors, the exemptions and privileged rules, the subsidies and the downright protectionism for incumbent organizations is a nasty blemish on what many still consider to be a capitalist country (how wrong they are). So I suppose, by association, that because the biggest companies are the most connected with government, and because government is the root of most evil, these radical capitalists have adopted the idea that large firms simply shouldn’t be supported, and that a prudent and principled free marketeer will choose instead to purchase from smaller, more local, less government-entwined companies. Thus, buying local becomes a pure expression of capitalist sentiment – a revolt against the corporatism pervading every modern nation.

So if that’s the reason that “buy local” is stamped on AOCS’ silver coins, then fine. I understand the reasoning. What if, however, localism is advocated, in part, due to the same “anti-bigness” ideology so emblematic of the left (except, unfortunately, when it comes to government).

Ayn Rand writes at length about this sentiment – that many people seem to simply despise “bigness,” and that this hostility arises from a combination of unacknowledged jealousy and the misunderstanding of the process by which wealth is created. For if, in a free market, money is earned only to the extent that one provides a marketable service to others, then the bigger a company gets, the more good it has done – the more wealth it has produced. However, to those who somehow believe that wealth is static and that it’s simply “distributed” amongst people, a large company would indeed represent a problem, for by being large it has by definition acquired wealth at the expense of those who lost it.

My hope is that my ideological allies don’t suffer from this “anti-bigness” ailment. I hope indeed that they’re able to appreciate the greatness in those people who, by their strength of will, their intelligence, and their creativity, are able to create massive organizations – organizations which manufacture wealth for their owners, employees, and customers. Yet, if that’s the case, then why buy from smaller, local firms?

Could this local advocacy arise instead from a misunderstanding of economics? This too, concerns me. For how can someone be so economically aware as to realize the fraud of central banking, yet be so economically ignorant as to believe that “keeping things local” is a wise course of action? These people don’t really believe that hoarding money in a certain geographical area will make them wealthier, do they? The sad fact is that some do. Today, I stumbled upon the website of the “Northern Colorado Community Barter” organization. Perhaps this is just some hippie-commune organization, but the fact that they promote AOCS coins means they’re running close to some very free-market circles; circles that are too close for comfort. Some of AOCS’ most popular coins are imprinted with the visages of Mises and Ron Paul, after all.

This community barter organization states the following:

“The benefits of keeping money in the community and patronizing local businesses are numerous. Locally spent money generates more local tax revenues leading to improved services. Local businesses employ more people, contribute to local charities, and bring unique character to their communities, making the community a great place to live and visit.”

My fears, it seems, are indeed true. Economic ignorance – just like that terrible feeling after eating a Happy Meal – is recurring, unyielding, and ever-present. How can it be that free-market advocates don’t understand the fallacy here? Perhaps the aforementioned organization shouldn’t be considered free-market, but then why are they promoting the usage of metals as currency, for in so doing they deprive the state of its ability to print money for the poor and underprivileged? If they’re not free-market, how can they advocate metals? If they are free-market, why in the world would they make a claim such as that quoted above?

I think what’s really going on here is yet another incidence of Bastiat’s “unseen” – the thrust of which suggests how people tend not to account for costs which are not visible. An easy example is the public sports stadium: people see the monolithic structure and praise the government for constructing it, yet the taxed wealth extracted from the city’s citizenry is now no longer able to be spent on other things – new companies, new ideas, new advances. These missing things are the “unseen” and so far as they are missing from public view, the public doesn’t realize they were lost. This fallacy pervades all public expenditures, sadly.

So how is localism related to the “unseen?” Simply this – by buying local, one is sacrificing either A) quality or B) price. This must be true, for if the local product was a higher quality, or a better price, then people would buy it naturally, and a call to “go local, buy local” would be wholly unnecessary. Indeed, such slogans are required only to the extent that a local product is inferior – superior goods require little such propaganda.

The “unseen” is thus the value lost by the consumer – it is that value or wealth which otherwise would’ve existed had the superior product been purchased in lieu of the local product. However, this is just half of the unseen, for when a foreign product is purchased, the compensation or revenue earned from the sale is sent to a faraway land. The benefits of that revenue to the producer are not seen by the consumer or his community, simply because they don’t live “over there.” The happy Chinese family – now with food on the table and a new pair of shoes – is not ever known, in any visceral sense, to the community in which the purchaser lives. This unseen wealth causes the purchaser to discount the reciprocating utility of his purchase, and makes him more sympathetic to those community organizations advocating localism.

But the honest observer should realize that by buying local, more benefit is “seen,” even though less benefit is created. In trade, every transaction creates value (for the most part), and by buying local one is cordoning that value into a smaller geographic area – an area more easily witnessed by one’s neighbors. Yet, by sacrificing price or quality for more “seen” value, the net effect must be negative relative to the consumer who seeks out superior products over those produced locally.

A critic here may direct my attention back to the quotation from the Northern Colorado Community Barter organization:

“Locally spent money generates more local tax revenues leading to improved services. Local businesses employ more people, contribute to local charities, and bring unique character to their communities, making the community a great place to live and visit.”

Personally, I don’t want more tax revenue to be generated at all, but that’s a separate issue. Assuming tax revenue is a good thing, the organization’s statement simply strengthens my point. It is because these benefits are seen in the local community that observers advocate localism. But unseen are the tax revenues, charities, and unique character of foreigners which will no longer be realized – even though the foreigner is producing the better product.

Once analyzed objectively, the issue betrays an embarrassing argument on the part of localists – that a certain community should benefit because it is nearby at the expense of a community further away producing superior work. Of course, we all want our own communities to thrive, but is it not a tad disingenuous, or even xenophobic, to advocate behavior which benefits our people at the expense of more deserving people further away? That shouldn’t sit right, especially with any “we love the world” leftists unfortunate enough to be reading this piece.

All things being equal, if the Chinese producer and the local producer create the same quality item at the same price, there is no reason not to give the business to your neighbor. It is an arbitrary decision, and a slight whim of deference towards those you know harms nobody at the margin. But alternatively, if the Chinese producer creates the superior product, then to give the business to your neighbor implies, at least tacitly, that he is more deserving that the Chinese. Why should that be the case? What’s more, the local supplier usually isn’t even one’s neighbor, but rather a stranger who happens to reside somewhat nearby. So to give the nearby stranger the business at the expense of the far away stranger who produces more effectively is to make some kind of value judgement that an ethical person may want to avoid.

So there is the moral problem with localism, but there is also a logical problem. If indeed we should buy local in order to support those communities which are closest to us, then why stop at the state or town level? Why should we not prefer to buy from our own neighborhood? Or, even better, let’s try to purchase only from those on our street. The most enlightened of us can purchase solely from our own household, and reaching localist nirvana would simply mean producing all goods oneself.

When focusing in closer than a state level, the absurdity of localism should become clear. Of course you shouldn’t try to produce everything yourself… you’d be inefficient at everything and, on net, be much poorer than if you specialized and traded with your neighbor. As this should be self-evident, then of course a community shouldn’t try to trade with itself, but rather should specialize and trade with other communities. A state should trade with other states, a nation with other nations, and indeed our world should trade with other worlds to the extent we can make such fortunate contact.

Localism is one of those economic superstitions – like the broken window fallacy – that for some reason continues to trick people into irrationality. It is a great thing to support ones neighbor, but that greatness dwindles quickly when you account for the support no longer going to someone else’s neighbor – and in this day and age, probably a much more deserving, hardworking, and underprivileged neighbor in Asia.

While I have little hope for the Colorado Community Barter Organization, perhaps those kindred spirits who advocate liberty and sound money will realize their misguided affinity for localism.

Buy the best products at the best prices – give your business to that producer who is most deserving. If it’s your neighbor, buy from him… but don’t buy from him simply because he’s your neighbor. Article page