The new president bores me to tears, so I neither watched nor read his speech. I see little evidence that Obama understands the problem caused by our fiscal and monetary policies, and absolutely no evidence that he has the will to go about the crucial task of deleveraging our massive debt.
On the other hand, Ron Paul has some interesting things to say, as always, concerning where we are heading. A sample:
It is impossible to predict the time when confidence will be lost, but it can come quickly. Resorting to buying other paper currencies will not be of much help. When the dollar crashes, most likely the purchasing power of all currencies-since all countries hold dollars as a reserve-will go down as well.
This means that dollars and other currencies will go into buying consumer items, precious metals and other physical properties. Consumer prices will soar, as well as interest rates. The central bank will lose control; and the more they inflate, the worse the confidence becomes. The interest rates will respond to these efforts by rising sharply.
If the Fed tries to reverse the run on the dollar, interest rates will also soar, and the pain on the American citizens will be of such proportion that political chaos will result. Either scenario leads to political and social chaos-the third event, and the most dangerous.
Saturday, January 30, 2010
Wednesday, January 06, 2010
Keep them stateside
Too many wars fail to pass muster as just and necessary ones. Yet these are the type our government has been fighting lately. Opponents of these wars may get discouraged; indeed, it is difficult to avoid doing so. Yet the opposition to our wars is strong, and it is growing.
Lamentably, this growing opposition has effected no change as yet. The current president has won his Nobel Peace Prize, but he has done so while continuing the war in Iraq and escalating the war in Afghanistan. The Democrats in Congress are more considered with passing a shoddily assembled health care bill than doing anything to change our foreign policy, and the voters seem willing to go along with the President--for the time being, anyway.
But there is some good news to report. Certain states, including the one in which I live, are in the process of passing bills which restrict the Federal Government's ability to deploy the National Guard overseas without permission from the states. We don't really know if these bills will pass, or, if passed, they will be held up by courts if challenged by the Federal Government. These bills are nonetheless a step in the right direction.
As Steve Burns puts it:
Just take a look at our current situation: The United States exists in a permanent state of war, can even be said to be addicted to war, and all decision-making about the question of war has now been placed in the hands of one man: the President. Whatever we think of the current occupant of that office, this is clearly a dangerous, unhealthy and undemocratic state of affairs...
Congress no longer even bothers to declare war, even though it is the only body given authority by the constitution to do that. Instead, it passes "Authorizations for Use of Military Force" which are either based on blatant falsehoods, like the Iraqi Authorization, or are an unconstitutional abdication of Congressional war-making powers to the President, as with the Afghanistan Authorization, which says, in effect, "You go wherever you think you need to go, and for as long as you need to, Mr. President, in pursuit of the people who did 9/11, and we'll just sit here and sign the checks."
Make no mistake about it: the American people will not continue to fight these wars forever. And I don't mean that we'll win these wars and then suddenly return to a humbler foreign policy. Too many people make too much money off of war for it to simply end. But for that same reason, the American people will eventually tire of sending their sons and daughters to die in defense of vague causes in wars that never really end. The attempts by the States to reign in the Federal Government are a good start, and merit our full support.
Lamentably, this growing opposition has effected no change as yet. The current president has won his Nobel Peace Prize, but he has done so while continuing the war in Iraq and escalating the war in Afghanistan. The Democrats in Congress are more considered with passing a shoddily assembled health care bill than doing anything to change our foreign policy, and the voters seem willing to go along with the President--for the time being, anyway.
But there is some good news to report. Certain states, including the one in which I live, are in the process of passing bills which restrict the Federal Government's ability to deploy the National Guard overseas without permission from the states. We don't really know if these bills will pass, or, if passed, they will be held up by courts if challenged by the Federal Government. These bills are nonetheless a step in the right direction.
As Steve Burns puts it:
Just take a look at our current situation: The United States exists in a permanent state of war, can even be said to be addicted to war, and all decision-making about the question of war has now been placed in the hands of one man: the President. Whatever we think of the current occupant of that office, this is clearly a dangerous, unhealthy and undemocratic state of affairs...
Congress no longer even bothers to declare war, even though it is the only body given authority by the constitution to do that. Instead, it passes "Authorizations for Use of Military Force" which are either based on blatant falsehoods, like the Iraqi Authorization, or are an unconstitutional abdication of Congressional war-making powers to the President, as with the Afghanistan Authorization, which says, in effect, "You go wherever you think you need to go, and for as long as you need to, Mr. President, in pursuit of the people who did 9/11, and we'll just sit here and sign the checks."
Make no mistake about it: the American people will not continue to fight these wars forever. And I don't mean that we'll win these wars and then suddenly return to a humbler foreign policy. Too many people make too much money off of war for it to simply end. But for that same reason, the American people will eventually tire of sending their sons and daughters to die in defense of vague causes in wars that never really end. The attempts by the States to reign in the Federal Government are a good start, and merit our full support.
Monday, January 04, 2010
On square circles
A quick bit from Thomas Woods before I get back to my books:
The only answer that appears possible is this: the Church insists that thus-and-so must be done because justice demands it, even though it will make people, particularly those it was designed to help, materially worse off. However, no ecclesiastical document I have ever seen has taken this position. As I have said, these documents carry the assumption that their suggestions will accomplish their stated ends and increase the well-being of the least among us. That assumption, in turn, implies that the only thing standing between today and a more prosperous future is sufficient political will rather than constraints imposed by the very nature of things. That merely assumes the very thing that needs to be proven. And it begs the question yet again to declare that authority has spoken and the matter is closed – the very matter at issue is whether these subjects are of a qualitative nature to be susceptible of ecclesiastical resolution in the first place. If the law of returns, for instance, is an objective fact of nature (which it is), then the pope himself cannot declare it to be false, or expect success from policy prescriptions that ignore it, any more than he can fashion a square circle. It is no insult to papal authority to exclude the possibility of square circles.
As far as I can tell, Woods is the foremost Catholic champion of free market economics. I have no idea what kind of success he will have in causing members of the Church to rethink their policies, not because they are not well-intentioned, but because praxeological reasoning insists that their objectives are incompatible with their methods.
Anyone who is interested in the extent to which free market ideology is compatible with Church teaching would do well to read Woods's: The Church and the Market. I do not believe that his position is the only orthodox one--nor do I have any reason to think he believes as much--merely that it is firmly within the bounds of orthodoxy. And if it is true that the continuing economic debacle has shaken man's faith in markets, it is also true that the crisis compels men to ameliorate their ignorance about the economy. The works of Thomas Woods contribute positively toward that end.
The only answer that appears possible is this: the Church insists that thus-and-so must be done because justice demands it, even though it will make people, particularly those it was designed to help, materially worse off. However, no ecclesiastical document I have ever seen has taken this position. As I have said, these documents carry the assumption that their suggestions will accomplish their stated ends and increase the well-being of the least among us. That assumption, in turn, implies that the only thing standing between today and a more prosperous future is sufficient political will rather than constraints imposed by the very nature of things. That merely assumes the very thing that needs to be proven. And it begs the question yet again to declare that authority has spoken and the matter is closed – the very matter at issue is whether these subjects are of a qualitative nature to be susceptible of ecclesiastical resolution in the first place. If the law of returns, for instance, is an objective fact of nature (which it is), then the pope himself cannot declare it to be false, or expect success from policy prescriptions that ignore it, any more than he can fashion a square circle. It is no insult to papal authority to exclude the possibility of square circles.
As far as I can tell, Woods is the foremost Catholic champion of free market economics. I have no idea what kind of success he will have in causing members of the Church to rethink their policies, not because they are not well-intentioned, but because praxeological reasoning insists that their objectives are incompatible with their methods.
Anyone who is interested in the extent to which free market ideology is compatible with Church teaching would do well to read Woods's: The Church and the Market. I do not believe that his position is the only orthodox one--nor do I have any reason to think he believes as much--merely that it is firmly within the bounds of orthodoxy. And if it is true that the continuing economic debacle has shaken man's faith in markets, it is also true that the crisis compels men to ameliorate their ignorance about the economy. The works of Thomas Woods contribute positively toward that end.
Wednesday, December 09, 2009
Betting on inflation
Despite protestations to the contrary, the recession continues. Among those who realize the fragility of our financial system, there is no doubt that the elites have failed to produce the sustained recovery which they insist is already upon us. Playing with numbers can only do so much; in the end, the people know a recession when they are living through it. GDP means nothing to the man who has lost his job, or the housewife trying to feed her family on a salary which is losing its purchasing power. It is a matter of when--not if--the people compel their leaders to dispense with the lying.
But there is another question which is arguably more important. Will the United States experience inflation of deflation in the coming months. Most of the Austrians are in the former camp, but there are other hard money types--Robert Prechter, for instance--who find the isolationist argument unconvincing. Of course, the neo-Keynesians fear deflation above all else, and Bernanke will do his best to inflate his way out of the latest mess. The question is whether or not he will be able to do so, or if he is pushing on a string.
I want to get to an argument in favor of an inflationary scenario in a bit, but it's probably worthwhile to explain why the question is being asked in the first place. It's strange that people who agree on many aspects of economics would disagree about which scenario may be soon upon us. But with a bit of explanation, it should become apparent why disagreement exists. For more information about the topics I briefly cover below, I highly recommend Chris Martenson's Crash Course.
Due to our fractional reserve banking system, every dollar deposited in a bank need not remain in that bank; much of it can be loaned out, even if it is a demand deposit. This is the "money multiplier", which ensures that the money in circulation is far greater than that which can be returned to creditors should they attempt to withdraw their money from the bank. There is much talk about solvency, but in reality all fractional reserve banks are insolvent. This isn't problematic so long as the economy is booming, but all banks are prone to runs during bust times. The FDIC exists to insure bank deposits, so as to prevent runs, but as the FDIC is itself bankrupt, the trouble remains.
Now, when the government bails out a bank, it does so in the hopes that the bank will begin to lend out the money, thereby generating another boom. In reality, the bank knows that it is already over-extended; that many of its mortgages, for instance, are drastically over-valued and will not be paid; and that the threat of a bank run is more real than ever. Thus, rather than lend out the additional money, they keep it as a reserve, to shore up the problems which are inevitable in fractional reserve banking. This is what the deflationists call pushing on a string; no matter how much money the Fed gives to the banks, the money will not cause inflation if it sits idly rather than being lent out.
Gary North is well aware of these arguments, but he points out that the Fed can still force banks to lend, thereby causing inflation:
The FED could get every banker in the country to pull back all excess reserves ($1 trillion these days) tomorrow and lend the money. It does not have to issue an edict. It does not have to take over the banks. All it has to do is charge 10% per annum on all excess reserves. Probably 1% would do the trick...
Just raise the price of not lending until banks are fully lent out.
This argument makes a good deal of sense. The question now becomes whether or not Bernanke is liable to take such a step. In the short run--that is, until it becomes untenable to maintain the fiction that the recession is behind us--he is unlikely to do so. But given Bernanke's belief that deflation is what turned an ordinary recession into the Great Depression, it is unlikely that he will be content to allow banks to refrain from lending. I might be missing something here, but North's argument seems to lend considerable strength to the inflationary case.
But there is another question which is arguably more important. Will the United States experience inflation of deflation in the coming months. Most of the Austrians are in the former camp, but there are other hard money types--Robert Prechter, for instance--who find the isolationist argument unconvincing. Of course, the neo-Keynesians fear deflation above all else, and Bernanke will do his best to inflate his way out of the latest mess. The question is whether or not he will be able to do so, or if he is pushing on a string.
I want to get to an argument in favor of an inflationary scenario in a bit, but it's probably worthwhile to explain why the question is being asked in the first place. It's strange that people who agree on many aspects of economics would disagree about which scenario may be soon upon us. But with a bit of explanation, it should become apparent why disagreement exists. For more information about the topics I briefly cover below, I highly recommend Chris Martenson's Crash Course.
Due to our fractional reserve banking system, every dollar deposited in a bank need not remain in that bank; much of it can be loaned out, even if it is a demand deposit. This is the "money multiplier", which ensures that the money in circulation is far greater than that which can be returned to creditors should they attempt to withdraw their money from the bank. There is much talk about solvency, but in reality all fractional reserve banks are insolvent. This isn't problematic so long as the economy is booming, but all banks are prone to runs during bust times. The FDIC exists to insure bank deposits, so as to prevent runs, but as the FDIC is itself bankrupt, the trouble remains.
Now, when the government bails out a bank, it does so in the hopes that the bank will begin to lend out the money, thereby generating another boom. In reality, the bank knows that it is already over-extended; that many of its mortgages, for instance, are drastically over-valued and will not be paid; and that the threat of a bank run is more real than ever. Thus, rather than lend out the additional money, they keep it as a reserve, to shore up the problems which are inevitable in fractional reserve banking. This is what the deflationists call pushing on a string; no matter how much money the Fed gives to the banks, the money will not cause inflation if it sits idly rather than being lent out.
Gary North is well aware of these arguments, but he points out that the Fed can still force banks to lend, thereby causing inflation:
The FED could get every banker in the country to pull back all excess reserves ($1 trillion these days) tomorrow and lend the money. It does not have to issue an edict. It does not have to take over the banks. All it has to do is charge 10% per annum on all excess reserves. Probably 1% would do the trick...
Just raise the price of not lending until banks are fully lent out.
This argument makes a good deal of sense. The question now becomes whether or not Bernanke is liable to take such a step. In the short run--that is, until it becomes untenable to maintain the fiction that the recession is behind us--he is unlikely to do so. But given Bernanke's belief that deflation is what turned an ordinary recession into the Great Depression, it is unlikely that he will be content to allow banks to refrain from lending. I might be missing something here, but North's argument seems to lend considerable strength to the inflationary case.
Monday, November 16, 2009
War weariness strikes the right
Prediction which rests on the assumption that recent trends will continue in perpetuity are often fallacious. For instance, while presently the political right is undeniably more likely to clamor for war, this has not always been the case. Indeed, as Justin Raimondo details in his book, Reclaiming the American Right, there is a long tradition of opposition to war by non-leftists. Today, the libertarians--led by Ron Paul--and many, though not all, of the paleo-conservatives-- exemplified by Pat Buchanan--have made principled stands against recent wars. Regrettably, most right-wingers have failed to follow these shining examples.
But if the wars continue for long enough under leftists, a backlash will eventually emerge. This opposition will not be as principled as those taken by members of the anti-war right, or rather, it will probably stem from different principles--though in many cases it will be purely pragmatic. But it will come. As Obama continues to dither over his decision as to how many troops he will send to Afghanistan, it is possible that we will see a swell of dissent, not from the left, which has been lamentably AWOL on the anti-war effort, but from the heretofore imperialist right.
Two cases present themselves, both courtesy of WorldNetDaily. Now, I frequently disagree with many of the columnists who write for WND, and while I appreciate their genuine journalism, a not insignificant number of their stories bear too close a resemblance to pieces in the Weekly World News for my taste. Nonetheless, they publish three of my favorite columnists, and they refuse to debase themselves in the manner of the sycophants of the mainstream press.
In any event, here are Pat Boone and Joseph Farah demanding the troops be brought home.
First Boone:
I want to emphasize that perhaps 75 percent of American Muslims don't necessarily approve of suicide bombings and jihadist activities – but it's in the nature of the religion and culture not to expose or repudiate the extremists. And so it grows. The problem is not just Islam; it's the jihadist ideology that has infected it.
Second, Farah:
Anyway, Farah's mistake is in assuming that presidential leadership is capable of stealing victory from the jaws of defeat in that graveyard of empires. The reality is that it doesn't matter how many troops we send. Shooting jihadists is an achievable goal for the U.S. military. Building a civilization in the desert, with most of the population either opposed or indifferent to the endeavor, simply isn't a practicable goal.
Given that victory is impossible, it is absolutely imperative that Obama brings the troops home as soon as possible. Here's hoping this sentiment sweeps through the rest of the right.
But if the wars continue for long enough under leftists, a backlash will eventually emerge. This opposition will not be as principled as those taken by members of the anti-war right, or rather, it will probably stem from different principles--though in many cases it will be purely pragmatic. But it will come. As Obama continues to dither over his decision as to how many troops he will send to Afghanistan, it is possible that we will see a swell of dissent, not from the left, which has been lamentably AWOL on the anti-war effort, but from the heretofore imperialist right.
Two cases present themselves, both courtesy of WorldNetDaily. Now, I frequently disagree with many of the columnists who write for WND, and while I appreciate their genuine journalism, a not insignificant number of their stories bear too close a resemblance to pieces in the Weekly World News for my taste. Nonetheless, they publish three of my favorite columnists, and they refuse to debase themselves in the manner of the sycophants of the mainstream press.
In any event, here are Pat Boone and Joseph Farah demanding the troops be brought home.
First Boone:
I want to emphasize that perhaps 75 percent of American Muslims don't necessarily approve of suicide bombings and jihadist activities – but it's in the nature of the religion and culture not to expose or repudiate the extremists. And so it grows. The problem is not just Islam; it's the jihadist ideology that has infected it.
And so, as a lifelong staunch conservative and active supporter of our brave military, I call loudly: BRING OUR TROOPS HOME – AND NOW!
You can't fight or change an ideology with guns or bombs; in some ways, you fuel and inspire it. These warped jihadists, like Maj. Hasan, are the reverse of God-fearing patriotic Americans. They have been brainwashed to believe that their concept of God will honor and reward them for killing as many innocent men, women and children as possible! We've never faced anything like this before. Never.
His insistence that we cannot "change an ideology with guns or bombs" is basically correct, assuming we refuse to go down the Roman route of enslaving everyone. Still, he misses something which actually helps his argument. Our very presence in the region has been cited by Osama Bin Laden as a reason for his jihad. Every time U.S. forces mistakenly bomb another wedding party, or accidentally kill a civilian, Bin Laden has an easier time finding recruits. This is not to say that merely leaving the region will dispel all hatred for the Great Satan. It's too late for that. But the longer we remain in the region, the further Bin Laden's poisonous ideology will spread.Second, Farah:
I do not believe Barack Obama is capable of achieving anything remotely resembling victory in either Iraq or Afghanistan – at least not victory for the United States of America.
A president incapable of recognizing that war came home Nov. 5 at Fort Hood is certainly incapable of waging foreign wars.
A president incapable of recognizing that terrorists are among us could never be counted on to do the right thing in remote places like Afghanistan and Iraq.
A president whose own worst enemies are the Republican Party, Fox News Channel and the tea party movement couldn't possibly ever understand the nature of real combat.
It's time to bring the troops home now!
I understand, to an extent, Farah's anger. I have not seen any evidence that Obama is capable of making difficult decisions. He is a tolerably good--if wildly overrated--speaker, and he shows signs of political acuity--though these two have disappeared, or at least diminished in recent months. It may be argued that given the record of The Decider, the mere ability to make choices is not enough; we only profit if the decisions are good ones.Anyway, Farah's mistake is in assuming that presidential leadership is capable of stealing victory from the jaws of defeat in that graveyard of empires. The reality is that it doesn't matter how many troops we send. Shooting jihadists is an achievable goal for the U.S. military. Building a civilization in the desert, with most of the population either opposed or indifferent to the endeavor, simply isn't a practicable goal.
Given that victory is impossible, it is absolutely imperative that Obama brings the troops home as soon as possible. Here's hoping this sentiment sweeps through the rest of the right.
Sunday, November 15, 2009
The Next Great Depression
Interest in economics appears to be inversely proportional to the strength of the economy. When wealth seems to be expanding—when houses can be bought, flipped, and resold quickly and at great profit, or when IPOs of Internet startups make everyone involved filthy rich—only contrarians and pessimists question the soundness of what is universally regarded as a good thing. But when the boom turns to bust, it becomes imperative to understand where things went wrong. Doe-eyed economists, who were as blind-sided by the downturn as those who foolishly followed them, scramble to retain credibility. Meanwhile, more skeptical commentators are provided with an opportunity to make their case against a system built on debt—at least until credit expansion brings about the next boom.
Vox Day is a self-described contrarian, whose prognostications of doubt about the health of the global financial system go back to at least 2002. In The Return of the Great Depression (RGD), Day cautions against “the consensus view that the economic contraction of the last eighteen months is essentially over.” This optimism fails to take into account the actual state of the economy, and is instead built on “definite hope.” He presents six economic scenarios for the coming decade which merit contemplation, ranked in order of decreasing likelihood to occur as follows: Great Depression 2.0, The Great Recession, Whiskey Zulu India or Hyperinflation, The Jobless Recovery, Fallout 4 Live or Doomsday, Saint Bernanke and the Greenshoots or Immaculate Recovery. His case for a second Great Depression is regrettably convincing, as are the ten reasons he gives as to why the current depression will be worse than the first.
RGD begins with a look at the Japanese recession of 1989, which is about to enter its second decade. The reason this recession is relevant for those trying to come to terms with our present economic crisis is that the actions taken by the Japanese Government in an attempt to stave off recession are disturbingly similar to those taken by the Bush and Obama administrations. “In nineteen years, neither monetary nor fiscal policy has managed to pull the Japanese economy out of the crater created by the Heisei boom.” The implementation of demonstrably inadequate policies portends a prolonged and painful recession for the U.S., and, indeed, much of the world.
For the most part, RGD is easy for the layman to follow. Some knowledge of economics would be useful, and is in fact provided by a helpful glossary of terms, but Day intends for his book to be read by “economic actors, not the economists who study them.” The sheer number of statistics and charts may prove overwhelming, but they also help illustrate one of the author's points. In attempting to accurately grasp the state of the economy: No One Know Anything. This doesn't make econometrics worthless, but it does mean that we need to be skeptical about facts and figures bandied about by talking heads—especially when these come courtesy of government bureaucrats.
To give just three examples from the book: Consumer Price Index (CPI), GDP, and unemployment figures are very unreliable. The formula used to compute CPI, which is used to determine inflation, was changed in the early 1990's. The new figure may understate inflation by as much as seven percent. GDP, too, possesses dubious utility as a statistical metric, since a decrease in imports causes the GDP to rise. Similarly, unemployment figures fail to take into account those who have ceased seeking employment. Paradoxically, a rise in unemployment may be seen as good news, since those who had given up looking for a job have resumed their searches, increasing unemployment numbers.
If Saint Bernanke and his fellow central bankers have actually ended the current recession, government intervention will see a boost of popular support, while the doomsayers, Day among them, will be justly ignored. On the other hand, if Day is correct, the coming depression presents an opportunity to diminish the role central bankers, bureaucrats, and politicians play in the economy. A freer, more prosperous world depends on radical adjustments to the structure of our economic system. Although the picture it paints is rather dark, RGD ultimately provides a useful blueprint for a better economic future.
Vox Day is a self-described contrarian, whose prognostications of doubt about the health of the global financial system go back to at least 2002. In The Return of the Great Depression (RGD), Day cautions against “the consensus view that the economic contraction of the last eighteen months is essentially over.” This optimism fails to take into account the actual state of the economy, and is instead built on “definite hope.” He presents six economic scenarios for the coming decade which merit contemplation, ranked in order of decreasing likelihood to occur as follows: Great Depression 2.0, The Great Recession, Whiskey Zulu India or Hyperinflation, The Jobless Recovery, Fallout 4 Live or Doomsday, Saint Bernanke and the Greenshoots or Immaculate Recovery. His case for a second Great Depression is regrettably convincing, as are the ten reasons he gives as to why the current depression will be worse than the first.
RGD begins with a look at the Japanese recession of 1989, which is about to enter its second decade. The reason this recession is relevant for those trying to come to terms with our present economic crisis is that the actions taken by the Japanese Government in an attempt to stave off recession are disturbingly similar to those taken by the Bush and Obama administrations. “In nineteen years, neither monetary nor fiscal policy has managed to pull the Japanese economy out of the crater created by the Heisei boom.” The implementation of demonstrably inadequate policies portends a prolonged and painful recession for the U.S., and, indeed, much of the world.
For the most part, RGD is easy for the layman to follow. Some knowledge of economics would be useful, and is in fact provided by a helpful glossary of terms, but Day intends for his book to be read by “economic actors, not the economists who study them.” The sheer number of statistics and charts may prove overwhelming, but they also help illustrate one of the author's points. In attempting to accurately grasp the state of the economy: No One Know Anything. This doesn't make econometrics worthless, but it does mean that we need to be skeptical about facts and figures bandied about by talking heads—especially when these come courtesy of government bureaucrats.
To give just three examples from the book: Consumer Price Index (CPI), GDP, and unemployment figures are very unreliable. The formula used to compute CPI, which is used to determine inflation, was changed in the early 1990's. The new figure may understate inflation by as much as seven percent. GDP, too, possesses dubious utility as a statistical metric, since a decrease in imports causes the GDP to rise. Similarly, unemployment figures fail to take into account those who have ceased seeking employment. Paradoxically, a rise in unemployment may be seen as good news, since those who had given up looking for a job have resumed their searches, increasing unemployment numbers.
If Saint Bernanke and his fellow central bankers have actually ended the current recession, government intervention will see a boost of popular support, while the doomsayers, Day among them, will be justly ignored. On the other hand, if Day is correct, the coming depression presents an opportunity to diminish the role central bankers, bureaucrats, and politicians play in the economy. A freer, more prosperous world depends on radical adjustments to the structure of our economic system. Although the picture it paints is rather dark, RGD ultimately provides a useful blueprint for a better economic future.
Thursday, October 29, 2009
Cause for skepticism
We learn again, today, that the recession is over. I'm not buying just yet. The people exclaiming that the worst is behind us are, by and large, the same people who kept on insisting that a recession was impossible until almost the moment it was upon us. For instance, here's Congressman Ron Paul in his book End the Fed, talking with Federal Reserve Chairman Ben Bernanke on July 18, 2007, two weeks before the collapse of Bear Stearns:
Ron Paul: War, sometimes, is not healthy for a currency for keeping prices down, at least inflation. It's hard to find, in all of history, when war didn't create price inflation because, even in ancient times, countries resorted to clipping coins and diluting values or whatever... And yet, in the seventies, we had consequences of guns and butter. Now we're having guns and butter again (we're having consequences) and it just looks like we may come to a [stagflation situation as in] '79-'80. Do you anticipate that there is a possibility that we'll face a crisis of the dollar such as we had in '79 and 1980?
[At this point, Bernanke maintains that the Fed will maintain stable inflation--whatever that is--so Paul insists he answer the question.]
Ben Bernanke: I'm not anticipating a problem like '70-'80. (pp. 102-3)
Now, it is presently too early to tell whether or not we will see stagflation again, though it remains a possibility. The salient point is that Bernanke could not conceive how such a situation could come about under his reign. Quite obviously, the central bankers didn't have things under control, or they would have been able to steer us past this crisis. There is an argument that they have in fact done so, which we'll get to in a bit; what's inarguable is that they botched things this time around.
I should also add that while I don't think anyone can steer around economic crises by injecting credit into the economy since this is the precise mechanism which causes crises, I take it for granted that the central bankers do believe such a thing is possible. If you're keeping track at home, this means that on the side of possibilities we have an end to the boom-bust cycle, and on the side of impossibilities we have the reemergence of a phenomenon which came into existence as little as thirty years ago.
No one will deny that the crisis caught Bernanke, as well as most mainstream economists, completely unaware. Notes to the meetings at which bankers set monetary policy may be safely hidden (End the Fed, pp. 95-9)--for the good of the people of course--but, until the State finds a way to control it, the Internet provides a record for posterity. One might think, then, that the false prophets who insisted that everything would go on swimmingly--forever--would be ignored. And, in fact, some of them have been regulated to the dustbin of history; but it remains quite advantageous to be optimistic, even over something which one knows nothing about--at least when it comes to the economy.
Perhaps this is merely human nature. We gawk at car accidents; but only if we're not participants. We want to believe that things are getting better, yet this alone is not evidence that things are, in fact, improving. We may hope that the optimists are right. But the pronouncements of those who insist that the worst is behind us, and that the recession is now over, should be met with the same caution which should have greeted those who insisted, scarcely more than a year ago, that the good times would roll on forever.
Ron Paul: War, sometimes, is not healthy for a currency for keeping prices down, at least inflation. It's hard to find, in all of history, when war didn't create price inflation because, even in ancient times, countries resorted to clipping coins and diluting values or whatever... And yet, in the seventies, we had consequences of guns and butter. Now we're having guns and butter again (we're having consequences) and it just looks like we may come to a [stagflation situation as in] '79-'80. Do you anticipate that there is a possibility that we'll face a crisis of the dollar such as we had in '79 and 1980?
[At this point, Bernanke maintains that the Fed will maintain stable inflation--whatever that is--so Paul insists he answer the question.]
Ben Bernanke: I'm not anticipating a problem like '70-'80. (pp. 102-3)
Now, it is presently too early to tell whether or not we will see stagflation again, though it remains a possibility. The salient point is that Bernanke could not conceive how such a situation could come about under his reign. Quite obviously, the central bankers didn't have things under control, or they would have been able to steer us past this crisis. There is an argument that they have in fact done so, which we'll get to in a bit; what's inarguable is that they botched things this time around.
I should also add that while I don't think anyone can steer around economic crises by injecting credit into the economy since this is the precise mechanism which causes crises, I take it for granted that the central bankers do believe such a thing is possible. If you're keeping track at home, this means that on the side of possibilities we have an end to the boom-bust cycle, and on the side of impossibilities we have the reemergence of a phenomenon which came into existence as little as thirty years ago.
No one will deny that the crisis caught Bernanke, as well as most mainstream economists, completely unaware. Notes to the meetings at which bankers set monetary policy may be safely hidden (End the Fed, pp. 95-9)--for the good of the people of course--but, until the State finds a way to control it, the Internet provides a record for posterity. One might think, then, that the false prophets who insisted that everything would go on swimmingly--forever--would be ignored. And, in fact, some of them have been regulated to the dustbin of history; but it remains quite advantageous to be optimistic, even over something which one knows nothing about--at least when it comes to the economy.
Perhaps this is merely human nature. We gawk at car accidents; but only if we're not participants. We want to believe that things are getting better, yet this alone is not evidence that things are, in fact, improving. We may hope that the optimists are right. But the pronouncements of those who insist that the worst is behind us, and that the recession is now over, should be met with the same caution which should have greeted those who insisted, scarcely more than a year ago, that the good times would roll on forever.
Tuesday, October 27, 2009
Endless war
The number of times in which the accepted wisdom differs from the actual facts is not insignificant. This is especially true when it comes to the realm of politics. To give but one example: it is widely bemoaned that Republicans wish to turn back the clock on abortion, forcing reluctant mothers into alleyways to destroy their progeny. In point of fact, very few Republicans care one iota for abortion, as evidenced by their paltry record in curtailing, however slightly, this barbaric practice.
A similar illusion exists when it comes to war. In the minds of most, the Right wages war, while the Left opposes them. Of course, this doesn't comport with the historical data: most wars have been started by Democrats. But setting aside the American paucity of memory, we cannot even be relied upon to stay focused on the narrative long enough to realize that it is a lie. For though we have elected a Democrat, the wars continue.
Setting aside all of the ridiculous non-wars which nonetheless share that appellation, we are presently fighting two. The first, according to the narrative, was the "necessary war" in Afghanistan. The second, the "unnecessary" one, is in Iraq. Following his election, Obama insisted that we would withdraw from Iraq by 2011. But as with his predecessors "mission accomplished", there is more than a little hyperbole in the assertion. 50,000 troops will remain even then, so Iraq will be occupied long after the war is officially over. Sort of like Germany, or Japan, or South Korea, or...
Meanwhile, despite the deadliest month of fighting in Afghanistan since we first invaded, we're still mired in a war which cannot be won. Worse, Obama continues to waver over whether or not he will send more troops to die in the region. I say this not because I support such a measure, but because if you seriously believe the war can be won, you have to take the necessary measures to achieve victory. It's hard to escape the conclusion that Obama is content to allow the war to continue endlessly as long as it doesn't hurt him politically.
(In this vein, I fully expect him to compromise by sending enough troops to the region for his supporters to claim he's working toward victory, while his detractors can insist he's not supporting the troops--but we'll see.)
What's extraordinary to me about this is not the betrayal the more principled, if naive, Obama supporters are bewailing. After all, anyone who was paying attention knew that if Obama was less likely to bomb Iran than was McCain, he was not at all likely to do anything about either of our wars. Instead, what I find amazing is how the narrative hasn't changed. The Democrats are still seen as the pacifists. Would that they were! The wars might actually end.
I wish I could say I see a way out. Alas, so long as otherwise sensible opponents of war are not a threat to go against Obama, he will be able to keep the wars going. After all, antiwar democrats aren't going to vote for the other guy--whoever he is. So Obama gets to act as if he's tough on terror for the affordable price of a hundred or so dead soldiers a month. Is this a great country or what?
A similar illusion exists when it comes to war. In the minds of most, the Right wages war, while the Left opposes them. Of course, this doesn't comport with the historical data: most wars have been started by Democrats. But setting aside the American paucity of memory, we cannot even be relied upon to stay focused on the narrative long enough to realize that it is a lie. For though we have elected a Democrat, the wars continue.
Setting aside all of the ridiculous non-wars which nonetheless share that appellation, we are presently fighting two. The first, according to the narrative, was the "necessary war" in Afghanistan. The second, the "unnecessary" one, is in Iraq. Following his election, Obama insisted that we would withdraw from Iraq by 2011. But as with his predecessors "mission accomplished", there is more than a little hyperbole in the assertion. 50,000 troops will remain even then, so Iraq will be occupied long after the war is officially over. Sort of like Germany, or Japan, or South Korea, or...
Meanwhile, despite the deadliest month of fighting in Afghanistan since we first invaded, we're still mired in a war which cannot be won. Worse, Obama continues to waver over whether or not he will send more troops to die in the region. I say this not because I support such a measure, but because if you seriously believe the war can be won, you have to take the necessary measures to achieve victory. It's hard to escape the conclusion that Obama is content to allow the war to continue endlessly as long as it doesn't hurt him politically.
(In this vein, I fully expect him to compromise by sending enough troops to the region for his supporters to claim he's working toward victory, while his detractors can insist he's not supporting the troops--but we'll see.)
What's extraordinary to me about this is not the betrayal the more principled, if naive, Obama supporters are bewailing. After all, anyone who was paying attention knew that if Obama was less likely to bomb Iran than was McCain, he was not at all likely to do anything about either of our wars. Instead, what I find amazing is how the narrative hasn't changed. The Democrats are still seen as the pacifists. Would that they were! The wars might actually end.
I wish I could say I see a way out. Alas, so long as otherwise sensible opponents of war are not a threat to go against Obama, he will be able to keep the wars going. After all, antiwar democrats aren't going to vote for the other guy--whoever he is. So Obama gets to act as if he's tough on terror for the affordable price of a hundred or so dead soldiers a month. Is this a great country or what?
Tuesday, September 22, 2009
Meaningful Meditations
I picked up The Quest for God based on the endorsement—if we may stretch the term to call it that—which the imperturbably irreligious John Derbyshire gave it in one of his pieces for National Review: "I am tempted to say that any believers out there who feel like writing a book of apologetics should imitate P.J.’s approach, if they want to make any impression on the unbelieving reader." Since apologetic tracts seem to have lamentably little influence on those whom they were written to convince, when a casual visitor doesn't run out shrieking in the midst of all the preaching to the choir, the preacher merits further investigation.
In contrast to some of his more opinionated works—Intellectuals, for instance—The Quest for God is largely respectful and even-handed. This is not to say that Johnson avoids the difficulties inherent in a meditation on tricky theological issues, either by avoiding them altogether, or by pretending that they do not exist. Instead, he freely admits that the most important areas of belief are usually those most shrouded in mystery, and confesses his own ignorance and uncertainty. "We may not be able to being to understand God. We may not even be able to believe in him."
While admitting that he wants all to experience the riches of Catholicism, Johnson admits: "I never proselytize, as such... I want to help -I do help when asked or when it is clear my help is needed and will be useful. But I also confess my own woeful ignorance and shortcomings and uncertainties." This is a good approach to take. Our attempts to provide spiritual assistance may be well-intended, but they are not always appreciated. Instead of attempting to cajole reluctant converts, Johnson provides useful thoughts for anyone who is concerned with the questions which vex us all, while also giving incite into the mind of an intelligent believer.
Unfortunately, the book is not exactly orthodox: "Not only do I think there is salvation outside my church; I also think that, for some people, salvation is more likely outside my church - in other churches or no church." Since few people would turn to Johnson for theological certitude, fellow Catholics shouldn't be too bothered with this passage—see instead CCC 816. Of greater concern: one wonders why anyone would become a Catholic if salvation can be had without bothering with all that awful church business. It is a tricky balance to maintain: charitably interpreting the more difficult aspects of Christianity while insisting that truth is nonnegotiable. For the most part, Johnson achieves this by adequately exploring each issue he examines. Death, heaven, hell, purgatory: they're all here--and much more besides.
The closing chapter on prayer he calls "the most important". Although he does not cite Pascal in this context, Johnson maintains that all can and should pray; since our belief in God ultimately has no bearing on whether or not he exists, it is prudent for everyone to do so. This holds even for the agnostic or atheist: "In a way, the prayer for faith is the purest form of prayer." If God exists, and he is at all concerned with human beings, he cannot help but assist those who implore his help. This is why prayer is "the one thing I have found in life that never fails completely."
The Quest for God was enlightening and edifying—as most of Johnson's books are—and it draws one's attention away from worldly things to that which really matters, if only for a brief while. That is the merit of books of this type. There are better reflections out there, but Paul Johnson has contributed a worthy addition.
In contrast to some of his more opinionated works—Intellectuals, for instance—The Quest for God is largely respectful and even-handed. This is not to say that Johnson avoids the difficulties inherent in a meditation on tricky theological issues, either by avoiding them altogether, or by pretending that they do not exist. Instead, he freely admits that the most important areas of belief are usually those most shrouded in mystery, and confesses his own ignorance and uncertainty. "We may not be able to being to understand God. We may not even be able to believe in him."
While admitting that he wants all to experience the riches of Catholicism, Johnson admits: "I never proselytize, as such... I want to help -I do help when asked or when it is clear my help is needed and will be useful. But I also confess my own woeful ignorance and shortcomings and uncertainties." This is a good approach to take. Our attempts to provide spiritual assistance may be well-intended, but they are not always appreciated. Instead of attempting to cajole reluctant converts, Johnson provides useful thoughts for anyone who is concerned with the questions which vex us all, while also giving incite into the mind of an intelligent believer.
Unfortunately, the book is not exactly orthodox: "Not only do I think there is salvation outside my church; I also think that, for some people, salvation is more likely outside my church - in other churches or no church." Since few people would turn to Johnson for theological certitude, fellow Catholics shouldn't be too bothered with this passage—see instead CCC 816. Of greater concern: one wonders why anyone would become a Catholic if salvation can be had without bothering with all that awful church business. It is a tricky balance to maintain: charitably interpreting the more difficult aspects of Christianity while insisting that truth is nonnegotiable. For the most part, Johnson achieves this by adequately exploring each issue he examines. Death, heaven, hell, purgatory: they're all here--and much more besides.
The closing chapter on prayer he calls "the most important". Although he does not cite Pascal in this context, Johnson maintains that all can and should pray; since our belief in God ultimately has no bearing on whether or not he exists, it is prudent for everyone to do so. This holds even for the agnostic or atheist: "In a way, the prayer for faith is the purest form of prayer." If God exists, and he is at all concerned with human beings, he cannot help but assist those who implore his help. This is why prayer is "the one thing I have found in life that never fails completely."
The Quest for God was enlightening and edifying—as most of Johnson's books are—and it draws one's attention away from worldly things to that which really matters, if only for a brief while. That is the merit of books of this type. There are better reflections out there, but Paul Johnson has contributed a worthy addition.
The welfare state
Iamyouasheisme has been kind enough to respond to my recent post in which I attempted to use the thought of Ludwig von Mises to expose some of the flaws in the neo-Keynesianism of Paul Krugman, as well as the Monetarist approach to which the latter rightly objects. I made some quick replies, but I believe the criticism is substantial enough that it is worthy of more substance and length than I gave it.
He writes:
Everything I have heard or read of libertarian economics seems to require - even if it is not acknowledged - a retreat from bigness. Not just in government, but in business.
This appeals to anarchists, populists, back-to-nature hippies, and right wing libertarian types, but not to most people. Call them suckers, but they know what they want. What they really want is the welfare state, without having to pay for it.
First, he is completely correct in that libertariansim requires--I quite like the phrase--"a retreat from bigness". Whatever term we use for the current economic system, it is categorized by bigness. Sure, both parties offer occasional paeans to the small businessman, but the system is designed so that corporations with lobbyists benefit to the exclusion of actual entrepreneurs. There is some virtue in bigness; there are valid arguments against Wal-Mart, but it manages to provide cheap goods for the consumer. At the same time, any large entity will move sluggishly to adapt to the consumer's changing needs. Libertarian theory envisions a system in which small entities react readily to meet these needs.
I think there is a strong argument that can be made for smallness, especially in business. This was a main component of the distributist theory of Belloc and Chesterton. And while we ought not pretend that there is a silent libertarian majority out there somewhere, I think there is an urge for smaller things by many people across the political spectrum. Still, it is apparent that most people are comfortable with the Welfare State, especially if they don't have to pay for it.
It is also true that libertarians tend to assume that the welfare state is much worse than it is. Certainly, one who believes in the free exchange of goods and services on the market, both because it doesn't involve a violation of rights, but also because it tends to increase wealth for all members of society, will be reluctant to endorse the welfare state. Still, the current system is far better than the socialist regime, in which, as Rothbard puts it, the market is violently abolished, and in which a board of advisers must attempt to perform economic calculation in the dark, to the detriment of all its subjects. It is telling that while Ron Paul would readily have abolished most departments of the Federal Government, the majority of his rhetoric was devoted to attacks on the Empire and the Federal Reserve. Returning welfare to the market was much less of a priority.
Charles Murray, a very thoughtful libertarian, explains well the workings of the welfare state:
[T]he European model has worked in many ways. I am delighted when I get a chance to go to Stockholm or Amsterdam, not to mention Rome or Paris. When I get there, the people don't seem to be groaning under the yoke of an evil system. Quite the contrary. There's a lot to like--a lot to love--about day-to-day life in Europe, something that should be kept in mind when I get to some less complimentary observations.
Murray recognizes that it is an exaggeration to suggest that the welfare state does not work. It is plainly false, and thus undermines the good in libertarian theory, in the same way our more paranoid and conspiratorial members give us a bad name. I've been careless on this point; while my critiques have tended to focus on the long run, in the end, unless a fundamental contradiction can be exposed in the system as it exists, such that long run stability is impossible, insisting that a system will not be permanent is merely a trite truism. Of course the United States will not last forever. Nothing does. What must be done is locate the problems with the welfare state and explain how a libertarian system would be preferable.
Let us return to Murray's talk. He draws on Madison's Federalist 62 to argue that: "A good government implies two things: first, fidelity to the object of government, which is the happiness of the people; secondly, a knowledge of the means by which that object can be best attained." Murray argues that Madison is speaking here in an Aristotelian sense. In other words, we are speaking of eudaimonia.
He tries to sketch some framework for this happiness:
To become a source of deep satisfaction, a human activity has to meet some stringent requirements. It has to have been important (we don't get deep satisfaction from trivial things). You have to have put a lot of effort into it (hence the cliché "nothing worth having comes easily"). And you have to have been responsible for the consequences.
He goes on to note that there are four institutions which provide this framework:
family, community, vocation, and faith. Two clarifications: "Community" can embrace people who are scattered geographically. "Vocation" can include avocations or causes.
The critique of the welfare state, then, is that it significantly narrows this framework, and actually encourages its citizens to avoid the human activities which lead to deep satisfaction. To use one of his examples: although it is profoundly challenging, being a parent is rewarding. Yet parenting is precisely the sort of thing the citizens of Europe are no longer doing, and they are avoiding it because the welfare state no longer places a priority on parenting. Absent strong encouragement from the institutions Murray mentions--or discouragement to duck one's responsibility--there is evidently little reason to become a parent, and certainly even less to have a large family.
It is not that Europeans hate children, nor is it that the government doesn't want them. On the contrary, in many European nations one can be paid for having children. For a time, declining birth rates were greeted with approbation, but this has changed. The welfare system will have to be rolled back unless more workers are found to perpetuate the system. In lieu of European babies, immigrants have been imported from Africa and the Middle East. Setting aside any commentary on the prospects of substantially different cultures living in harmony, this method too seems destined for failure. Immigrants have been quick to realize the good in the welfare state without contributing as meaningfully to the number of workers as was expected.
Now, we might argue that being a parent is its own reward, and that people should have children regardless of government policies. In fact, this is my own position. But it appears to be no more popular than libertarianism, as falling birth rates attest. The welfare state is able to provide for the poor; and although this is not my position, it may even do so better than the free market ever could. However, it is incapable of fostering the institutions necessary to the well-being of man. It provides a comfortable material minimum beneath which the lowliest citizens shall not be permitted to slip. Meanwhile, it enervates the human spirit.
The progressives who agitated for the welfare state were no doubt filled with good intentions. Some were truly revolutionary, and wished to replace institutions like the family. But others merely sought to use government to buttress them. What we have found in our decades of social experiments is that this is not the way things work. Attempting to help single mothers provides a disincentive to form families. It may be laudable that single mothers are no longer social pariahs. But concomitant with the acceptance of single motherhood as a viable alternative to married life has been the undermining of marriage. The neglected ghettos of our inner-cities are resplendent with children who can usually eat, thanks to our welfare system, but whose family life is insufficient to provide them the means to live happily. If the State can take credit for providing the food, it also deserves blame for destroying the family.
I said earlier that we learned that the State cannot easily buttress institutions, but what I should have said is that we ought to have learned. There are thoughtful advocates of the welfare state, but many of them seem to ignore the great shortcomings of such a system. It is not enough to insist that welfare policies will have no deleterious effects on the family when we now know that they do. These effects may be a price we are willing to pay, but they must be considered as part of the equation.
Lest I be seen as a mere critic, I will briefly offer some suggestions for a way out, though I am not optimistic that we will take it.
There are two things that must be done to revitalize our way of life. First, we must reduce the size and scope of Government. This is politically impracticable, but it is necessary if we do not wish to lapse into anemia. If the rise of the State reduced the efficacy of essential institutions, reduction of the former will provide much needed breathing room for the latter. This is not to say that the family would be honored the instant welfare is ended. As it is far easier to let an institution decay than to build it up again, I think it highly likely that, at least during an indeterminable transition period, things will look dark indeed. But the State must be reduced if our institutions are to thrive.
Second, those of us who reject the welfare state must do everything we can to foster the institutions which the State has undermined. The early Christians built a community in the rotting carcass of Rome. When Rome at last fell, civilization did not stop; the torch was passed on. There is no reason we cannot begin to build as well.
He writes:
Everything I have heard or read of libertarian economics seems to require - even if it is not acknowledged - a retreat from bigness. Not just in government, but in business.
This appeals to anarchists, populists, back-to-nature hippies, and right wing libertarian types, but not to most people. Call them suckers, but they know what they want. What they really want is the welfare state, without having to pay for it.
First, he is completely correct in that libertariansim requires--I quite like the phrase--"a retreat from bigness". Whatever term we use for the current economic system, it is categorized by bigness. Sure, both parties offer occasional paeans to the small businessman, but the system is designed so that corporations with lobbyists benefit to the exclusion of actual entrepreneurs. There is some virtue in bigness; there are valid arguments against Wal-Mart, but it manages to provide cheap goods for the consumer. At the same time, any large entity will move sluggishly to adapt to the consumer's changing needs. Libertarian theory envisions a system in which small entities react readily to meet these needs.
I think there is a strong argument that can be made for smallness, especially in business. This was a main component of the distributist theory of Belloc and Chesterton. And while we ought not pretend that there is a silent libertarian majority out there somewhere, I think there is an urge for smaller things by many people across the political spectrum. Still, it is apparent that most people are comfortable with the Welfare State, especially if they don't have to pay for it.
It is also true that libertarians tend to assume that the welfare state is much worse than it is. Certainly, one who believes in the free exchange of goods and services on the market, both because it doesn't involve a violation of rights, but also because it tends to increase wealth for all members of society, will be reluctant to endorse the welfare state. Still, the current system is far better than the socialist regime, in which, as Rothbard puts it, the market is violently abolished, and in which a board of advisers must attempt to perform economic calculation in the dark, to the detriment of all its subjects. It is telling that while Ron Paul would readily have abolished most departments of the Federal Government, the majority of his rhetoric was devoted to attacks on the Empire and the Federal Reserve. Returning welfare to the market was much less of a priority.
Charles Murray, a very thoughtful libertarian, explains well the workings of the welfare state:
[T]he European model has worked in many ways. I am delighted when I get a chance to go to Stockholm or Amsterdam, not to mention Rome or Paris. When I get there, the people don't seem to be groaning under the yoke of an evil system. Quite the contrary. There's a lot to like--a lot to love--about day-to-day life in Europe, something that should be kept in mind when I get to some less complimentary observations.
Murray recognizes that it is an exaggeration to suggest that the welfare state does not work. It is plainly false, and thus undermines the good in libertarian theory, in the same way our more paranoid and conspiratorial members give us a bad name. I've been careless on this point; while my critiques have tended to focus on the long run, in the end, unless a fundamental contradiction can be exposed in the system as it exists, such that long run stability is impossible, insisting that a system will not be permanent is merely a trite truism. Of course the United States will not last forever. Nothing does. What must be done is locate the problems with the welfare state and explain how a libertarian system would be preferable.
Let us return to Murray's talk. He draws on Madison's Federalist 62 to argue that: "A good government implies two things: first, fidelity to the object of government, which is the happiness of the people; secondly, a knowledge of the means by which that object can be best attained." Murray argues that Madison is speaking here in an Aristotelian sense. In other words, we are speaking of eudaimonia.
He tries to sketch some framework for this happiness:
To become a source of deep satisfaction, a human activity has to meet some stringent requirements. It has to have been important (we don't get deep satisfaction from trivial things). You have to have put a lot of effort into it (hence the cliché "nothing worth having comes easily"). And you have to have been responsible for the consequences.
He goes on to note that there are four institutions which provide this framework:
family, community, vocation, and faith. Two clarifications: "Community" can embrace people who are scattered geographically. "Vocation" can include avocations or causes.
The critique of the welfare state, then, is that it significantly narrows this framework, and actually encourages its citizens to avoid the human activities which lead to deep satisfaction. To use one of his examples: although it is profoundly challenging, being a parent is rewarding. Yet parenting is precisely the sort of thing the citizens of Europe are no longer doing, and they are avoiding it because the welfare state no longer places a priority on parenting. Absent strong encouragement from the institutions Murray mentions--or discouragement to duck one's responsibility--there is evidently little reason to become a parent, and certainly even less to have a large family.
It is not that Europeans hate children, nor is it that the government doesn't want them. On the contrary, in many European nations one can be paid for having children. For a time, declining birth rates were greeted with approbation, but this has changed. The welfare system will have to be rolled back unless more workers are found to perpetuate the system. In lieu of European babies, immigrants have been imported from Africa and the Middle East. Setting aside any commentary on the prospects of substantially different cultures living in harmony, this method too seems destined for failure. Immigrants have been quick to realize the good in the welfare state without contributing as meaningfully to the number of workers as was expected.
Now, we might argue that being a parent is its own reward, and that people should have children regardless of government policies. In fact, this is my own position. But it appears to be no more popular than libertarianism, as falling birth rates attest. The welfare state is able to provide for the poor; and although this is not my position, it may even do so better than the free market ever could. However, it is incapable of fostering the institutions necessary to the well-being of man. It provides a comfortable material minimum beneath which the lowliest citizens shall not be permitted to slip. Meanwhile, it enervates the human spirit.
The progressives who agitated for the welfare state were no doubt filled with good intentions. Some were truly revolutionary, and wished to replace institutions like the family. But others merely sought to use government to buttress them. What we have found in our decades of social experiments is that this is not the way things work. Attempting to help single mothers provides a disincentive to form families. It may be laudable that single mothers are no longer social pariahs. But concomitant with the acceptance of single motherhood as a viable alternative to married life has been the undermining of marriage. The neglected ghettos of our inner-cities are resplendent with children who can usually eat, thanks to our welfare system, but whose family life is insufficient to provide them the means to live happily. If the State can take credit for providing the food, it also deserves blame for destroying the family.
I said earlier that we learned that the State cannot easily buttress institutions, but what I should have said is that we ought to have learned. There are thoughtful advocates of the welfare state, but many of them seem to ignore the great shortcomings of such a system. It is not enough to insist that welfare policies will have no deleterious effects on the family when we now know that they do. These effects may be a price we are willing to pay, but they must be considered as part of the equation.
Lest I be seen as a mere critic, I will briefly offer some suggestions for a way out, though I am not optimistic that we will take it.
There are two things that must be done to revitalize our way of life. First, we must reduce the size and scope of Government. This is politically impracticable, but it is necessary if we do not wish to lapse into anemia. If the rise of the State reduced the efficacy of essential institutions, reduction of the former will provide much needed breathing room for the latter. This is not to say that the family would be honored the instant welfare is ended. As it is far easier to let an institution decay than to build it up again, I think it highly likely that, at least during an indeterminable transition period, things will look dark indeed. But the State must be reduced if our institutions are to thrive.
Second, those of us who reject the welfare state must do everything we can to foster the institutions which the State has undermined. The early Christians built a community in the rotting carcass of Rome. When Rome at last fell, civilization did not stop; the torch was passed on. There is no reason we cannot begin to build as well.
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