Preserving Wealth in a Currency Crisis – Investment Strategies

Peter Schiff, that Austrolibertarian guy on Wall Street who was right about a whole lotta stuff, just so happens to run a full-service, registered broker/dealer specializing in foreign markets and securities.  His firm caters to exactly the kinds of strategies he outlines in his prescient book from 2006, Crash Proof, in which he provides a rundown on the state of the economy and suggestions on appropriate investment strategies.

His firm, the aptly-named Euro Pacific Capital, offers an outlook similar to to that found in his book.  Take a look.

Meanwhile, detractors point to the dollar’s rally in 2008 as reasons to discount Schiff’s investment strategy, which is based on projected foreign de-coupling from the U.S. economy and rising gold and commodity prices relative to the dollar.  Schiff and others maintain that the 2008 rally was a bear market aberration that will prove to be a blip in an otherwise uninterrupted downward trend for the dollar.

Who do I believe?  I think you know, at this point, that I’m on Schiff’s side with this one.  For the rest of you, take some time to check out some of the arguments the Austrians are making; chances are you’ll find a lot to agree with – and you just might get nervous eyeing that dollar sign in your savings account.

Paul Krugman Challenged to Debate Austrian School; Soup Kitchen Donations Hang in the Balance

What is Paul Krugman afraid of?  This is a question that the libertarian crowd has been asking, publicly, for years.  So far, Mr. Krugman has brushed off the droves of Austrian school adherents looking to see him take on Austrian Business Cycle Theory in debate; but with this latest gambit, the New Keynesian may find himself up for an offer his conscience can scarcely refuse.  Tom Woods sums it up pretty well:

Many Austrians have tried to get Krugman to debate business cycle theory.  He’s too busy and too sophisticated to debate an Austrian, of course.  Until now.

Economist Robert Murphy has come up with a clever way to make this happen.  Through a website called The Point, people can pledge an amount of money to make the debate happen.  Not one cent is charged to them until it does happen.  The money will go to a charity for the hungry in New York.  So if it hits, say, $100,000, Krugman will have to explain why getting $100,000 to New York’s hungry isn’t worth one hour of his time.  Brilliant.  I’ve already pledged.  Bob is up to around $5,000 already.

Woods wrote that in October.  I just went by the site to make a $30.00 donation and at the time of this posting, $57,335 have been pledged by 919 donors.

I’m anxious to see Mr. Krugman’s response.  With so many charity donations on the table, it will be difficult for him to back down on the grounds that he has more worthy undertakings vying for his attention, so most observers will likely associate his potential refusal with a suspect reluctance to engage the opposition.  So which will it be, PK?  Will you let professional egotism trump your liberal conscience?  Or will we finally see you defend your ideas against their strongest assailants in the public forum?  I can already tell this is going to be fun…

(Here’s the complete story as described by economist Robert Murphy, the Austrolibertarian who thought this up and is on deck to debate the Krug.)

“We Are All Austrians Now”

Ah, the Austrian School.  That marvelous brand of free-market reasoning borne of a turn-of-the-century respect for laissez-faire capitalism, nurtured to maturity beneath the sun-kissed awnings of prewar Austria-Hungary’s street-side salons and coffee shops, and from there, exported across the world as a beacon of truth to the oppressed and centrally-planned.  (For a brief historical perspective on the Austrian school and its tumultuous relationship with Keynesianism, check out this PBS documentary – made available online in its entirety by viewers like you.)

But with the rise of Keynes came a casting-out of the Austrian perspective, relegating both its original founders and new adherents to fringe status in mainstream academia and public policymaking.  A status quo that remained, effectively unchallenged, for decades.  Until…now?

In the wake of the recent global economic crisis and the ostensive vindication of vocal Austrian analysts by ensuing events, free-market thinkers the world over gathered in broad daylight and, in hushed-yet-hopeful tones, communed bullishly on the possibility of a mainstream rediscovery of the forgotten tomes of Ludwig von Mises, Friedrich August Hayek, and other authors of Germanic etymological nomenclature.

Those prayers, it seems, may have been answered.  The mainstream media’s long-awaited return to sanity seems to finally be upon us.  Check out this CNBC article for starters, or–even more startling–this one, published in opinion-leading Newsweek.  What a twist, eh?

Perhaps we are approaching a tipping point in popular opinion, with people simply waking up to the notion that “those guys”, who have been quietly – and correctly – predicting economic outcomes for the past century, may have been onto something after all.

Note: Scrupulous observers may notice that the Newsweek article is based entirely on promoting Hayek as the poster child of Austrian economics, rather than the more appropriate Mises, Hayek’s mentor and teacher and a thinker far more stubborn in his adherence to Austrian principles.  Hayek, on the other hand, proved throughout his career a knack for taking up conciliatory – and, often, self-defeating – positions that his predecessor Mises would have considered anathema to free market argumentation.  This is worth mentioning as a precaution to those who would otherwise take mainstream media’s distillation of Austrian thought for granted, and I remind readers to keep an eye out for policymakers’ deceptive co-opting of the Austrian brand as a way to promote central-planner ideologies within the public forum.  Watch out!

Trading Spaces: America’s Place in Tomorrow’s Economy

While the readers of this blog have continued their search for solid ground, Americans everywhere are struggling to maintain a foothold against the backsliding currency crisis as fallout from the asset bubble foments a nuclear winter of frozen credit and depressed consumption.  Meanwhile, our pals in the mainstream media continue their call for more and greater forms of stimulus to get consumption moving again – lend more, consume more, and the world will soon right itself, or so they say.

Unfortunately for the major news outlets, their loud-mouthed advocates for increased lending and spending continue to argue from a flawed understanding of the global economic system and America’s unenviable position therein as its biggest debtor.  Thanks to her citizenry’s profligate importation of foreign goods on foreign credit, and her central bank’s reckless attempts to print away the trade imbalance, we have exported our inflation to the very trade partners who are presently sustaining our collective livelihood.  And if we continue to waste our borrowed money on consuming foreign goods and domestic services – instead of producing goods for export – we are only hastening the day that the world stops lending to us.  When that day comes, the inflation we’ve been shipping overseas will swing back around and torpedo what’s left of our currency.  The end result?  Generations of hardship and reconstruction as our progeny struggle to rebuild our lost manufacturing base in an effort to produce exports for foreigners wealthier than themselves.

So… no, I don’t think more borrowing and consumption are the answer.  And I don’t think anyone can provide a complete picture of the problem by limiting discussion to the needs of the American consumer; the myth that consumption sustains economic growth is as popular as it is mistaken.  Instead, we ought to take a look at our trade deficit and the institutions that exacerbate it.

Currency pegs are a good place to start.

As a form of central planning, currency pegs distort the economy and the true inflation rate.  Existing currency pegs, especially the one with China, hold up America’s purchasing power relative to her trading partners, which in turn enables us to export much of our inflation to those trading partners and effectively shield ourselves from the full effects of our inflationary policies by spreading the damage abroad.  If you don’t care about the wellbeing of foreign consumers, this might not sound like such a bad thing; after all, getting to print free money without having to deal with the consequences sounds like a pretty good deal, right?  …Well, sure, until those dollars come flooding back home to roost.

Here’s how it all works.  Some (read: lots) of the money we print is used to buy foreign goods.  Because the dollar continues to be the world’s reserve currency, foreign central banks are happy to warehouse these printed dollars as part of their foreign exchange reserves and for use in trading oil, gold, and other products exchanged in global markets.  (In other cases, those dollars get lent back to us as the central bank buys T-Bills – or mortgage-backed securities.)  Because we export so little relative to how much we import, the bulk of those dollars remain overseas and must therefore be absorbed somehow; the only solution is for those nations to expand their own money supplies.  This is how we “export inflation”, by encouraging other countries to take our inflated dollars and, in turn, inflate their own currencies.  As long as foreign central banks continue to take our inflated currency and prevent all that paper money from gumming up our domestic money supply, the full extent of our inflationary policies will not be felt at home.

Thus, one can see that a currency peg put in place to encourage American importation of foreign goods further distorts the trade relationship by artificially supplying American consumers with low-priced goods.  A nation like China, whose currency is pegged to be weaker than the American dollar, experiences a booming export business and an influx of dollars that they are – for now, at least – happy to take in.  While American consumers benefit, Chinese consumers are forced to compete with their wealthier American trade partners for the same goods, whose prices reflect the purchasing power of the American dollar.  As such, the currency peg keeps both consumer prices and interest rates low for Americans, and artificially high for the local Chinese population.

Meanwhile, we fail to produce sufficient quantities of export goods needed to balance the trade deficit, which leaves us with hundreds of billions of dollars in debt to other nations.  True, this debt is currently being paid for with all those American dollars floating around overseas.  But those are dollars, not goods.  So while we’re enjoying our imported purchases, our trading partners are experiencing a standard of living kept artificially low by their central banks’ policies of taking American dollars without reservations.  Why do they continue to do this?

Let’s look at China again as an example.  So much of that country’s development has been fueled thus far by exporting to meet American consumer demand.  Large swaths of their manufacturing capacity are funded by American dollar payments, and aided by the currency peg.  And these dollars continue to be desirable, because their function as reserve currency is propped up by international trust in American creditworthiness.  Under this system, the Chinese central bank sees no reason to change its behavior; removing the currency peg to allow appreciation of the Chinese yuan would threaten Chinese industry and offset its tremendous growth trajectory, leaving millions unemployed or otherwise less productive.

However, this line of reasoning – though popular amongst mainstream analysts both at home and abroad – is fundamentally flawed.  Letting the market set the exchange rate would indeed allow the Chinese yuan to appreciate, but that alone would not dismantle the Chinese economy.  Sure, exports would drop and so would prices, but such deflationary pressures would only awaken the true potential of local Chinese purchasing power.  After some painful re-tooling by manufacturers to adjust their production for their domestic market, Chinese would begin selling to Chinese, and making profits in yuan.  Their already-massive population of consumers would only expand as prices shifted downward to raise millions out of poverty; meanwhile, demand for manufacturing-heavy products would skyrocket, as many of these newly-enabled Chinese would be purchasing big-ticket items like refrigerators, washers, dryers, and automobiles – exactly the sorts of large, raw material-heavy appliances that American consumers today are merely replacing every couple of years.  Most Chinese own a fraction of what Americans own; they wouldn’t be simply replacing worn-out consumer products every so often, they’d be buying new ones en masse.  The Chinese economy would quickly recover from the initial shock and achieve new heights in living standards.  In short, the conventional wisdom that rules out Chinese “de-coupling” from American consumers is unsound; if ever there comes a day that China and other trade partners decide to stop taking American import dollars, they’ll likely get along fine without us.

All this brings us back to our own situation.  None of the above would be bad news for Americans, if we had the manufacturing capacity to meet foreign demand.  Unfortunately, the American economy today is a service economy with limited manufacturing ability, and few savings left to fund the capital and labor costs needed to expand a manufacturing base.  Meanwhile, we continue to deplete our savings by consuming foreign goods and borrowing from foreign central banks to fund those same imports, all while our consumer debt problem, national debt, and trade deficit continue to grow.  Artificially low interest rates meant to stimulate borrowing only compound the problem by encouraging borrowing at a time when there are insufficient savings to fund it, while the Fed trips over itself to print out the difference.  Meanwhile, the toxic assets we sold as bonds to foreign central banks continue to incinerate foreign balance sheets, causing American creditworthiness and goodwill to go up in smoke.

The final nail in the coffin will be the rejection of the American dollar as the international reserve currency.  At some point, foreign countries will simply stop regarding American dollars as reliable guarantors of wealth, and look toward some other form of currency instead (a process that has already begun).  Whether the dollar is replaced by another fiat currency or by gold is largely insubstantial to most Americans, as the vast majority of us hold our wealth in neither gold nor foreign currency, but in dollars.  Our wealth will become worth a fraction of its current value, and we will no longer be able to afford the top-notch goods that have defined the American lifestyle for decades.  At most, we’ll be using a mish-mash of our own domestically produced second-rate goods, the second- and third-rate goods of second- and third-rate foreign economies, and used goods.

Once our currency crisis reaches the point of no return, we simply won’t have the savings to dig ourselves out of the hole.  Printing dollars will be worthless at that point, and we’ll have to rebuild our economy the old-fashioned way: by consuming less than we produce, and by investing the savings in growing our production capacity (you know, what the Asian and Central European economies have been doing all these years while we were spending our butts off).  The problem is that building factories, buying equipment, and training workers is a major undertaking.  Such adjustments could easily take generations before we begin to approach the living standards we have today.

I’m sorry if I’ve left you a bit troubled.  Luckily, there are many resources you can follow up on to better understand our predicament, and to learn how best to protect yourself and your loved one’s from the ever-worsening currency crisis.  A great place to start is with investment maven Peter Schiff’s book Crash Proof, which he originally authored in 2006 prior to the housing crisis.  In it, he successfully predicted much of the economic calamities that began in 2008 and that continue to confound most mainstream analysts today.  In 2009, he published a revision entitled Crash Proof 2.0, which left the original text intact but for brief addendums to each chapter explaining events from a 2009 perspective.  Mr. Schiff has made a name for himself as a frequent contributor on cable news channels, where he happily plays the role of the Austrian School heterodox in challenging the conventional wisdom of his mainstream colleagues – which, when reviewed in hindsight, prove to be tragically hilarious.

For a broader economic education by way of Austrian economics, check out Henry Hazlitt’s timeless Economics in One Lesson, or many of the (free) resources provided by the Mises Institute.  And for a Fed-specific lesson, check out Ron Paul’s beautifully concise End the Fed.

Or, I guess you could always stick to reading this guy.  (Wait, sorry, honest mistake – really).

Your Government Loves Inflation, and So Should You!

It’s an exciting time to be alive, boys and girls.  Our economy is in trouble and it’s our generation’s job to figure it all out before things get (really) nasty.  Luckily for you, here at Search for Solid Ground we work through the misinformation and competing ideologies to bring you the facts you need to keep your knowledge bank safe from the barbarism of the orthodoxy.  So let’s leapfrog past the mainstream media mumbo-jumbo and crack open the true dimensions of our currency crisis.

You’ve heard by now about the “deflation threat”, and why we need inflationary monetary policy to keep us free and clear of it.  Well, the truth is far more sinister: there is no deflation threat – it’s a straw man used by the government to keep us blind to the real menace, the ruinous inflationary policies used to fund government spending while depleting the dollar’s purchasing power.  Even worse is how government actively hoodwinks the populace by misinforming us with goofed-up statistics on the inflation rate, which in turn masks the full extent of the dollar’s plummeting value.  If we let the process continue, Americans will see their generations of accumulated wealth vanish in a matter of years.

To begin, let us define inflation and deflation by taking a page out of the Austrian playbook.  Whatever your qualms with the Austrian School, you’ll have to admit they might be onto something when they insist that to define inflation (and deflation) in terms of the price level is to confuse the symptoms with their cause.  Instead, Austrians prefer to define inflation/deflation as expansion/contraction of the money supply relative to the total amount of goods and services.  Expanding the money supply when the supply of goods/services remains unchanged raises prices – or, as we often observe, keeps prices level when they should be falling.

The distinction between causes and symptoms is important because it reveals the arbitrary nature of price.  A given price level is the natural result of how much money is in play relative to what can be purchased with that money, and thus it is counterproductive to speak of a “target” price level in the context of monetary policymaking; prices reflect what an economy is capable of producing at a given moment in time.

Consider a Fed spokesman’s advocacy for “price stability”.  It is necessary to keep prices level, he reasons, because the alternative – prices that drop in step with productivity gains – would lead to some kind of disaster.  The Great Depression, he reminds us, was caused in part by deflation.  Businesses, he cries, would fail en masse if prices fell!  ”Gentle”, “natural” inflation at a rate of 2% to 3% a year is the necessary preventive medicine for keeping such ailments at bay.  Never mind the bitter aftertaste of rising consumer prices; Deflation Fever is much, much worse!

In truth, there isn’t anything natural (or necessary) about inflating the money supply at regular intervals.  That all-too-familiar gag reflex brought on by rising costs of living is your brain’s natural response to seeing your dollars artificially cheapened and its holder made unnecessarily poorer.  ”Controlled” inflation isn’t an antidote: it’s a poison.

Deflation, on the other hand, is only ever a real threat when demand disappears completely due to a collapse of income – one of the symptoms (not a cause!) of the Great Depression.  In all other cases, demand necessarily exists at some price level; if incomes fall relative to consumer prices, then those prices fall to reflect supply that outpaces demand.  Goods, now cheaper, again become affordable as a reflection of market forces.  Those who argue that this somehow hurts business owners (in turn weakening their ability to employ, invest, and produce) are forgetting that profitability is about margins – and margins remain constant as costs and prices fall together.  (One could even argue that falling prices often reflect in increased sales, which in light of constant margins, often lead to greater profits.)

Here’s a happy truth about market economies: successful producers who cover their costs, achieve economies of scale, and streamline their operations are able to lower their prices, increase sales, and make larger profits.  Meanwhile, consumers benefit from this rise in productivity by seeing lowered costs of living.  Without a central bank to increase the money supply, the money supply stays constant while the amount of goods and services increases; deflation results, forcing prices down.  It was deflation during the Industrial Revolution that allowed Americans to upgrade from candles to electric lights, and deflation today that lets us buy flat-screen TVs at a fraction of the price they were a few years ago.  In fact, deflation has been the hallmark of our economic success: between 1780 and 1913, prices consistently fell – sometimes, sharply – while living standards steadily improved (an exception being the Civil War era, when the introduction of paper money jacked up prices – effects that quickly wore off when the new money was taken out of circulation.)

But wait!  In today’s dire economic times, when the balance sheets of our nation’s largest credit institutions are being torn apart by loan defaults and toxic assets, unimaginable quantities of wealth are disappearing as defaults pile up!  Surely this will lead to uncontrollable deflation that must be countered with inflationary monetary policy!

While it is true that defaults on loans indeed contract the money supply, this has clearly been offset by the creation of new dollars; it’s hard to deny that our economy has seen net expansion of the money supply when consumer prices continue to outpace increases in purchasing power.  Beyond this, the loans that went into default weren’t intended to increase productivity in the first place – most of them went to fund consumption – so to let that bubble money evaporate is akin to letting imaginary wealth go back to being imaginary.  However, even if this was a case of productive loans going bad and not simply market corrections zapping away asset bubble cash, I’m not convinced that inflationary policies are the answer.  If it were true that the negative effects of defaulted loans could be made up for by the printing of new dollars without a net loss to society, then there would be no need to monitor a potential debtor’s creditworthiness – the bad loans could simply be made up for by the central printing press.  But the reality is that loans (and new dollars meant to replace those loans) must go toward goods produced; otherwise, there’s nothing to give the money value.

So why do we hear so much about the “threat” of deflation, and the need to counter this threat through inflationary measures executed by the Federal Reserve and other central banks?  And how, as I have claimed, does the government mask the extent of its actions from the public?

At the risk of sounding “conspiratorial”, I invite you to consider the government’s role as an agent of misinformation on this topic.  Let us begin by examining how government benefits from inflation.

From the very start, the money that the central bank creates is “spent” into circulation by the government; the government alone has the power to control how those dollars enter the economy.  Oftentimes, this means using the money for public services, thereby circumventing the need to tax or otherwise appropriate existing public funds, both of which can be uncomfortable for politicians.  By pursuing inflationary policies and misleading the public about the impact, the government gets away with printing new money to fund the many unfunded liabilities and public welfare programs that voters love – all without raising a single tax.  This, of course, is why many consider inflation to be an insidious form of taxation in its own right: artificial inflation prevents productivity gains from lowering consumer prices, robbing the populace of rising living standards in order to prop up government spending habits.

Furthermore, since the government is the world’s biggest debtor, it is not difficult to argue that the government is also the world’s biggest beneficiary of inflation.  After all, inflation allows the government to repay its (considerable) debts with cheaper currency.

And let’s not forget that higher prices mean a higher GDP, creating the feel-good illusion that economic progress is being made.  (The silliness behind this thought process helps reveal one of the many reasons GDP statistics are unreflective of economic health – a discussion for another time, perhaps.)  Meanwhile, asset prices rise, fooling people into thinking that their stocks and real estate are appreciating in value.  In this sense, inflation is government’s opiate to the masses.

Inflation also generates tax revenue for the government.  When real estate appreciates, for instance, the government sees returns via the capital gains tax; meanwhile, some of those fortunate enough to see their income rise with inflation see themselves pushed into a higher income tax bracket.

In short, there are a whole host of reasons that the government benefits from inflation, none of which – presumably – are lost on the decision-makers in control of the printing press.

More complex is the notion that government actively obfuscates the true level of inflation from the public by promoting specious statistics like the CPI, PPI, and PCE.  I urge readers to look more into why these and other indices, commonly relied upon to gauge inflation, in fact do much to mask the true extent of inflation’s effect on living costs.  This blogger provides a worthy introduction to the topic by taking a look at how government molds the CPI to project a make-believe depiction of the economy in which prices are rising at a far slower rate than they are in reality.  A more complete discussion of these flawed indices are, sadly, beyond the scope of this post.  (Also, my typing muscles need a break.)

In conclusion: neither inflation nor deflation is inherently bad, except when a central authority artificially induces one or the other.  Politicians and their allies benefit from inflationary policies, and scare up deflationary threats in hopes of legitimizing their harmful policies.  Meanwhile, they hide the true extent of inflation from the public by touting flawed indices and framing conversations in terms of those indices.

So where does this all leave us?  Well, here’s what we’re seeing today: asset prices, especially in real estate and dollar-bound stocks, are continuing to fall while consumer prices continue their rise – leading to the destruction of purchasing power for Americans whose costs of living are increasing even while their wealth holdings in stocks and home equity are losing air.  I’m speaking, of course, in dollar terms.  In gold terms, both asset and consumer prices are dropping through the floor; consumer prices are simply falling far slower than asset prices (which were artificially high thanks to inflation-induced asset bubbles, but are now rapidly tanking).

By distinguishing between gold and dollar prices, a key point becomes clear: if a trigger-happy printing press continues driving down the value of the dollar, Americans (whose wealth is captive in dollars, not gold), will see costs of living dramatically lowered in real terms relative to producers and consumers abroad.  However, the dollar-bound American will be unable to capitalize on any of these falling prices, as his paper money will be losing value even faster.  Any deflation in real terms will be masked by skyrocketing inflation in dollar terms.

This leaves us at the doorstep of the Big Question: what is the present condition of our economy, and where might we end up if we stay the current course?  I invite you to ponder these and other matters as I prepare my next post.

A Final Thought on Prop 19

So Tuesday evening came and went, and Proposition 19–California’s 2010 ballot initiative to “Regulate, Control, and Tax Cannabis”–was defeated at the polls, 54% to 46%.  Meanwhile, freedom-lovers the world over sadly chalked up yet another loss in the never-ending war against their authoritarian neighbors, while Californians resigned themselves to a few more years of life under the Big Bad Gun.

For some of you reading this, Prop 19 will be the first loss you’ve lived through in your personal War Against Illegitimate Authority, while for others, it merely reinforces a life lesson borne out by human history and personal experience: it’s rarely enough to have liberty and free-market truths on your side in a political movement–you need fear to win.

If you want them to listen, scare them.  It’s the only way.

Scare them with the economic facts.  Tell them about black markets and where the money is going, about how exceptionally evil people end up turning a buck when prohibition is law.  Make them realize that their stance against human freedom pollutes more than just the vacuum of philosophical debate; that it leads them, ass-backward, toward the conclusion that depriving others of their lives and livelihoods is preferable to exposing future generations to a harmless substance they will almost certainly discover anyway.

It is this sickening conclusion, reached by far too many fellow Californians, that has continued to haunt me in the wake of Prop 19’s defeat.

It comes as no surprise that those opposing legalization rarely debate their fellows on the economic arguments; it is well-understood by most that Mexico’s Drug War exists thanks to U.S. demand of illegal substances, and that the mighty cartels make big business out of trading American greenbacks for Mexican green.  The only notable debate on whether legalization would stop the violence stems from the RAND Corporation’s deliberate misstating of its own research, which was a transparent attempt at masking the real-world consequence of legalization–that is, wiping out (a conservative) 60 percent of Mexican drug cartel profits.  If we go by the general black market rule that violence follows profit in proportionality, we can assume that the cannabis trade has caused 60 percent of the 28,228 deaths since President Felipe Calderon’s declaration of war on the cartels.  That makes 16,937 deaths so far, many of which were civilians.

Add that to California’s 219 felons imprisoned for marijuana possession and her 61,388 misdemeanor arrests for possession, both statistics describing the state in 2008 alone.  Finally, consider that .8% of Californian inmates carry HIV/AIDS, and things get even more distressing for the victims of our War on Drugs.  The collateral damage of supporting prohibition is the most real aspect of the debate, and must be recognized by anyone claiming to understand its implications.

When people tell me they “get” the economics, and that it is the moral debate they find troubling, I reply that the stone-cold economics of drug trafficking is what lands us in the moral quandary in the first place.  (That, and the whole thing about people having the right to do what they want with their own bodies in private, blah blah blah…)

Oh, not that moral debate, they say.  The one about how my kids will be smoking those sticky-icky weeds–that’s the real issue!  So stop yammering on about the Drug War(s) at home and abroad, and let’s talk about how Prop 19 makes it harder to be a parent.

Well here’s some news for those of you born yesterday: weed isn’t habit-forming, and it doesn’t kill.  Period.  Guns and prisons, on the other hand, will always be a threat to children everywhere–as they have been for decades, especially if you’re a minority–unless we work to change the laws.  Meanwhile, let’s hope your kids don’t discover alcohol, tobacco, or any of the Jackass movies; with all that junk around, cannabis and its medicinal benefits are probably the least of your parenting problems.

So to those of you who don’t care about our neighbors down south and how their kids are losing parents, homes, and futures to cartel violence, go on and tell your kid how you voted No on 19 so they wouldn’t have to suffer growing up around legal cannabis.  Teach them the lesson that outsourcing black market violence is a good way to forget it exists.  And give yourself a pat on the back for being such a great parent while your kid sneaks off to smoke blunts in the park.

Meanwhile, I’ll keep fighting for the day we can all join him.

Fed Up with the Meltdown

Last time I checked, the debate on the efficacy of price controls was pretty much a done deal (remember these guys?).  After trying it out in the ‘30s, we realized that central planning just doesn’t compare to the efficiency of letting market forces set our schedules.  Unfortunately, this broader lesson has yet to be applied toward the ostensibly different but fundamentally identical matter of letting our central bank set the price of borrowing and lending.

Thanks to a cooperative Congress and an acquiescent public, the Federal Reserve’s latest round of quantitative easing will likely go unchallenged.  (Meanwhile, niche movements are beginning to rediscover well-established Austrian School theories on why this is a bad idea.)

Bernanke’s rescue plan comes out of the same tattered playbook that got us into trouble in the first place: with consumption and borrowing at a present low, the central bank is moving to again artificially lower interest rates to stimulate new lending.  Since savings have severely bottomed out, it makes sense that banks and other institutions are sluggish to lend out reserves.  But will printing and lending hundred of billions of new dollars improve our situation?

By holding down the “price” of borrowing (i.e., interest rates), the Fed hopes to encourage short-term consumption and long-term investments.  Consumers will increase consumption because the low interest rates seem to discourage saving, while long-term investors and entrepreneurs find it easier to begin new projects as the price of borrowing is held so fantastically low.

Sound familiar?  Nearly a century after the passing of the 1913 Federal Reserve Act, and nearly four decades after the dismantling of Bretton Woods, it certainly should.  The Fed’s current plans to instigate a “boom” echo its earlier machinations that led to the multi-decade boom we now associate with the 2000 dot com crash.  The Fed’s response to that failure was to cut rates to an unprecedented low, buying the country an artificial last hurrah that, in turn, ended with the housing meltdown.  The solution today is more of the same: print dollars, lower interest rates, and encourage more wild spending and borrowing.

To understand why the central planners have failed, one need only remember that our complex system of money and credit is not so fundamentally different from the economy at-large; both are ruled by market forces, which signify realities via a pricing mechanism that cannot be successfully manipulated through mandates of ceilings and floors.  Just as we all know how poorly the economy functions when hobbled by price controls, the monetary system suffers when interest rates are kept lower than they would be by the free market.  Our central bank chieftains suffer from the same Knowledge Problem that doomed the Soviets: no central entity can ever predict the true market rate, and deluded rate-setting deceives the public into acting out of accordance with market realities.

By depressing the interest rate, the Fed sends the miscue that savings are sufficient to fund long-term projects (e.g., housing construction and dot com ventures), and that consumers are consuming less in the short-term in favor of saving for the long term.  However, since these artificial rates greatly overestimate the market’s real demand for long-term investment, a cresting point eventually arrives whereby entrepreneurial ventures begin to fail en masse.  Thus comes the crash, better understood as the market’s natural purging of all the malinvestments encouraged by the Fed’s mismanagement of the printing press.

And so here we are, eagerly awaiting another $500 billion bailout from the Fed that will do nothing but bloat the overfed money supply with more new dollars, further suppressing interest rates to encourage another round of lousy investments.

As the central bankers again take their seats at the mahogany table to plan our economic recovery, the American people hunker down for a future plagued by the same economic maladies that have defined this century’s experiences thus far: bubbles, boom-bust cycles, inflation, and unsustainable trade imbalances.  Let us hope that the mighty minds in charge of printing the world’s reserve currency have the wisdom to finally let go.

 

Non-interventionism, not Isolationism

It’s time we set the record straight, readers.  Non-interventionism is not isolationism.

For proponents of a free society, there is no foreign policy more effective than a non-interventionist one, which advocates using military force only as a defense against actual or imminent foreign aggression, and then only when Congress has issued a declaration of war.  In other words, taking a Constitutional approach to foreign policy.

On the other hand, a frighteningly effective way to shackle and impoverish a free society is to turn it isolationist.  In other words, for that society to “turn inward” by ending diplomacy, free trade, and freedom of travel; or for it to “force out” the international community by imposing embargoes and sanctions, or by threatening militaristic coercion.

Non-internventionists choose engagement, diplomacy, and the setting of positive examples as their guiding principles in determining foreign policy.  Isolationists fear the cosmopolitan nature of a free society, and choose to interfere with the free exchange of currencies and ideas by prescribing rules and regulations backed by the threat of force.

The difference between a non-interventionist nation and an isolationist one is the difference between Switzerland and North Korea.

So please, if you must publish smear pieces on Ron Paul, at least take a moment to learn this simple distinction so educated readers (which, presumably, form the basis of The Atlantic‘s readership) don’t trash you in the comments section of your own articles.

Ending the American Empire

As my current station in life continues to deny me convenient access to small children, my ability to navigate the intellectual deathtraps of preschooler conversation remains woefully substandard.  So when a friend’s nephew recently asked me if, and I quote, “war happen[s] because there aren’t enough police to arrest all the soldiers for murdering each other”, I took the fatal misstep of attempting to address the little rascal through reasoned dialogue.  Hours later, once the tinnitus had finally subsided and I could begin to repair my shattered ego, I paused to reflect on the popular paraphrasing of a famous Einstein quote: “If you can’t explain something to a six-year-old, you don’t understand it well enough.”  Having soundly failed this litmus test in my attempt to impart a libertarian critique of American foreign policy upon the Playskool crowd, I return to address my regular readership with a valuable lesson learned: kids have enough sense to know that waging war is silly—grown-ups, on the other hand, could use the occasional reminder.  In the eyes of this classical liberal, our nation’s policymakers have lost sight of interventionism’s moral perils, choosing to fill that void with misguided conclusions about the economic and security implications brought forth by meddling in the affairs of other peoples.  Whether one favors arguments from morality or a pragmatic analysis of the dangers of American interventionism abroad, it is clear that policymakers interested in promoting either domestic security or general welfare amongst the international community must recognize that an invasive foreign policy prevents the United States from achieving either end.

The modern American libertarian draws much inspiration from the original patriot noninterventionists, Washington and Jefferson, whose legacies instilled in their countrymen a healthy aversion toward interfering in the internal affairs of other peoples.  Jefferson’s vision, immortalized in his 1801 inaugural address and echoing Washington’s Farewell Address, sought to deliver the young country “peace, commerce, and honest friendship with all nations, [and] entangling alliances with none”.[1] By keeping America’s military close to her own shores, American interests could maintain independence from the complex and clouded affairs of foreign statesmen.  As these two Founding Fathers foresaw, a non-interventionist foreign policy—in part the natural privilege of a new nation a hemisphere removed from Old World pressures, in part the moral imperative of a people championing the cause of liberty—provided a means to preserving national security that was both morally and pragmatically sound.  Without succumbing to the folly of isolationism, which tosses out the values of cosmopolitanism along with the bathwaters of imperialism, Jeffersonian non-interventionism recognizes that American security is best advanced not by tethering her people to the clamors of foreign allies and enemies, but by preserving her citizens’ inalienable right to be free from those affairs in which they have neither representation nor practical familiarity.

Even today, when a globalizing economy and robust information systems infrastructure have elevated Americans to a more intimate international communion, a geopolitical relative to Mises and Hayek’s economic “Knowledge Problem” continues to devalue interventionist foreign policy.  This is the same encumbrance that has plagued nation-building and imperial ambitions since the time of Thucydides, and will necessarily exist as long as a particular people have better understanding of their own affairs than do their would-be foreign hegemons.  Together, those individual affairs comprise the particular cultural institutions—language, religion, mores, and so on—that define a “nation”.  A nation is therefore its collection of cultural forms, not its geography or political institutions; and while the interventionist stubbornly wields the latter as his central planning tools, the former will continue to dictate the local realities that frustrate such plans.

As a product of the spontaneous order coordinated by its individual agents, a nation is not so different from a complex economy in that it remains similarly resistant to the efforts of centralized manipulation.  Or, as Hayek reminds us in his writings on economics, planners suffer from the abovementioned Knowledge Problem in that they lack the “very important but unorganized knowledge…of the particular circumstances of time and place”:[2]

If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them.  We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders.[3]

When economist Steven Horwitz applies this Hayekian framework to the geopolitical exercise of nation-building, he concludes:

Just as the intervention of economic planners inevitably produces results that run counter to their stated goals, leading them to intervene again to solve those problems, so will nation-building create resistance and new forms of culture and community that frustrate the designs of the builders.  The quagmires of Iraq and Afghanistan are clear evidence for this argument.[4]

Decentralization succeeds by empowering the “man on the spot”, that indigenous agent whose local knowledge and ability to respond cannot hope to be improved upon by a central authority, especially not when that authority is passed down from a distant class of beltway bureaucrats.  Our mismanagement of the occupation in Afghanistan, which we have struggled to correct and in so doing entangled neighboring Pakistan, provides a devastating case study on the realities of nation-building.

Nine years after the beginning of Operation Enduring Freedom, Afghanistan is still an impoverished, corrupt, and violent country that gives anarchy a bad name.  2,412 civilians were killed in 2009 alone, making just last year the “most lethal [year] for Afghan civilians” and “a jump of 14 percent over the previous year.”  Meanwhile, “American and NATO combat deaths jumped to 520…from 295” the year before, and Taliban activity increased beyond what had been seen since 2001.[5] Earlier this August, Pakistani president Asif Ali Zardari famously declared his belief that the U.S. and her international allies are “in the process of losing the war against the Taliban”, having already “lost the battle for hearts and minds.”[6] To salvage the mission, the U.S. has deemed it necessary to widen its scope of intervention—by engaging “militants” in Zardari’s Pakistan.  On October 14, Secretary of State Hillary Clinton threatened to withhold flood aid for Pakistani citizens unless their government again raised taxes so as to better share in the burden of waging war against Taliban supporters and Afghan insurgents within Pakistan’s borders.  Since July, Pakistan has followed U.S. dictates and “launched offensives against [the Pakistani provinces of] Swat Valley, Bajaur, South Waziristan, Orakzai, and Khyber.”[7] While the puppet government continues hunting its own citizens, the U.S. military maintains its defense of its “right” to cross Pakistani borders in service of the Afghan occupation, whose spillover effects have already killed hordes of Pakistani residents and left millions homeless.  Worse, Zardari has been reported as “believ[ing] that terrorist bombing attacks inside Pakistan for which the Taliban are blamed are in fact CIA operations designed to destabilize Pakistan and allow Washington to seize Pakistan’s nuclear weapons.”[8] The more nation-building responsibilities the U.S. takes on, the more things fall apart in the region, which necessitates ever-greater involvement and micromanagement of the affected states.  If nation-building and interventionism can be said to establish any sort of order, it is clear that such order is neither autonomously sustainable nor mindful of the fundamental civil liberties of the Afghan or Pakistani “man on the spot”.  It is time to chalk up the last decade of interventionism as another painful lesson for those Wilsonian thinkers who would seek to “preserve the United States’ global hegemony and engage in armed proselytizing for democracy”.[9]

So if nation-building bankrupts, endangers, and dehumanizes the people in whose name the U.S. purports to act, what of the effects levied upon her citizens at home?  Do interventionist policies make us freer, richer, or, at the very least, safer as a nation?  Or ought we instead fear the civil consequences of an enlarged and more centralized State; the economic consequences of maintaining a globetrotting military; and the violent blowback inflicted upon Americans by the recipients of our so-called solicitude?  Let us examine each of these concerns.

When turn-of-the-century public intellectual Randolph Bourne famously wrote, “War is the health of the State”, he was suggesting that the State commands its greatest allegiance during those periods where it has deemed necessary—in the interests of national security and prosperity—the imposition of coercive force against an outside threat.[10] This notion is especially true of a republican society, which by the nature of its particular composition can boast none of the enchantments afforded to more autocratic regimes; a republic’s rulers, if such a term can be applied, are necessarily ephemeral and unsanctified, tainted always by the stain of partisan politics and civil commonness.  For such a State to transcend partisan disunity and capture the energies of a singular patriotism, its only recourse is through the display of military might against a common foe.  As such, it is during wartime that the State asserts itself in the hearts and minds of its people, and begins the insidious process of widening its authority.  Such authority is achieved in increments, with the State committing a series of civil transgressions on its own people that begins with its original declaration of interventionist intent.

As has been borne out by the history of our republican State, beginning with Jefferson’s First Barbary War and continuing through two centuries of violence (including a handful of false flag instigations of the most pernicious design) there is simply no instance in which the people were consulted regarding the decision to pursue military action.  Foreign policy is the de facto domain of the Executive Branch, however much involved the Congress may be in matters of domestic policy.  In international relations, the body politic as represented by Congress serves only as a mechanical extension of the Executive through the formality practice of ratification.  By the time this point in the legislative process is reached, the nation will already have been teetering on the brink of military obligation thanks to the unilateral machinations of the Executive and his agents abroad.  This is especially true today, in a world where the American hegemon does so much of its work through shadowy alphabet agencies beyond the censure of the people.  Without any opportunities for mediation by the people or their representatives, the State commits the lives of its citizens to the violent and unsure consequences of military conflict in a foreign land.  This is hardly the hallmark of a free republic, in which “agreements which are to affect the lives of whole peoples must be made between peoples and not by Governments, or at least by their representatives in the full glare of publicity and criticism.”[11]

Of course, all this is forgotten once the declaration has been secured by the State.  At this point, the already-diminished civil liberties of the people are curtailed even further when conscription properly begins, and the individual is made a subject of military regimentation.  As the conscripted soldier is coerced into becoming himself an agent of coercion, both his own rights and the rights of his eventual enemy are discarded entirely.  Whomsoever the State deems unworthy of life, liberty, and the pursuit of happiness, the citizen—now truly an agent of the State—sets off to harm.  He does this by internalizing the desires of the State in place of his own desires.  He gives up his freedom and manhood for the insane and indefensible trappings of an unseen controlling interest.  And on an aggregate scale, it is equally true that any nation believing in its own dubious right to extend military power beyond the borders of other nations necessarily elects to ignore the rights of other peoples to be free from foreign interference in the first place.  The interventionist nation gives up its moral standing in order to aggress.

Meanwhile, the situation at home continues to deteriorate.  In order to continue its expansion into foreign lands, the State tightens the tendrils of centralized power in domestic affairs as well.  By taking on the broad responsibilities of its patriotic crusade, the State convinces its constituents to grant it ever-greater powers.  The constitution upon which the republic was founded becomes a “living document” capable of bestowing all manners of “implied powers” to the agents of the State, the actions of whom Randolph Bourne describes as follows:

Every individual citizen who in peacetimes had no function to perform by which he could imagine himself an expression or living fragment of the State becomes an active amateur agent of the Government in reporting spies and disloyalists, in raising Government funds, or in propagating such measures as are considered necessary by officialdom. Minority opinion, which in times of peace, was only irritating and could not be dealt with by law unless it was conjoined with actual crime, becomes, with the outbreak of war, a case for outlawry. Criticism of the State, objections to war, lukewarm opinions concerning the necessity or the beauty of conscription, are made subject to ferocious penalties.[12]

War encourages uniformity to a conscienceless majority while marginalizing—even criminalizing—minority voices.  The essence of a free society, in which minorities are valued as diverse contributors to a pluralistic system, is sacrificed in the name of national security.  Liberty as a human value gives way to loyalty.  Creative types, intellectuals, and students of the humane disciplines, if they may escape the delayed suicide of warfare, are made to commit spiritual suicide in service of the State.  Worst of all, ordinary citizens are corrupted into transgressing the negative rights of their fellows in the effort to ensure all available energies are being directed toward the core patriotic mission.  Just as the soldier gives himself up to the State only to become a purveyor of aggression upon his fellow man, the private citizen allows the State to supplant his lifelong pursuit of liberty with the perverted desire to box in his neighbor as he himself has been boxed in.  Ultimately, the evils of interventionism are laid not upon the doorstep of the State—which remains an abstract political unit—but at the feet of the soldiers and citizens who allow themselves to become agents of immorality in the name of national security.

And of course, all this meddling overseas requires a steady source of funding.  Wide-scale economic extortion of the American people is thus the second great domestic evil of an interventionist foreign policy.  Currently, the U.S. military operates and controls between 700 and 800 military bases worldwide, while stationing military personnel in 156 countries.  We have bases in 63 countries, and have built new bases in seven countries since September 11, 2001.  Finally, the total land area occupied by U.S. military bases domestically within the U.S. and internationally is of the order of 5,443,077 acres, making the Pentagon one of the largest landowners worldwide.[13] It is no wonder that the U.S.’ total military spending in fiscal year 2010 fell between $880 billion and $1.03 trillion.[14] Meanwhile, recent trends in military expenditures as a percentage of GDP have indeed fallen, but only due to economic growth and not to diminishing military outlays; as such, though military spending as percentage GDP fell from a recent peak at 6.2 percent (1986) to 4.4 percent (2010), GDP itself has nearly doubled since 1986.  The U.S. outspends most other nations on military upkeep by multiple orders of magnitude, with the Cato Institute estimating that outlays per capita are five times those of Germans and over 27 times those of Chinese.[15]

Luckily for her present citizens, these outlandish expenditures have been made possible not through tax hikes, but with the aid of massive foreign borrowing.  Of course, this accelerates our unsustainable debt burden while placing us in a massive trade imbalance; we can be sure that America’s debt holders will not continue lending indefinitely, and that someday Americans will be called on to repay this massive debt—with interest.  When this happens, there will be no way for our progeny to afford the programs and infrastructure maintenance necessary for the continuation of our current lifestyles, meaning our actions today condemn future generations to a life we wish not upon ourselves.  Such horrid circumstances carry unsettling ethical implications, as in the words of Thomas Jefferson, “[T]he earth belongs exclusively to the living… [O]ne generation has no more right to bind another to its laws and judgments than one independent nation has the right to command another.”[16]

The final argument to be made against interventionism is as tragic in its simplicity.  As it turns out, imperialistic foreign policies, ostensibly pursued in the name of greater national security, in fact threaten the security of both our citizens and our soldiers by increasing the likelihood of foreign assault.  When the American military intervenes abroad as either an occupier or a war-maker, a certain degree of blowback is inevitable.  By bombing, raiding, policing, and directing policy on another nation’s soil, our troops become daily reminders to the local population that America finds it in her right to disrupt local life.  This fuels anti-American sentiments that, when manipulated effectively by groups like al-Qaeda, threaten the security of all Americans.  In the case of the War on Terror and the attacks that led up to it, we can trace terrorists’ motivations back to grievances seeded by American foreign policy; our decades-long troop presence, interventionist sanctions, and regime-puppeteering in the region were what first filled al-Qaeda’s ranks, and the ongoing conflicts continue to provide such groups with a powerful recruiting platform.  Writes Sheldon Richman, editor of The Freeman:

As long as the U.S. government pursues its imperial program of invasion, regime change, occupation, and sponsorship of corrupt governments in the Muslim world, Americans will be targets for avengers…. It’s either foreign intervention and retaliatory terrorism or nonintervention and security. There’s no third way…. Every empire has reaped a terrorist whirlwind. “Terror” is the tactic that the weak use against the strong.[17]

Robert Pape, a University of Chicago political science professor and former Air Force lecturer, further substantiated this conclusion in an interview last week regarding a just-released study on the nature and causes of suicide terrorism, “We have lots of evidence now that when you put the foreign military presence in, it triggers suicide terrorism campaigns, … and that when the foreign forces leave, it takes away almost 100% of the terrorist campaign”.[18] Blowback, as a phenomenon, is as real as it is transparent.  The solution is simple: end the empire.

When the facts are lain out and the realities exposed, our nation’s situation is cast in a new light.  The political reality remains that Americans rarely see the choice between terrorism and security for what it is: a choice between imperial ambition and noninterventionism.  The American empire need not persist.  The American soldier need not fight enemies of our own making, and the American citizen need not struggle to explain to his children why our country fights abroad.  The answer should be simple: we don’t, because we oughtn’t.

It is time our republic awakes from its conditioned acceptance of terrorism as a constant specter and militarism as our international legacy.  Let the image of America again be one of revolution, freedom, and democracy.  Let the revolution of nonviolence begin.

---

[1] http://www.bartleby.com/124/pres16.html

[2] http://www.econlib.org/library/Essays/hykKnw1.html

[3] http://www.econlib.org/library/Essays/hykKnw1.html

[4] http://www.thefreemanonline.org/headline/can-a-nation-be-built/#

[5] http://www.nytimes.com/2010/01/14/world/asia/14kabul.html

[6] http://www.telegraph.co.uk/news/worldnews/asia/pakistan/7924238/Pakistan-president-coalition-forces-losing-war-against-Taliban-in-Afghanistan.html

[7] http://news.antiwar.com/2010/07/06/us-demands-north-waziristan-offensive/

[8] http://www.lewrockwell.com/roberts/roberts284.html

[9] http://www.amconmag.com/blog/hawks-for-peace/

[10] http://flag.blackened.net/revolt/hist_texts/warhealthstate1918.html

[11] http://flag.blackened.net/revolt/hist_texts/warhealthstate1918.html

[12] http://flag.blackened.net/revolt/hist_texts/warhealthstate1918.html

[13] http://www.globalresearch.ca/index.php?context=va&aid=5564

[14] http://www.gpoaccess.gov/usbudget/fy10/pdf/budget/defense.pdf

[15] http://reason.com/archives/2010/01/07/military-spending-so-what

[16] http://www.goodreads.com/quotes/show/148657

[17] http://www.fff.org/comment/com1001d.asp

[18] http://www.salon.com/news/opinion/glenn_greenwald/2010/10/12/terrorism/index.html

Works Cited

“Can a Nation Be Built?” The Freeman | Ideas On Liberty. Web. 15 Oct. 2010. <http://www.thefreemanonline.org/headline/can-a-nation-be-built/&gt;.

Greenwald, By Glenn. “They Hate Us for Our Occupations – Glenn Greenwald – Salon.com.” Salon.com – Salon.com. Web. 18 Oct. 2010. <http://www.salon.com/news/opinion/glenn_greenwald/2010/10/12/terrorism/index.html&gt;.

Hough, By Andrew. “Pakistan President: Coalition Forces ‘losing War against Taliban in Afghanistan’ – Telegraph.” Telegraph.co.uk – Telegraph Online, Daily Telegraph and Sunday Telegraph – Telegraph. Web. 15 Oct. 2010. <http://www.telegraph.co.uk/news/worldnews/asia/pakistan/7924238/Pakistan-president-coalition-forces-losing-war-against-Taliban-in-Afghanistan.html&gt;.

“National Security: The Big Fraud by Sheldon Richman.” Welcome to The Future of Freedom Foundation. Web. 17 Oct. 2010. <http://www.fff.org/comment/com1001d.asp&gt;.

“Overspent and Overextended.” Reason Magazine. Web. 17 Oct. 2010. <http://reason.com/archives/2010/01/07/military-spending-so-what&gt;.

“Quote by Thomas Jefferson: “I Am Increasingly Persuaded That the Earth Belongs…”” Share Book Recommendations With Your Friends, Join Book Clubs, Answer Trivia. Web. 18 Oct. 2010. <http://www.goodreads.com/quotes/show/148657&gt;.

Reprint, Selected Essay. “Hayek, The Use of Knowledge in Society.” Library of Economics and Liberty. Web. 15 Oct. 2010. <http://www.econlib.org/library/Essays/hykKnw1.html&gt;.

Roberts, Paul C. “The War On Terror.” LewRockwell.com. Web. 16 Oct. 2010. <http://www.lewrockwell.com/roberts/roberts284.html&gt;.

“Thomas Jefferson: First Inaugural Address. U.S. Inaugural Addresses. 1989.” Bartleby.com: Great Books Online — Quotes, Poems, Novels, Classics and Hundreds More. Web. 15 Oct. 2010. <http://www.bartleby.com/124/pres16.html&gt;.

“US Demands North Waziristan Offensive — News from Antiwar.com.” News From Antiwar.com. Web. 16 Oct. 2010. <http://news.antiwar.com/2010/07/06/us-demands-north-waziristan-offensive/&gt;.

“War Is the Health of the State by Randolph Bourne.” Pierre J. Proudhon Memorial Computer. Web. 16 Oct. 2010. <http://flag.blackened.net/revolt/hist_texts/warhealthstate1918.html&gt;.

Kids are People, Too (…Maybe)

The life I live between blog posts is truly stunning in its subsumption of the nonessential. What with the constant need to buffer my property against the ravages of the South Los Angeles trashscape, and my exhausting struggle to prevent the occurrence of gross and improper groin angles (PDF warning) during episodes of repetitious lower-body exertion, one would expect the upkeep of essential gastric functions to be a foregone prerequisite to facilitating my many trivial pursuits. And yet, even this simple requirement at times escapes me.

As my body waged war against the nefarious agents of a most well-disguised Trojan Horse, my mind busied itself with an essential question of libertarian philosophy last introduced in my previous post regarding prostitution. From a rights-based perspective, the Prostitution topic provides a fantastic entry point to one of my favorite (read: unresolved) philosophical inquiries: the question of whether Children are indeed People. Phrased less flippantly, my struggle is in understanding the nature of “children’s rights” (or, phrased more flippantly, “Kid Lib”!). This issue remains a key sticking point of libertarian philosophy that, when left unresolved, allows the paternalist to cloak all sorts of value-based arguments in the defense of a child’s “best interest”. At the same time, it is a subject that presents particular difficulties for libertarian thinkers, as blogger KevinCK articulates in his blog education philosopher:

“I want to briefly outline why I think libertarians have such a hard time with the “child problem.” Libertarians, I think, are good at dealing with two different ideas: people (in the sense of autonomous adults) and property. To put it bluntly, children are neither of these and are probably best seen as somewhere in between the two in resemblance…. They are not quite autonomous persons because we – except some libertarians – recognize that children lack the mental ability to make certain decisions on their own or have the type of absolute freedom we grant to adults. Nor are they property because, morally, it strikes us as horrendous to think about parents being able to do anything they would like to their children. Unlike property, children have at least SOME freedoms.”

Paternalists defend their right to live in a world without legalized prostitution on the grounds that such a society would exert exogenous pressures upon child-rearing that neither the parents nor child could escape. It is essentially the same argument as the argument from the Offense Principle, which I had earlier dismantled in my previous post. However, by introducing the complexities of 1) A child’s right to realize his potential as a rational, self-owning adult, and 2) The parent’s right to raise his child as he so chooses, we are made to contend with a much more troubling moral argument that requires us to delineate the exact freedoms possessed by children and the parents that rear them.

To do this, we must clarify the parent-child relationship. As a unique individual separate from the parents, children must necessarily be as free from coercive force as their adult counterparts, their status as self-contained agents raising them above mere chattel or living property. Even in a free society, parents have no moral or legal grounds upon which they may initiate maiming or killing of their own children, for the same reason that they are prohibited from performing such acts on their adult neighbors. Furthermore, children–being potential adults–reserve the right to decide the exact point in their development at which they may set out on their own, taking on full responsibility as an adult and leaving the household and supervision of their parents. Whether this point overlaps with the 16th, 18th, 21st, or any other birthday is inconsequential; we must recognize that the decision rests with the child to remove himself from his parents on the basis that all potential adults have the right to claim for themselves the gift of self-ownership. Note that I am not advocating the removal of children from their homes; instead, I am defending the child’s essential right to decide for him or herself when separation may occur, given that separation necessarily transforms the child into an independent agent saddled with the full responsibilities of self-ownership.

But what then of the younger child, who yet struggles with helplessness and is years away from leaving the household as an adult? These children reside upon the property of their parents, dependent on their voluntary charity in the form of “unearned” goods and services. Thus, it follows that parents reserve the legal right to regulate the child at home, so long as such regulation excludes aggressive force and interference with the child’s absolute right to leave the household (once again, an act that severs the child’s connection to his parents’ property and care, thereby absolving the parents of their right to regulate).

Such are the rights of the child; as for the parent, he or she can be understood as an amalgam of property owner and voluntary guardian.

This leaves us to decide upon the moral and legal roles of the parent as guardian, and whether that role carries with it the right to limit others from changing social norms in a manner that affects the child’s upbringing. Entering into this discussion requires a deeper understanding of how moral responsibility and positive rights are distinct yet related, and a clarification on whether either of these notions can be legitimately defended.

I leave this task, and the resolution of the original question, for my next post.