There’s a simple alternative to regulation: liability. We don’t need to tell companies how to be safe if we make them legally responsible for negligence.
It’s as though Mass’s government decided that back-to-school season calls for creating real-life rent seeking examples for my class. They’re going to start taxing ride-sharing customers $0.20 per ride with five cents of that going to the taxi industry.
“The law says the money will help taxi businesses to adopt ‘new technologies and advanced service, safety and operational capabilities’ and to support workforce development.”
New technologies like an app that gets more use out of otherwise idle cars? Or an app that makes it easy to hail a ride with little wait? Or an app that brings supply into harmony with demand when demand surges? Oh wait! We’ve already got that and it’s the thing that’s being taxed!
There are a few important economic lessons that Massachusetts’ electorate is evidently in need of. Let’s start with taxes.
Taxes don’t stick
“Riders and drivers will not see the fee because the law bars companies from charging them.” They won’t see the fee, but that doesn’t mean they won’t pay it. A business only exists by collecting money from customers and paying some portion of that to suppliers. The government cannot tax a business without taxing that business’s customers and suppliers.
Granted, part of the cost will be reflected in lower profits (although profits aren’t as big as people think) which means Uber’s shareholders will face part of the tax. But what does that mean? It means 1) a little less money in pensions, and 2) potential investment capital is moved from the people who gave us the best version of taxi travel to the people who gave us the worst version of it.
Money is fungible and I don’t know how to run a cab company
Safety, new technology, and workforce development all sound good, but taxi companies (at least those that deserve to stay in business) will already be doing these things. Safety is important because accidents are costly (especially if your fleet size is limited by regulation). New technology is being adopted by every other (competitive) industry without government support. Other companies invest in their employees.*
Supporting workforce development is part of a larger trend of people supporting specific fringe benefits without appreciating the tradeoff between monetary and non-monetary compensation. And all these ideas reflect a faulty logic: just because something is good, doesn’t mean we need to force people to do it.
Voters simply aren’t in the right position to know if some good thing is good enough relative to other options. If you go into the backrooms of any industry you aren’t already familiar with you will surely learn about techniques and tools you had no idea existed before. So why should we expect that cab companies need regulators to tell them what to do? Let them learn from their trade magazines.
But there’s good news. If we mandated that cab companies use this new revenue stream to pay for new tires, they wouldn’t simply waste the money by buying superfluous tires. They’d stop buying tires out of their own revenues and start buying them from Uber’s. Telling someone to pay from their left pocket simply leaves more money in their right pocket for everything else.**
Extra money in cab company coffers could allow them to invest in better service, happier employees, “and help so taxi owners could buy ‘flagship’ vehicles like a 1940s Checker or a Porsche.” But cab companies are already free to reinvest their profits if they think doing so would create value (i.e. greater future profits). The more likely outcome is that they will simply have more money than before.
Competition is not the problem, it’s protectionism
When we see problems in the world we need to look for their root causes if we want to actually make things better. More often we act like a doctor diagnosing cancer is the cause of the cancer. Don’t want cancer? Outlaw doctors!
Cab companies aren’t as successful as they previously expected and the apparent culprit is Uber. But they only exist because an inefficiency in the market created a profit opportunity. Cab companies are doing poorly because they don’t provide as much value per dollar. And that’s largely because of regulation that prevents competition. Much of it was put in place specifically to protect incumbents from competition.
A lot of these regulations sound nice enough, but they still created the market niche that Lyft and Uber filled. And they protected cab companies from competition right up until ride-sharing became feasible.
Regulation is not the answer
Let’s give cabbies the benefit of the doubt for a minute. Let’s assume that they aren’t really in it for the cash-grab and that they just want to help people get around safely and conveniently. Let’s even assume that NYC’s medallion system is about congestion rather than competition.
If that’s the case, then there are better ways to address the root causes of the problems cabbies tell us to worry about. We don’t need to address each of these problems individually if we can find a few key causes at the root of each of them.
Cabs have medallions but civilians don’t, so congestion will still be a problem in cities until congestion fees are implemented that balance the demand for road access with its limited supply. Safety is important, but mandating extra inspections for only some types of cars is a half-assed way of dealing with it.
There’s a simple alternative to regulation: liability. We don’t need to tell companies how to be safe if we make them legally responsible for negligence. This is an important lesson for how we think about regulation in all industries. The basic logic is also why economists vastly prefer pollution taxes to specific regulations; it’s usually better to name the outcome we want and create a cost for failure to meet it rather than mandate specific behaviors.
Perhaps this means we should modify the laws that require all drivers to be insured so that some drivers have higher minimum liability coverage. That would be far less invasive and do far more to alleviate the concerns Uber’s critics raise than mandating specific behaviors.
Concentrated benefits dispersed costs
Okay, so maybe this is too small an issue to be concerned with. If that’s not by intentional design, then it at least reflects an evolutionary logic. This policy is likely to survive because the people it taxes will face a cost so small it isn’t worth doing anything about. Yes, Uber and Lyft have incentive to lobby against it, but it’s so close to invisible that they’ll probably be able to pass it almost entirely on to drivers and passengers.
This is going to cost millions… with a tiny little m. At first I read it as a 5% tax and quickly realized that Uber rides are so cheap that I won’t even notice it. And 20 cents a ride is even less than 5%.
So why worry? Precedent. The problem with death by a thousand cuts isn’t any one cut.
*Of course we can argue about whether they do enough of that. There may be a tragedy of the commons if there’s asymmetric information between people looking to make human capital investments and businesses looking to gain access to specific human capital. Such a situation might create an opportunity for government to do some good by investing in public goods or subsidizing on-the-job training. But if that’s the case, it calls for very different programs (education reform, etc.) than taxing successful companies to subsidize their competition.
**Why is this good news? Because if cab companies did change their behavior it would imply they’re doing something where cost exceeds benefit. It would destroy value. Remember those stories of WWII rationing? Imagine that situation but with cab companies buying twice as many tires and just storing extras in the garage. It would clearly be a bad thing. Scarcity isn’t so urgent nowadays, but the basic logic remains the same.
Rio Olympics are close to the end, and so far it has been a wonderful time for Brazilian athletes: the country is scoring 15 total in the medal table, quite high in its historical record. Brazil’s first Olympic medal in 2016 was won by Felipe Wu right in the first day of competition: silver in Shooting, 10m Air Pistol Men. Wu was followed by Rafaela Lopes Silva, who won gold in Judo, Women -57 kg, and then by Mayra Aguiar, who won bronze, also in Judo, Women -78 kg. Rafael Silva won another bronze for Brazil in Judo, Men +100 kg, and then Arthur Mariano won still another bronze, this time in Gymnastics Artistic, Men’s Floor Exercise. Diego Hypolito won silver in the same competition. On the tenth day of competition Poliana Okimoto won Bronze in Marathon Swimming, Women’s 10km and Arthur Zanetti won Silver in Gymnastics Artistic, Men’s Rings. The next day, Thiago Braz da Silva surprised everyone by beating favorite French Renaud Lanillenie and winning gold in Athletics, Men’s Pole Vault.
In the last few days other athletes followed the ones mentioned in this opening paragraph, but I limit the text to them for a reason: one highlight of these first 9 Brazilian medalists is that, with the exception of Hypolito, all of them are in the military, and some of my friends on what is considered “the right” in the Brazilian political spectrum are using this information to poke (in good spirit) my friends on the left. On the other hand, my friends on the left highlight that many of the Brazilian medalists also have in common coming from very poor backgrounds, and finding in government social programs the chance to become professional athletes. I want to be careful to say that both are wrong and I want to explain why (I hope I will still have some friends after this). Basically both ignore the concept of opportunity cost.
The concept of opportunity cost postulates that spending in one direction means not spending in another. In other words, that every choice comes with the cost of forgoing the next best alternative. It was developed in all but name by 19th century French economist Frédéric Bastiat in the parable of the broken window (also known as the broken window fallacy or glazier’s fallacy) that appeared in his 1850 essay Ce qu’on voit et ce qu’on ne voit pas (That Which Is Seen and That Which Is Not Seen). The parable goes somewhat like this: a boy breaks a window. The window owner gets upset, but someone tries to comfort him by saying that this will give the window manufacturer the opportunity to work. In the end, the economy wins. Bastiat shows that this is a fallacy: the money spent in a new window could have been spent in another way, say, with new shoes. The world would have new shoes and still have a window, but now the world has a new window and no shoes. Bastiat proceeds to show the law of unintended consequences, or how our actions can affect the economy in ways that are “unseen” or ignored, and also to apply the concept to several areas of public policy. Two of these happen to be military expenditure and “Theatres, Fine Arts.”
Concerning military expenditure, Bastiat argues that spending money in order to defend the country against foreign aggressors can be a good investment, but that any money that goes beyond this necessity would have been better spent in other way. This argument goes against Bastiat’s contemporaries who argued that money spent on the military had the benefit of creating jobs, even if defense was not a real necessity. Bastiat’s conclusion is that if the money was left with the taxpayer, this person would find ways to spend that would create more and better jobs. Applying to current events, if Brazil is spending money in the military in order to protect its borders, this is a good investment. If instead it is spending money in the military in order to get Olympic medals, the money should be spent elsewhere.
Bastiat lived before modern Olympic Games, so he has nothing directly to say public spending in this kind of event, but I guess that what he says about “Theatres, Fine Arts” also applies here. Some of his contemporaries defended that the government should invest in Theatres and Fine Arts, because these things are good in themselves, created jobs, and so on. Bastiat was once more against what he saw as excessive public spending. This time his answer exposed him to the logical fallacy of the straw man, or misrepresenting one’s argument in order to make it easier to attack: his critics accused him of not caring about Theatres and Fine Arts. But if we examine the evidences carefully, that is not the case at all: to say that the government should not invest in Theatres and Fine Arts is not to say that nobody should invest in it. It is just to say who is supposed to make the investment, the government of individuals. I am not equalizing Theatres and Fine Arts with sports, but I believe the lesson applies in this field as well: to say that the government should not invest in sports is totally different from saying that nobody should invest in it.
In conclusion, it seems that public investment in the military and social programs is helping Brazil to win medals in this Olympics. But we can ask ourselves where would that money have gone had this investment not been made. Based on Bastiat, I believe that if the money spending was left for the individuals, Brazil would have better military, more Olympic medals, and less necessity of social programs, not to mention better jobs, and a better overall economy. Perhaps after this Olympic Games my friends both on the left and on the right can feel like investing more in sports. Or maybe they will realize they prefer to spend on something else.
Hopefully, the US election will start getting out of the he-said-she-said of assassination attempts and badmouthing parents of military personnel and start being about actual policy issues. Unfortunately, that isn’t going to happen at all, but in a minuscule and futile attempt to help get us there, I’m going to blog about some policy issues for a minute.
Trump’s campaign released a brief memo about his healthcare positions recently. For the most part the positions—though not quite detailed enough to really call a “plan”—are fairly decent. They contain most of the reforms free-market analysts have been proposing for decades such as opening insurance competition across states, allowing for Health Savings Accounts, and streamlining Medicaid funding. Notably missing was abolishing the employer mandate to reduce price fragmentation, as Milton Friedman proposed, although Trump proposes taking steps in that direction by introducing a tax deduction for individual insurance plans.
But what stuck out to me was that Trump, surprise, surprise, made xenophobia an element of his health care proposal by furthering the myth that immigrants are a further drain on our healthcare and welfare programs:
Providing healthcare to illegal immigrants costs us some $11 billion annually. If we were to simply enforce the current immigration laws and restrict the unbridled granting of visas to this country, we could relieve healthcare cost pressures on state and local governments.
Meanwhile in reality, undocumented immigrants actually contribute more to Medicare than they withdraw. It is unclear where Trump is getting his $11 billion figure, but he is ignoring the increased payroll taxes undocumented immigrants pay into these programs. A 2015 study found that, in fact, between 2000 and 2011 immigrants paid up to $3.8 billion more into Medicare than they took out. From the results of the study:
From 2000 to 2011, unauthorized immigrants contributed $2.2 to $3.8 billion more than they withdrew annually (a total surplus of $35.1 billion). Had unauthorized immigrants neither contributed to nor withdrawn from the Trust Fund during those 11 years, it would become insolvent in 2029—1 year earlier than currently predicted. If 10 % of unauthorized immigrants became authorized annually for the subsequent 7 years, Trust Fund surpluses contributed by unauthorized immigrants would total $45.7 billion.
Thus Trump’s campaign is being factually dishonest by claiming that restricting immigration will help fund government healthcare systems, it will actually make Medicare go insolvent sooner. Which is especially concerning given that, until this memo, Trump has shown no interest in any meaningful entitlement reform.
This refrain—that immigrants are a fiscal drag on America’s welfare programs—has been among the most common refrains from Trump, and has even been popular among libertarians who are otherwise sympathetic towards immigration. But, as I’ve argued extensively in the past, it is completely false. Almost every major study shows that immigrants, at worst, pay as much into welfare programs as they get out of them.
Right now my city, Rio de Janeiro, is hosting the Summer Olympic Games. It is in many ways a great moment, and it is especially good to see people from so many parts of the world together in relative harmony. In other words, a good example of cosmopolitanism. The cosmopolitanism in the city today reminds me of the attempts of multilateralism that marked Brazilian (and world) foreign policy in previous governments, but that now seem to fade away. The two terms, cosmopolitanism and multilateralism, are not exactly synonyms, but are closely related: multilateral policies should work in bringing peoples together in a more cosmopolitan world. Concerning that, I think of a multilateralism that does not work in bringing people together through cosmopolitanism, and one that can work in that way.
When the Cold War was over, multiple theories were presented to explain what would happen to a world without the tension between two superpowers. Some suggested that the US would reign as a lone superpower; others that it would embrace some form of benign hegemony, in a New World Order. Others still believed that US power was in decline, and that the World would see more multilateralism in the 21st century. This last view was especially dear in Brazil, but as the 21st century progresses, it does not seem to hold as much water anymore.
One great example of multilateralism substituting American hegemony was the integration of Western Europe, but that does not seem to be the case anymore. It is true that beginning shortly after WWII European countries experienced growing levels of regional integration, culminating with the European Union and the Euro in the 1990s. But even then, economists warned politicians and the general public that such a level of integration was not possible, at least not without a central government in Europe. Successive economic crises, Brexit, and the harsh questioning of immigration policies show today that economists were right back then.
Another example of multilateralism celebrated in the 1990s was the growing importance of the UN. Successive humanitarian missions and interventions in several countries suggested that that UN could now surpass the dawn that marked the relationship between USA and USSR in the previous period. Optimism went so far as to discuss themes such as the ‘obligation to intervene’, substituting previous understandings of state sovereignty. But as the years go by, cases like Haiti, Rwanda, Sudan, and many others show that the optimism was at best too high.
Finally and more recently, Brazil and other underdeveloped and developing countries focused greatly on South-South Cooperation, trying to substitute the more standard paradigm of North-South Foreign Aid. This materialized in initiatives such as UNASUR and BRICS. Although presented as a new development, that was actually very reminiscent of The Non-Aligned Movement, The Group of 77, and other initiatives from the 1960s and 1970s. Now, as Brazil, Venezuela, Ecuador, Bolivia, Turkey, China, Russia, and several other countries face growing levels of economic and political hardship, attempts to “overcome American hegemony” seem but preposterous.
New forms in multilateralism in Europe, the Global South, and even the World (in the UN) did not work because they are not really democratic, as they claim to be. Behind a rhetoric of democracy, empowerment of the poor, and so on, they are just new forms of mercantilism: political elites trying to control the economy, not just at the national level, but the international one as well. The point was never to actually bring people together, but to maintain the status quo by avoiding real competition.
The multilateralism that can bring about cosmopolitanism, and that somewhat shows in the Summer Olympic Games in Rio, is one characterized by spontaneous order. People do come together: that is the natural ways of things. The desire to trade spontaneously brings different peoples closer to one another, and as they are closer they realize how much they have in common, and also what can be learnt from the differences. It is not always a peaceful dealing, but the more people are educated to tolerate the differences and to benefit from them, the more cosmopolitan they become.
A top down approach to cosmopolitanism is just a deformed clone of the real thing. Even if some results appear, they always seem to fall somewhere in the uncanny valley, and anyway, the results do not last very long. A bottom up cosmopolitanism is the real thing, and if only elites let it be, it can grow stronger, bring more wealth, and even a little more peace to the world.
I think Donald Trump has the attention span of a two year-old and the potty mouth of a six year-old reared by an indulgent grandmother who is also hard of hearing. I also think he is deeply ignorant on a very important issue (international trade) and I disagree forcefully with him on another (illegal immigration from the south). Finally, I believe there is little chance that a President Trump’s foreign policy would reverse the Obama precipitous decline of the US on the world stage, which I think is dangerous for Americans.
Not a pretty picture overall. So, it takes serious concerns for a dedicated, generally well-informed rationalist like me to vote for him. Here are the reasons why I will.
First, Trump has already told us whom he would appoint for the Supreme Court which sets the life conditions of American society for a generation or more. All his potential appointees are fine by me. It’s not difficult to guess that no Clinton appointee would be acceptable, not one, zero. Any of them would facilitate the creeping abrogation of the US Constitution we witnessed under Obama.
Second, I am certain – because it’s difficult to imagine otherwise – that a President Trump would try to stop and reverse most the climate change cult nonsense and relegate it to the level of a private religion where it belongs. His administration would allow an energy revolution sufficient in itself to rekindle economic growth. I see no prospect of normal economic growth under a Hillary Clinton presidency. (I mean 3% per year and over.) She has said herself that she would continue Pres. Obama’s paralytic policies.
Third, through the example of his sheer verbal brutality, Trump would lift some the yoke of political correctness. This is not a superficial or a light reform. I believe that political correctness actually paralyzes Americans’ criticality on nearly all issues. (Examples on request.)
My last reason is Democratic candidate Clinton of course, even if I leave aside every single one of the leftist policies she is likely to try to implement. Mrs Bill Clinton is still bought and paid for. The fact that I don’t know exactly by whom or by what only makes it worse. (Someone who would not braggingly share her $250,000 a shot speeches with the public is unthinkable to me.) On that account alone, if I had to choose between H. Clinton and Al Capone for president, it would be a toss-up. We know what interests Al was serving, after all.
There is worse: Her lies about her lies, her lies that have zero chance of being believed have become a proof that she is delusional, at least part of the time. By contrast, Trump ‘s untruths are like those of a little boy who can’t help himself from opening his mouth before he talks.
Presidential elections are not only about the presidency, of course. They give the winner’s party a confirmation of the validity of the principles it proclaims and of the policies it embodies. This is obviously true for well defined policies such as Obamacare. It’s true, more subtly, about cultural policies both explicit and implicit. Seven and half years of Obama administration have established firmly – with Big Media complicity – the language of envy and the spirit of beggardliness in American political discourse. Public speech is now built around platitudes, clichés, half-truths, and big lies repeated so frequently that they have become truth, Goebbels-style. The new liberal language is disgusting but completely predictable and thus boring. It’s also a form of child abuse. (Individuals who were 10 during Pres. Obama’s first campaign are now 19. They have never known public sanity.) As for Demo principles, there aren’t any. I count my blessings!
Donald Trump on his part, is his own buffoon. He is only an epiphenomenon. His objectionable traits are not part of a cultural movement. He is not contagious. There is zero chance the Republican Party, or the conservative movement are going to adopt his crudeness. Neither could if they tried.
I am angry about this cultural deterioration because I believe that in the long run what people do, what they accomplish collectively, is strongly constrained by culture. The contemporary American left-liberal culture shackles the imagination, and by doing so destroys many possible futures. Again, the Obama/Clinton conceptual swamp is vastly more of a lasting threat to America than the childish vulgarity and the ignorance Trump displays so frequently.
Being on the side of Trump often puts me in embarrassing company, I admit. But being on Clinton’s side would place me knowingly in vicious company. It would also range me squarely on the side of an intellectual class that has spent decades consolidating its collective blindness and its collective deafness about the reality of the world. It’s a class I know well because much of it lives in universities. There is no doubt that Trump as president is a big gamble. But Clinton is no gamble at all; her evilness is predictable.
Sometimes, to be a man of conscience, you have to gamble. That’s what I plan to do, on my behalf and on your behalf.*
* Public persons often contribute unwittingly to me finding my bearings: If Harry Reid, the corrupt real estate and proud deliberate liar loudly condemns Trump, there has to be something right about supporting Trump.
I am based in Turkey and have been at the edge of some dramatic events. Before I was in Turkey, I was in the Turkish sector of Cyprus (officially designating itself the Turkish Republic of Northern Cyprus, but only recognised as such by Turkey), where I followed the Postmodern or Indirect Coup of 28th February 1997 when military representatives on the National Security Council were able to force the collapse of a coalition government under an Islamist Prime Minister. Later that year I relocated to Istanbul where I experienced sporadic terrorism from Kurdish separatists and Jihadists. In June of this year I landed at the Atatürk airport just after an ISIS suicide attack. In a more gradual way I saw the disappearance of a Turkish political system under the guardianship of Jacobin laicist army generals, known as Kemalists after the first President of the Republic of Turkey, Kemal Atatürk.
The changes in Turkey came about through a de facto alliance between a party with Islamist roots, the AKP (JDP, Justice and Development Party) and the followers of Fetullah Gülen. Gülen was himself a product of Nurcu Islam, which developed in the early years of the Republic before World War Two as a reaction against the state-led secularisation of Turkey. Gülen was a not very well educated preacher who operated in the context of a fragment of the Nurcu movement, which is not as a whole connected with him. Given the enormous tension between laic Kemalists and the religiously observant population, there was room for a movement devoted to developing conservative Muslim power in civil society and the state.
The Gülenists were preceded in this by the Nakşibendi community, which targeted the state bureaucracy and had followers in politics, notably Türgüt Özal, Prime Minister and then President in the 1980s. Secretive and manipulative politics has been a feature of Turkish and Ottoman politics for a long time. The power of the Janissary elite military and bureacratic corps during the Ottoman period was tied to a religious community, the Bektaşis, creating a parallel system to the legal power of the Sultan until they were violently crushed in the late eighteenth century.
The Committee of Union and Progress, which came to power with military support in the last phase of Ottoman history, developed into a conspiratorial organisation rather than a parliamentary political parry, and a secret arm of it was at the centre of the destruction of Anatolian Armenians in 1915. Secretive groups of Unionists provided a power base for Kemal Atatürk when he revolted against the restored power of the Sultanate and its subservience to the partition/occupation of what is now Turkey after World War One.
The idea of a secret part of the state was maybe not so strong during the early years of the Republic when a one-party system (though in principle the republic was under popular sovereignty) under the dominance of Kemal Atatürk and then İsmet İnönü maybe made it less necessary. Nevertheless, the conditions were established for a revived politics of manipulation behind the scenes. Unfortunately, İnönü’s decision to join the west after World War Two played a part in this. The reorientation resulted in free elections in 1950, with a change in government, and Turkish membership of NATO in 1952.
As in some other countries, the Gladio units played a role in dark political activities. These were the units established to engage in resistance in the event of a Soviet invasion. They had a secretive army within an army aspect and were inevitably a magnet for the most fiercely anti-communist officers, including Alparslan Türkeş, who played an important role in the 1960 Coup. Türkeş was expelled from the coup government, which found him too radical, but he founded the extreme right party in Turkey, Nationalist Action, which is comparatively moderate now, but was heavily involved in political destabilisation and terrorism along with the most anti-communist parts of the state.
What came later was infiltration of the state by Nakşibendis and then Gülenists. Their activity was rather overshadowed by the darker activities of the army and its extreme right allies, often also connected with the Mafia. This network is often known in Turkey as the Deep State. It tended to favour a secular democratic system in terms of formalities, but with concessions to religious conservatism along with an anything goes attitude to covert war against communists and then more importantly Marxist Kurdish autonomists, as well as very limited tolerance for the Left. The hard right element of the army with a base in Gladio was not the whole story. There were far left army officers, particularly up to 1971 and a general staff that tended to be in the middle, though the middle tended to move further right from 1960 to 1980, and then became unwilling to launch anymore violent coups after the 1980 military council stepped down in 198. The general staff itself became increasingly concerned about infiltration by Islamists, including Gülenists.
As it turns out the army’s fear was more than justified. The country liberalised, from a very illiberal base, in the late 1990s, and while the army to some degree went along with that, it launched a peaceful ‘post-modern’ coup in 1997 against the Islamists and was left with the image of the pillar of anti-democracy and anti-liberalism in Turkey. This is an important part of the background to the AKP ‘moderate’ Islamist/conservative democrat electoral victory of 2002 along with the economic crisis of 2001, which along with the 1997 coup left the secular parties very fragmented. The AKP gained a lot of liberal and libertarian support (a very small proportion of Turkey though) and more general reformist support from those who believed it would be a vehicle for reducing the military role in politics and for generally less nationalist-statist politics.
The AKP had very few supporters in place in the military, in the state bureaucracy, or in senior positions in education. The Fetullah Gülen campaign to turn his supporters into the dominant force in Turkey meant they had people in these positions, partly through infiltration of state institutions and partly through founding private educational institutions. This was just one part of the Gülen empire, which include major media groups, banks, and industrial companies in Turkey, and in many countries outside Turkey including the USA. Gülen himself moved to the USA to avoid prosecution by the Kemalist old guard before AKP came to power, claiming to have no links with the economic and educational empire of his supporters which is clearly less than honest of him.
The Gülenists expected a large role in the AKP government and served them most spectacularly in purging the armed forces after an attempted website coup in 2007. In that year the armed forces, unwilling to launch an outright coup, hoped to influence public opinion and the political process by placing a message on its website proclaiming the army’s guardian role in relation to secularism. This turned into the final political defeat of the army’s Kemalist guardian-tutelary role. The AKP won a general election and a referendum to change the method of electing the President. This triumph of civil electoral politics was, however, undermined by the trials of supposed armed coup plotters in the armed forces. Such trials gave the impression of completing the civilian dominance over the army, but were themselves rigged using weak and outright faked evidence. The judges and prosecutors were from the Gülen movement and were creating space for their own people to take the high offices in the armed forces.
The AKP began a campaign against the Gülenists after making its own illiberal core attitude very clear in 2013 in its highly intolerant and authoritarian reaction to the Gezi protest movement. It was increasingly clear to the (even then) most enthusiastic of liberal fellow travellers with the AKP that it was Islamo-nationalist and statist at its core, reducing democracy to the unlimited will of the party elected to government. The Gülenists and the AKP now found the state was not big enough for both of them and the Gülenists decided to use conspiratorial methods against the AKP. Audio files and video tapes of AKP figures and associates, which had evidently been kept in reserve and which suggested widespread corruption were released. Recep Tayyıp Erdoğan (then Prime Minister and now President) and the AKP government succeeded in sacking, retiring and transferring enough Gülenist police officers, prosecutors and judges to stop this evidence coming to court. They then declared the Gülenists to be a parallel state and a terrorist group, entering into a process of purging the state of Gülenists and seizing their assets in the media, educational and other sectors. The coup conspiracy convictions against army officers, and others, were overturned and it became widely accepted that Gülenists had rigged the trials.
On 15th July this year, I was at a small party on a terrace in the Üsküdar district of Istanbul, overlooking one of the Bosphorus bridges, though by quite a large distance. We could see traffic interrupted on the bridge and news began filtering through of a confrontation between police and army units in what was described as an anti-terrorist operation gone wrong, but was beginning to sound like the beginning of a coup. It turned out that a coup had started and for a brief part of the night it appeared that the old Kemalist-Guardian army had come back to dispose of a government that was elected but increasingly authoritarian. Any welcome in the party where I was, of secular anti-AKP Turks and foreigners was strongly outweighed by a fear that a coup regime would be authoritarian, would create new problems, and the AKP or something like it, if not worse, would be in power for ten or twenty years by way of reaction. This turned out to be the mood of anti-AKP and anti-Erdoğan Turkey. It also became increasingly reported and accepted across the political spectrum that though the putschists had adopted Kemalist language, they were for the most part Gülenists rising up before a purge of the army in a last grasp at domination of the Turkish state.
Since then a purge has unfolded against the Gülenists in state and society, covering the universities (the sector where I work), which has already led to the sacking and arrests of about 60 ooo, including constitutional court judges, army generals and university rectors. The number will certainly at least double before the purge and the current state of emergency is over. Such sweeping action is understandable up to a point given the violent actions of 15th July, and the accumulating evidence over the years of Gülenist infiltration to create a Gülenist-controlled state and society, but clearly the potential exists for massive and systematic individual injustice with abuses of state power affecting over enemies of the state, real and imagined. Some of the language President Erdoğan has used since the coup has been highly polarising and vengeful, demanding submission to state power; some of his rhetoric has been more conciliatory, recognising that all political parties opposed the coup and that deputies across the spectrum sheltered together in the basement of the National Assembly fearing for their lives. I cannot say I am hopeful that the post-coup atmosphere will be beneficial to liberty, but we should hope for and work for the best in Turkey, while being vigilant in working against further declines of liberty.
In semi rural Normandy, in France, a mass is interrupted by two young men who speak Arabic among themselves. They force the aged priest to kneel. They demand that some of the faithful present video the next scene. Then they cut off the priest’s head with a long knife. They don’t shoot him!
After this, they take several people hostage, injuring one seriously and they attempt to escape. The police are waiting for them outside and shoot the decapitators dead.
In this true story, only the police had guns just like liberals and President Obama want it to be the case in the US. The murderers almost did not commit their crime because they only had one gun that was not even functional, almost didn’t.
ISIS quickly claimed the crime as committed by some of its “soldiers” (brave soldiers, murdering an eighty-year old priest). One of the dead assassins was immediately identified as a local young man. He was on electronic bracelet parole after being arrested in Turkey and sentenced for trying to join Islamic State. The French authorities don’t joke when it comes to terrorism!
The main French imam condemned the crime immediately and in the most vigorous terms. He did not comment on the mode of the assassination, beheading. He did not speculate whether this could have some cultural resonance for some Muslims, given that the Prophet Mohamed himself demonstrated a certain preference for beheading as a way to dispatch his enemies. (References on request.)
The French are brain frozen. No one in France has wondered publicly about what would have happened if one of the faithful at mass had carried a hidden handgun.
I have been debating classicalliberalism and the EuropeanUnion with Edwin van de Haar. For the moment at least, I think the debate should end or we will risk repetition of previously made points. I would like to thank Edwin for a constructive debate and to invited readers to read through it themselves. Now is the time to move onto a more concrete discussions of the UK referendum vote to leave the European Union.
The UK referendum vote to leave the European Union is not producing the consequences its most eloquent supporters and ideologues had predicted. It is of course very early to have a complete view of the consequences of Brexit, but a large part of Brexit journalistic, campaigning and intellectual elite have argued for leaving the EU on the grounds it would enable a mıore free market UK, one less burdened by regulations ‘imposed’ from Brussels.
A disproportionate part of this elite claims to be libertarian or conservative libertarian, operating in party politics via the Conservative Party and the UK Independence Party and operating in libertarian to conservative campaigning groups. Employees of the most important classical liberal and libertarian policy institutions, the Institute of Economic Affairs and the Adam Smith Institute were divided on this issue. However, some part of the Brexit elites were High Tory, that is traditionalist conservative.
The insistence on sovereignty and national institutions outweighs a commitment to free markets and individual rights. Immigration in particular comes off badly here. The High Tory narrative dominates the Brexit narrative in practice. Some Brexit enthusiasts welcome the supposed opportunity to boost defence spending (though this has nothing do with the European Union which places no limits whatsoever on national defence spending) and believe Brexit will allow restoring the UK’s Great Power status. This is already very high by general European standards and given the inherent limits of the UK’s resources compared with the USA, Russia and China, it’s hard to see how great power status could be attained and why the UK should try. It is clearly not compatible with retrenchment of the state.
David Cameron announced his resignation as Conservative Party leader and Prime Minister straight after the referendum result. His replacement Theresa May began her term of office with a speech suggesting greater state involvement in the economy and society. As Home Secretary she has a particularly illiberal record in civil liberties, immigration and drugs. She has announced support for changes in company law to force firms to accept employee representatives onto boards and restriction on takeover laws.
These measures have led the ‘Red Tory’, Philip Blond, to announce compatibility with his views and enthusiasm for her leadership. Blond runs the policy institute, ResPublica (http://www.respublica.org.uk). He was a colleague of mine in graduate programs at the University of Warwick in the late eighties, though I have not been in touch with him since. He moved from a period of research and university teaching in theology (he was studying European philosophy since the early nineteenth century when I knew him) into the policy world.
The contemporary theologian who influenced him most is John Milbank, an adherent of a version of the Christian tradition which tends to advocate community above individual, or at least would seem to do so if its social philosophy is turned into state enforced actions. There is a strong element of Medieval nostalgia for an organic society in Blond’s social and political thought. He is arguing for less not more free markets and individualism. Now there is no reason to think that Blond’s ideas will have a major influence on May, but if he feels so comfortable with her then that is reason to think there will be strong streak of communalist conservatism in the post-referendum government and even a hint of Christian socialism.
May’s approach has also been compared to that of Joseph Chamberlain, a nineteenth century advocate of interventionist local government and then of a protectionist, state-welfare orientated British Empire; he was as well considered by some to be the strongest advocate of Empire ideology in his time.
Previous free market advocates, who found it easy to be advocates when the EU served as a scapegoat for any and every overextension of state activity in the UK (whether or not in reality it originated with the EU), have become less clear in their commitment given that some EU support for open markets, such as bans on subsidies to keep bankrupt companies afloat, are no longer available. With some institutional supports for free markets removed, the Brexit liberty advocates find themselves in a world of paying off voters who voted for ‘leave’ because they don’t like ‘neoliberalism’ and blame any difficult consequences of technological invention and market innovation on Brussels Bureaucrats along with immigration from EU countries.
One key theme of the more ostensibly libertarian parts of the ‘leave’ campaign was to argue that they did not want to reduce immigration, but globalise it by replacing automatic rights of EU citizens to live in the UK with an Australian points system, which allows people to enter from anywhere in the world who has sufficient points with regard to educational level, scarce skills, money to invest and so on. However, it is clear that many ‘leave’ voters just want a reduction in immigration and May has distanced herself from a ‘points’ system in favour of absolute reduction.
The ‘leave’ vote won based on the anti-immigration, anti-globalist and anti-‘neoliberal’ instincts of a significant section of the ‘leave’ vote. It is not the whole of the ‘leave’ vote, but ‘leave’ could not have won without it. The evidence so far is that whatever the intentions of the libertarian to conservative element of ‘leave’ thinking that the government is now driven by the wish to follow that aspect of public opinion. The UK is headed towards communalist corporatism, or even protectionist/mercantilist, security-state Great Power nationalist versions of conservatism. Clearly there is much work for liberty advocates to do in the UK counteracting this disaster.
Sometimes the theater of the absurd, current events that is, just gets to be too much and I have to comment. This time the issue is whether photography is an art form, a case arising from a professional photographer’s refusal to cover a lesbian wedding. If photography is art, goes the argument, it’s a form of speech protected by the Constitution and that protection overrides any laws prohibiting discrimination on account of sexual orientation.
This nonsense arises from the notion that some forms of voluntary transactions should enjoy legal protection and others shouldn’t. Transactions that are deemed to be exercises of religion or freedom of speech are protected while it’s OK to suppress others even when they are mutually voluntary. The courts view artistic works forms of speech, and are protected. This protection covers not just engaging in protected activities but also refraining from engaging in them. Thus if photography is art, then refraining from photographing a lesbian wedding is an exercise of free speech, protected by the first amendment.
That’s all well and good as far as it goes, but it leaves courts with the job of drawing lines delimiting religious activity or free speech activity. Example: during Prohibition, Catholics were allowed to use wine as part of their Communion sacrament. But Native Americans who want to use peyote as part of their religious ceremonies have consistently run afoul of the law. What’s the difference? Obviously, Catholics are more numerous and politically powerful than Native Americans. Since there is no objective way of delimiting either religion or art (as presently understood), court decisions about these matters are necessarily political.
Delimiting artistic expression may be even more problematic than with religion. Given that any and all kinds of garbage can be found in “Modern Art” museums, it would seem that almost any activity, spraying graffiti for example, could be construed as artistic expression.
The solution is to recognize the right of free association and its concomitant freedom of dissociation, whether in personal or business affairs. (Though not a part of the First Amendment, these rights might be found in the Ninth Amendment.) There are two qualifications. First, any transaction that infringes on the rights of third parties is illegitimate. As Ayn Rand put it, “any alleged ‘right’ of one man, which necessitates the violation of the rights of another, is not and cannot be a right.” Second, politicians and bureaucrats must not be allowed to discriminate since they are supposed to represent the entire population. Those qualifications aside, any business person must be free to turn away gays, blacks, Jews, or anybody else, with or without explanation. But woe unto anyone who tries such exclusions in today’s world. They would pay a stiff price in lost business and boycotts. Unless they found a niche market among KKK bigots, such business people would very likely lose most of their customers, including, I hasten to add, this writer.
Some time ago I posted a piece on these pages defending the right of Lester Maddox, a truly obnoxious character, to exclude blacks from his chicken restaurant, which he did in the 1960s in defiance of the Civil Rights Act. Those were different times, and he garnered enough support to get elected Governor of Georgia. That would not happen these days.
Though I got a lot of pushback, I stand by the argument that obnoxious characters like Lester Maddox constitute a vanguard that helps defend the rights of us “normal” folks. If their outrageous but non-aggressive actions are protected, our moderate actions are safe. Nobody has made this case better than Walter Block in his book “Defending the Undefendable.” He trots out and defends one seedy character after another—pimps, prostitutes, you name it—whose actions, while distasteful to almost everyone, violate no one’s rights.
Returning to the photographer in question, it should make no difference whether her refusal is informed by religion or by hatred of gays. She should be free to turn away customers for good reasons, bad reasons, or no reason.
Incidentally, my friend Michelle Kamhi recently convinced me that photography is not art. I highly recommend her book Who Says That’s Art?, devoted primarily to demolishing modern and post-modern “art” which she calls “anti-art.” I think she’s spot on, but whether you agree or not, you will have to admire the courage and tight reasoning in her book.
Following the massacre in Nice yesterday, I am hearing comments on radio that, together, would have one believe that it could not happen here, that it’s somehow the fault of the French themselves. I think that’s a dangerous dream.
Americans have to get past the Irma la Douce fantasy about France that many still shelter in their hearts. The French do not wile away their days at sidewalk cafes terraces brimming with insouciance. (That means a “devil-may care” attitude.) France is an industrial society pretty much like the US though without most of the inventiveness. Its economic policies for the past twenty years have been stinky. The causes of the French stagnation would sound familiar to any Bernie Sanders supporter. The current government of the Socialist Party differs from the Obama administration in matters of degree only. The same la-la-la Land dream occupies the minds of most of the French Left as of most American liberals. If anything, the French tend to be more realistic because they have had more experience of its failures.
It’s not the case that France has had an open borders policy as I have heard say on conservative radio today. Nevertheless, for historical reasons, France probably has many more Muslims proportionately than the US has. “Probably” because no one knows who is really a Muslim; no one really knows who is really a Catholic. The only thing that’s more or less known is the number of Muslims names. There are many. Most are French citizens by birth.
The current French Minister of Labor has a Muslim name. People with Muslim names are present throughout all levels of French society. They are in banking, in entertainment. The most popular French citizens probably have Muslims names; they are in sports. By and large, such people are well integrated within a mostly religiously indifferent French society. That is, as well as can be done within an economically stagnant society with a permanent unemployment rate of 10%, 20% for the young. How much discrimination there is against people with Muslim names is anyone’s guess. The fact is that immigrants with Muslim names keep trying hard to move to France. Not many try to move to Egypt or even to Saudi Arabia, for example, where the fate of immigrants may be even worse.
This large population with Muslim names is seen from the US as providing a bottomless pool of jihadist recruits. That’s true but it should also be an asset in combating violent jihadism. Thousands of French police personnel have Muslim names. (The police officer murdered outside Charlie Hebdo was one such.) Hundreds if not thousands of police and other security personnel are fluent in diverse dialects of Arabic. This is more, of course, than can be said of their American counterparts.
The French intelligence services have earned the respect of their allies. The country was not caught sleeping after the Bataclan slaughter. It had been under a state of emergency lightly suspending some personal rights. The state of emergency was slated to be removed in the coming days. Perhaps, someone did not want it to stop although it’s hard to believe given how light it was.
As I write on July 15th, there has been no claim by any Islamist organization. The only thing known is that the driver of the truck, the murder weapon, was a person of Tunisian origin who was probably a French citizen. That’s not enough to prove a link to Islamist terrorist organizations. The man was known to the police as a petty criminal (a familiar story). Note that a petty criminal is one who is not very successful, one at the bottom of the criminal pecking order. He was also undergoing a difficult divorce. I speculate that jihadist organizations provide people of Muslim origin undergoing personal difficulties a high-sounding excuse for venting their anger on the innocent many.
If there was indeed an involvement of ISIS or Al Qaida, no reason for the attack on civilians need to be found. They hate Westerners, irrespective of what Westerners actually do. The fact that France has been publicly involved in fighting Islamist terrorism in two theaters – in Iraq next to the US and in Mali may have made it a priority target for jihadists.
With this group assassination the lack of scruples of violent jihadists is confirmed again. Given the number of victims, the circumstance and the location of the crime, there is a 100% certainty that some of the victims have Muslim names. (By the way, the best video of the event was supplied by an Egyptian tourist.) I wonder if this is going to prompt Muslim organizations everywhere, including in the US, to do more than passively deplore the crime. I wonder if this is going to lead to request for energetic surveillance measures involving the breeding marshes of violent jhadists, which are not Lutheran seminaries or Buddhist monasteries. I ask because, under Obama, in this country, we are paralyzed by political correctness as if avoiding bruising the feelings of some was well worth a few hundred blown up civilians here and there.
I write in reply to Edwin van de Haar’s post ‘Classical Liberalism, Cosmopolitanism and Nationalism’, which contains some generous remarks about my social media posts while putting forward a view different from my own about the role of the nation state. Edwin argues that the nation state is foundational to classical liberalism in that post. I have previously argued for the benefits of the United Kingdom staying in the European Union, just before the referendum which has put the UK on the path to leaving.
I will start with the doctrinal issues of how far classical liberalism might be considered as something that is embedded in the emergence of the nation state as we know it. It is true that classical liberalism arose as the nation state emerged and consolidated and it did not occur to classical liberals, on the whole, to question the state system as they knew it. That is a system defined in early modern natural law and contractual theory about law and state as one of a very unified system of sovereignty in a world of ‘a state of nature’, anarchy, or lawlessness between states.
We have to note at least one major deviation in the familiar list of classical liberal authors, which is Immanuel Kant, thinking of his essays ‘Idea for a Universal History with a Cosmopolitan Purpose’ (1784) and ‘Perpetual Peace: a philosophical sketch’ (1795), which do not question the internal sovereignty of states, but does argue for a law governed set of relations between states with a global institution of some sort to prevent republics going to war with each other.
We should consider John Stuart Mill’s thoughts on federal states in Considerations on Representative Government (1861), particularly chapter XVII, ‘Or Federal Representative Governments’ which looks at the possibility of a state with decentralised decision making functions. A nation state can be federalised, at least in principle, but what are the components of the federation other then sub-nations, where the population may even regard them as nations within the state. Mill was building on the experience of the United States since the constitution of 1787, and Switzerland, particularly since the federal constitution of 1848.
The United States and Switzerland did not come out of nowhere. The US consolidated the links between thirteen colonies of Great Britain while federal Switzerland built on the Swiss Confederation and its links with places like Geneva which were associated with the confederation, but were not part of it until the restructuring of European states in the Napoleonic period. The point here is that modern states may be federal as well as unitary states and that includes continuity with pre-modern links between at last partly self-governing regions-nations. We could even say that kind of state of associated states was the Medieval norm.
The example, and even idealisation, of this Medieval structure enters classical liberalism via Montesquieu’s The Spirit of the Laws (1748), along with the work of Swiss jurists of the time, particularly in Berne. Montesquieu was building on the experience of the kind of medieval and early modern monarchy where he thought there was liberty, moderation in government, distinguishing it from tyranny. In such situations different laws and assemblies for towns and for historic regions was quite normal under the monarchy. In so far as such states, like France, were tending to evolve in states based on the absolute sovereignty of the centre, in the formation of what we call a nation state, Montesquieu saw the danger of despotism.
The historical experience that Montesquieu was drawing on was the way that Medieval monarchies were constructed through assembling patch work of the monarch’s personal domains, regions with their own lords and institutions, and church domains, along with increasingly self-governing towns. He also looked at the antique experiences of allying republics in a federation, which he thought was preserved in the Netherlands and Switzerland of his time. Germany, which at that time was a kind of federal/confederal empire of very varied forms of sub-imperial sovereign units including princes with lands outside the Empire, was also a form of federation for Montesquieu.
If we go back to the German history of the century before Montesquieu, the idea of the modern nation state is strongly associated with the Treaty of Westphalia (1648), which ended the Thirty Years war, focused on Germany, but drawing in most of Europe. ‘Westphalian state system’ has become a label for an internal system of states which are completely sovereign internally and face each other as equal legal personalities with no higher instance of sovereignty or collective instrument for enforcing the laws of nations, which do have some basis in the natural law doctrines of the time, and earlier.
The trouble with this understanding of Westphalia is that though it has some truth for Europe outside the German Empire (officially known as the Holy Roman Empire), it is very misleading for the Empire, and therefore for those European powers, including Sweden and Denmark, which had land within the Empire. The princes, cities and other territorial units within the Empire were under the legal authority of the Emperor, who largely served as a judge of interstate disputes though with far greater powers in the lands of the Habsburg family (consolidated as the Austrian Empire in the Napoleonic era) which always had the Emperor, though the Emperor was legally an elective office. The Habsburgs land extended outside the Empire into central Europe so the Westphalian system of Imperial authority brought in other European nations and extended outside the Empire strictly speaking.
Westphalia modified a system rooted in the Middle Ages of Germany as a middle European federation or confederation, drawing in other parts of Europe and therefore anchoring a European system of some kind. Periods of dominance by France or Spain complicate this story, but French claims always overlapped with Imperial claims and the peak of Spanish power was when the Spanish monarchy was from the same family as the German Emperors.
The Napoleonic era disrupted these arrangements severely, but we can see Napoleon as trying to revive the original Empire of the Romans under Charlemagne in the ninth century, which united France, Germany and neighbouring territories under a Frankish over-king. Charlemagne was know as ‘father of Europe’ in his time, perhaps more in connection with Europe as Christendom and his wars against Muslims in Spain, then with Europe as we might think of it now, but this is part of the story of what it is for there to be a Europe and a European system. Coronation by the Pope and recognition of the Frankish kingdom as heir to ancient Rome connects the medieval German Empire with the first great European political system, the Roman Empire.
The aftermath of the Napoleonic period in Germany was a confederation, which again included those European powers (the United Kingdom was one) which had lands in Germany. This evolved into the German Empire founded in 1871, which was itself an extraordinary mixture of Greater Prussia, federation, democracy, aristocracy, monarchy, and so on. It was more of a nation state than German predecessor systems in that it was a sovereign unified part of the international state system. The size and growing economic power of the Kaiserreich, incorporating Polish, French and Danish speaking areas, made it a destabilising force in Europe. Too big for the security of other European states, too small to anchor a European system.
The First World War and the Second World War were both consequences of this unstable system. The European Union is in large part an attempt to solve the problem by creating a European system which Germany anchors, though since unification the dominance of Germany has become an issue again. Whatever the problems, the EU provides a better framework for structuring a European system in which Germany is both contained and can exert influence in a consensual manner.
Returning to the issue of the nation state, Germany was never a nation state in the strictest sense of a very unitary state with a single language and ethnicity. France has usually been taken as the model of the nation state ‘strictly speaking’, but even so it has only been a country of speakers of standard French since the late nineteenth century. As it is now, it includes speakers of Breton, Basque, Occitan and Alsace German. Corsica has special status and Alsace-Lorraine also has some special arrangements in recognition of its specificities.
The European world before the First World War was more of a Europe of multi-national Empires than nations, with four Empires (German Hohenzollern, Austrian Habsburg, Turkish Ottoman, Russian Romanov) dominating the centre and east. Spain in practice has always been an extended Castille in which other regions-nations have played variable distinct roles. The United Kingdom never completely integrated as a nation state; even at the peak of integration in the nineteenth century, Scotland kept its own legal, state church and educational system and since then in a rather complicated way the UK has become more loosely integrated and may lose Scotland in a few years.
Even with the imminent departure of the UK from the EU, Europe continues to be a political system, not just an aggregate of nation states. The larger European states are not nation states in the strictest sense. Even without the EU, European states accept various kinds of obligation with regard to north Atlantic security and global trade which limit sovereignty. The UK will negotiate some kind of membership of the internal market of the EU and its passport union aspect, as well as participation in various EU schemes. It will therefore continue to be part of a European system anchored by Germany.
Ever since the Romans, Europe has needed a European system of some kind, and the German anchor schemes going back to 800 have recognised the Roman precedent. In reality there has never been a Europe of nation states and the periods closest to that model ended in catastrophic wars. Disaggregation of the European system as it is now may not result in war, but it has the potential to unleash trade wars, protectionism, competitive currency devaluation, erosion of chances to live, work, and study abroad, associated labour market sclerosis, destabilising struggles for political-diplomatic dominance, and an incapacity to ally in order to deal with global and strategic issues affecting Europe, including migration flows, Russian expansionism, and Middle Eastern conflict and terror.
(more on the consequences of the UK leave referendum soon)
In another thought-provoking post on Facebook (does the guy ever write mediocre stuff, I wonder?) Barry raised the question of the relation between classical liberalism, nationalism and cosmopolitanism. He wrote the following:
“On the capture of classical liberal/libertarianism by anti-cosmopolitans. This is very influential at the heart of the ‘leave’ ‘elite’ in the UK, and can only be destructive of classical liberalism/libertarianism. The immediate political consequence of Leave is the elevation of Theresa May to Tory leadership/Prime Minister’s office on a much more ‘Red Tory’, communitarian, corporatist foundation than existed under Cameron. ’To the extent to which the current wave of populism maps into a conflict over national versus transnational identity (Dan Drezner is unconvinced), the problem is not an excess of cosmopolitanism but rather its absence, especially on the conservative, free-market right.”
He seems to take a positive relation between classical liberalism and cosmopolitanism as the default position. Of course Barry did not provide definitions in a FB post, but here I take cosmopolitanism to mean “the idea that all human beings, regardless of their political affiliations, belong to a common moral community. Cosmopolitans often believe that all individuals have the same basic moral status, and tend to downplay the importance or desirability of national political institutions. [They are] opposed to nationalism” (source: Matt Zwolinski (editor), Arguing About Political Philosophy, Routledge, 2009).
I argue that Barry overlooks that classical liberalism combines a cosmopolitan side, with a strong defense of national political institutions (e.g. the state). The cosmopolitan side is perhaps easiest to see, if one takes the idea of free trade as the guiding principle. Free trade is by nature morally neutral for the individuals involved, and has numerous positive economic effects; it fosters cultural exchange as well as innovation and knowledge sharing. In that sense classical liberalism is indeed related to cosmopolitanism.
Yet this stops where the national state comes into play. Classical liberals never predicted any positive political effects of trade (see my earlier notes on this topic) and, just as importantly, they actually favor a strong state, with a limited number of tasks. At the same time, from Hume and Smith onwards to Mises and Hayek, they strongly dislike the idea of transnational political institutions, because these lack any substantial emotional basis which nations do posses. Also, these large political institutions easily become a threat to individual liberty, even more so than national states with too many tasks. So, there is no really no relations between political cosmopolitanism and classical liberalism at all.
There is also no relation between nationalism and classical liberalism. A preference for the national state does not lead to nationalism, which is the vicious and poisonous belief in the superiority of one’s country, often accompanied with a dislike of allegedly inferior neighboring countries or peoples or groups. This is collectivism turned even worse, which is a double ‘no’ from a classical liberal perspective. This said, if patriotism is defined as national pride, then classical liberalism and patriotism can and will go together. There is a fine line between the two sometimes, but patriotism is not violent and dividing, but a binding force between individuals sharing a national state.
The last point is on the European Union. Hayek and Mises have been on record with strong support for a European Federation, primarily as a remedy to war-torn and nationalism-infected Europe. In these circumstances the default position of an international order as a society of states no longer functioned, so there was a need to seek an alternative. Needless to say their federation had little resemblance with the current super state we know as the European Union, which has become a classical liberal nightmare in terms of liberty and property rights violations it commits on a daily basis.
The current EU has some classical liberal traits (the imperfect common market is the single most important one), which is of tremendous use to all European individuals. It is, however, way too cosmopolitan in the bad political way. A likely consequence of Brexit is that this will become even worse, now that the French and their allies will get more room for their collectivist fallacies.
Police brutality is back in the news cycle following the Dallas shootings, Philando Castile shooting, and [insert your regional news cycle shooting here] in early July. I expect the topic to be removed from the news cycle as the Olympics draw closer so I am writing this note now explaining why I don’t trust the police and why I hope other classical liberals have similar reservations.
Two quick asides:
I am at heart at pacifist and I don’t encourage the use of violence against anyone.
The current literature shows that police activity reduces crime rates; here is an ungated article for those interested in reading part of that literature.
I come from a poor migrant family and was raised in Los Angeles’ Koreatown back in the 90s. The area has become more middle classed in recent years due to new development, but at the time it was a working class neighborhood populated largely by recent migrants and other minority groups. Unsurprisingly there was plenty of crime and the sound of police sirens and helicopters was common for me growing up.
Despite this I don’t think I ever held police in a high prestige. It is true that I often saw the police round up criminals, but I also saw them round up several innocents or perpetrators of ‘victimless’ crimes, mostly unlicensed merchants.
Many of the migrants in my neighborhood, including my family, were illegal and therefore unable to acquire employment in the formal sector. To survive they instead turned to work in the informal sector. I had a neighbor who ran a bakery from her kitchen and sold her goods on the street. Another neighbor sold various electronics and clothing apparel; during the weekend they would go around buying things from garage sales in bulk and re-sell them during the week. My father ran a taco stand. Often times the police would harass these informal vendors by confiscating their goods and/or destroying their makeshift stands. I vividly remember my father’s taco stand being thrown to the street when he didn’t have the proper documents for passing police.
In my mind the police were worse than the criminals they put away. To be sure criminals are undesirable, but most of the ones I encountered in my youth only wanted to steal what cash you had and they would leave you alone otherwise. On the other hand whenever my father’s taco stand was raided by the police his cash would be confiscated and he’d be put back several hundred dollars in fines and having to rebuild his stand. Not only was a robbery cheaper, but criminals never pretended to have the moral high ground.
Note that in my story there was no mention of police corruption. The police who harassed my family and neighbors might have been acting out of genuine belief that they were serving the public good. Their good intentions still had negative consequences for the neighborhood though. Those who were harassed were the immediate losers, but so were their consumers. There were plenty of people who would have wanted to purchase from the informal vendors, but were denied the freedom to do so.
-And for what reason? It was not like vendors in the informal market have any incentive to cheat their consumers. The neighborhood baker might not have been licensed, but she could hardly afford to give food poisoning to anyone. The apparel salesperson relied on repeat business and would quickly be out of business if they didn’t sell clothing others wanted. My father certainly wasn’t adding horse meat to the tacos or anything like that – migrants are picky about how their tacos are made!
The police may be filled with good intentions, but they ultimately are enforcers of illiberal laws. If well intentioned can so easily cause harm one needn’t much imagination to see how corrupt police can do much worse. It is difficult for me to understand those who defend the police or even honor them. It may be the case that they are a necessary evil to discourage other criminals, but they are still an evil themselves. Police ought to be tolerated at best, but never glorified.
Past Friday, 51.9% of the British have voted to leave the European Union against 48.1% of those who have voted to remain. The details of the EU referendum can be found on BBC’s EU referendum page. Although it is still unclear what shape the relationship between Britain and the EU will take, I expect that the Brexit will offer good economic opportunities for Britain provided that they can reach free trade agreements with all nations within the EU and provided that they will continue to open up their markets for free trade with other countries outside of the EU.
An Exit of the Netherlands, or a Nexit, will have more consequences than a Brexit as the Netherlands are also participants in the European Monetary Union. A Nexit could therefore lead to an end of the Euro. An analysis of the EU is a political analysis and as politics is always complemented by power, this analysis should hence incorporate insights on power struggles and competing visions. Each country has its own interests within the EU, just like any politician within the EU has his own special interests that he is serving. Participation in the EU is often represented as an exercise of solidarity and political appeasement, however it is still politics with politicians’ usual desire for self-enrichment.
There have always been two competing visions of the EU. The first one is a classical liberal vision, led by German speaking Christian democrats Schuman (France), Adenauer (Germany) and Alcide de Gasperi (Italy) with the Treaty of Rome (1957) as the greatest achievement of this classical liberal vision for Europe. The Treaty sought to deliver the following four freedoms: free movement of goods, freedom of movement for workers, the right of establishment and freedom to provide services, and free movement of capital. The other vision was a socialist vision led by mainly French politicians, such as Jacques Delors and François Mitterrand whose goal was to create a supranational state.
Treaty of Rome.
Classical liberal vision The first vision promotes political competition between the EU’s member states by opening up borders. When a person is discontent with the excessive taxes in his country, he could leave his country for another. Competition between member states would lead to smaller governments, lower taxes, and political respect for people who would want to pursue their individual freedoms in another member state. It would represent a return to the political model that was prevalent in Europe from the Middle Ages to the 19th century when different political systems coexisted independently. There were independent cities or city states in Flanders, Germany and Northern Italy. There was the kingdom of Bavaria, the republic of Venice, and small city states like Ghent and Bruges embraced their autonomy. The German writer and poet Johann Wolfgang von Goethe (1749-1832) had expressed the beauty of such a political system as follows when he discussed a Germany that was still splintered in 39 independent states:
“I do not fear that Germany will not be united; … she is united, because the German Taler and Groschen have the same value throughout the entire Empire, and because my suitcase can pass through all thirty-six states without being opened. … Germany is united in the areas of weights and measures, trade and migration, and a hundred similar things. … One is mistaken, however, if one thinks that Germany’s unity should be expressed in the form of one large capital city, and that this great city might benefit the masses in the same way that it might benefit the development of a few outstanding individuals. … What makes Germany great is her admirable popular culture, which has penetrated all parts of the Empire evenly. And is it not the many different princely residences from whence this culture springs and which are its bearers and curators? … Germany has twenty universities strewn out across the entire Empire, more than one hundred public libraries, and a similar number of art collections and natural museums; for every prince wanted to attract such beauty and good. Gymnasia, and technical and industrial schools exist in abundance; indeed, there is hardly a German village without its own school. … Furthermore, look at the number of German theaters, which exceeds seventy. … The appreciation of music and song and their performance is nowhere as prevalent as in Germany, … Then think about cities such as Dresden, Munich, Stuttgart, Kassel, Braunschweig, Hannover, and similar ones; think about the energy that these cities represent; think about the effects they have on neighboring provinces, and ask yourself, if all of this would exist, if such cities had not been the residences of princes for a long time. … Frankfurt, Bremen, Hamburg, Lübeck are large and brilliant, and their impact on the prosperity of Germany is incalculable. Yet, would they remain what they are if they were to lose their independence and be incorporated as provincial cities into one great German Empire? I have reason to doubt this.”[1]
In addition to the advancement of political competition, the vision also promotes economic competition. A German employee would not be obstructed from working in France anymore, a Dutchman would not be taxed by the government if he transfers money from a Dutch to a Spanish bank or when he decides to buy stocks on the Italian equity market. Nobody would withhold a Belgian brewery from selling beer in other countries within the European free trade area.
Socialist vision The second vision promotes a European central state that holds the power to enact more regulations, redistribution of wealth, and harmonization of legal systems within the whole Union. A strong central political body is to coordinate such efforts. The consequence is that its member states would increasingly have to give up their sovereignty. This is clearly visible from the political events in Greece and Ireland during the financial crisis of 2008 when Brussels demanded from Greece and Ireland how they should deal with their deficits and what austerity measures they should take. The socialist vision of Europe is an ideal for the political class, bureaucrats, interest groups and the subsidized sectors that want a powerful central state for their self-enrichment. Political competition among its member states, something that the classical liberals supported, should be eliminated. Doing so, Europe becomes less democratic and political power is increasingly shifted into the hands of bureaucrats and technocrats in Brussels. Historically, such plans for concentrated political power had been realized by such figures as Charlemagne, Napoleon and Hitler. The difference with our times is that the creation of a modern European superstate does not directly require military means. The introduction of new institutes like the European Central Bank, a common currency like the Euro, and extended power of the European Commission would suffice. Similar socialist intentions were already visible from the start of the European integration in the European vision of Jean Monnet, the intellectual father of the European community. Fearing an independent and emerging Germany after the second World War, an integration of Germany into Europe was considered to be a good thing. Next to that, the French wanted to have control over the Rühr area and they wanted to keep other vital German resources out of solely German hands. After losing her colonial powers in Indochina and Africa, the French ruling elite were also looking for new influence and pride which they eventually found in the European community.[2] The French premier in 1950 had for example proposed a plan to install a European army under the leadership of the French.
Why it is good for the Netherlands to leave the European Union I believe that the EU should never have had more ambitions than the free trade zone that requires no supranational institutes, except for a European Court of Justice that is restricted to supervising conflicts between the member states and guaranteeing the four freedoms. The EU has become so far removed from the classical liberal vision of political and economic competition that it is not worthwhile anymore for the Netherlands to participate. It has declined into a malignant cartel of states that can tell its members with whom and how they should conduct their trade. A good example were the quotas and import levies on Chinese solar panels in 2013 under the disguise of ‘anti-dumping’ measures. Several countries like the Netherlands and Germany had first opposed to these measures as they would like to maintain good relationships with China. Nonetheless, the European Committee, apparently under influence of solar panel lobbyists like those of the German producer Solarworld AG, introduced ‘anti-dumping’ measures. The eventual winners of such measures are European solar panel producers and its victims are the European people that simply want to buy cheap solar panels. Another example are the sanctions that the EU had imposed on Russia since the Ukrainian conflict – a conflict that was provoked by American imperialists and NATO.[3] The deteriorating trade relationships between the EU and Russia is also detrimental to the wealth of ordinary European citizens. Another recent example is the prohibition of high-powered vacuum cleaners and possible future bans on other energy appliances such as kettles and hairdryers in order to reach environmental targets.[4] Those who profit from such measures are mainly large legacy organizations such as Bosch and Siemens that have enough capital to meet the strict EU regulations.
Another reason why a Nexit would be good for the Netherlands is that it offers an opportunity to extricate oneself from the Euro and the implicitly pledged financial aid when a future financial crisis will tear through Europe.
The tragedy of the Euro The introduction of the Euro has proven to be a huge mistake, because it has enabled fiscally irresponsible governments of such countries like Portugal, Italy, Greece, Spain etc. to conduct unsustainable economic policies. In the past, when these states had their own currency, their governments had to finance their budget deficits through the sales of government bonds which resulted in higher government debts. The higher government debts manifested itself in higher interest rates on their government bonds, and a greater money supply would lead to devaluations of their currencies.
To illustrate how the process of government bonds financing works in the European Monetary Union, we could look at the development of 10-year government bonds. The graph below shows the interest rates that governments have to pay to the financiers of their 10-year government bonds from 1995 to 2011:
Interest rates on 10-year government bonds from 1995-2011.
The y-axis represents the rates of interest that an investor receives from 10-year government bonds. Countries that are economically stronger and fiscally more conservative are rewarded with lower interest rates due to the smaller risk that these governments will not pay back their loans. In the case of Germany, a country with traditionally a stronger economy, a more conservative Bundesbank, and a fiscally more responsible government than many other European nations, investors received 7.5% interest on their 10-year government bonds in 1995. Greek government bonds had a yield of 18% in 1995. 1995 was the year in which the European Committee had announced that the Euro would arrive in 2002. Interest rates on government bonds consequently converged in the following years. At the end of 1997 all rates of interest on Portuguese, Irish, Spanish, Italian, French and German 10-year government bonds were more or less equal despite the fact that many of the governments of these countries still spent more than they received in tax incomes. The consequence of sharing a common currency with fiscally more responsible countries like Germany and the Netherlands is that fewer price signals in the form of higher interest rates on government bonds of fiscally irresponsible governments emerge. Irresponsible governments can issue government bonds to the banking sector that transfer these bonds as collateral to the ECB in return for loans. The interest rate that banks pay for the loans of the ECB are issued as profits to their governments. This is in short how ‘seigniorage’, the profits derived from money creation when the costs of money production and the distribution of money are lower than the value of money itself, is created.
Sovereign debt financing in the European Monetary Union.
This process leads to inflation, but the costs of inflation in the EMU are not solely borne by the respective country that issues the government bonds, but by all countries that participate in the EMU. A country like Spain can for example issue government bonds that traditionally would correspond with 10% inflation. However, when other countries like the Netherlands and Germany issue an amount of bonds that corresponds with 5% inflation, Spain benefits from seigniorage as the inflation created by Spain is higher and borne partly by the Netherlands and Germany. A Euro in this regard is beneficial for fiscally irresponsible governments. It is actually a “Tragedy of the commons”. Abusing the Euro in this way is exactly what countries like Portugal, Italy, Ireland, Greece, Spain and France have done. This works until a financial crisis shows how insolvent the governments of these countries actually are. That has happened in 2008, the moment when interest rates on European government bonds started diverging. The ECB had even decided to buy up Greek government debts in May 2010 in order to lower the interest rates on Greek government bonds. In June 2010, a temporary European Financial Stability Facility (EFSF) was founded with guarantees of up to €440 billion to combat the European sovereign debt crisis. It has provided financial assistance to Ireland, Portugal and Greece. The EFSF was later replaced by the European Stability Mechanism (ESM) in October 2012 with a total described capital of around €700 billion of which the Netherlands has pledged €40 billion in capital participation. The Dutch prime minister, Mark Rutte, had promised the Dutch in 2011 that the Netherlands would receive back the money it has loaned out to Greece in May 2010.[5] The total sum that was loaned to Greece by the Dutch was €3.2 billion. However, in 2012 when the Netherlands loaned out €14.5 billion of the second financial aid package of €130 billion that was pledged by Europe and the IMF to Greece, the Dutch minister of Finance, Jeroen Dijsselbloem, admitted that the Netherlands were losing money. Rutte also admitted that he could not guarantee that the Dutch loans to the Greeks would not be forgiven.[6] Three years later, on July 13 2015, the Netherlands loaned out another €22.6 billion to Greece.[7] It has become clear that such financial pledges of the Netherlands to fiscally irresponsible governments like that of Greece are not beneficial for the Dutch. Even in the long run it is not beneficial for the EU as it supports and prolongs a socialist European system that is deeply rotten to its core and destined to fail. What the EU needs is a radical return to decentralization and political competition.
The EU has become a sinking ship. It appears to me that the Netherlands should leave the Union as soon as possible. I do not see how Europe can maneuver itself safely through the next financial crisis that is at the point of breaking out as more banks are on the brink of collapse.[8] I also expect greater centralization of political power within the EU and a greater loss of individual member countries’ sovereignty. On June 27, 2016, the Polish media had reported that France and Germany were taking matters into their own hands and are using the Brexit to unveil their plan to morph the continent’s countries into one giant superstate. Under their radical proposals,
“EU countries will lose the right to have their own army, criminal law, taxation system or central bank, with all those powers being transferred to Brussels.”[9]
Conclusion
A sensible Netherlands would leave the European Union and the European Monetary Union in order to preserve political and economic sovereignty. They would have free trade agreements with all countries within and outside of the EU. EenVandaag, a popular Dutch TV programme, had published the results of their 27,000 large online poll on Sunday June 26, 2016 in which 54% of the Dutch would like to hold a referendum about the Netherlands’ participation in the EU. 48% of the poll wanted the Netherlands to leave the EU against 45% who would like to remain in the EU.[10] In the meantime, the Remain camp will continue their nauseating snobbery accusing the Leave camp of being racist, nationalistic, isolationist or simply ignorant.
References Bagus, P. (2010). The Tragedy of the Euro.
Footnotes [1] From Johann Peter Eckermann’s Conversations with Goethe (1836-1848).
[2] Tony Judt writes in Postwar: A History of Europe Since 1945 (2006) that “[U]nhappy and frustrated at being reduced to the least of the great powers, France had embarked upon a novel vocation as the initiator of a new Europe” (p. 153). He also writes that “[F]or Charles de Gaulle, the lesson of the twentieth century was that France could only hope to recover its lost glories by investing in the European project and shaping it into the service of French goals (p. 292).”
[3] See for example Prof. John McMurtry’s “Ukraine, America’s ‘Lebensraum’. Is Washington prepared to wage war on Russia?” for an analysis how Washington had provoked the Ukrainian conflict with Russia.
[4] See “First they came for the vacuum cleaners: will it be kettles next?”
Politicians, pundits and activists jumped on a new literature that asserts that there no negative effects of substantial increases of the minimum wage on employment. Constantly, they cite this new literature as evidence that the “traditional” viewpoint is wrong. This is because they misunderstand (or misrepresent) the new literature.
What the new literature finds is that there could be no significant negative effects on employment. This is not the same as saying there are no negative effects overall. In fact, it is more proper to consider how businesses adjust to different-sized changes by using various means. Once, the minimum wage is seen in this more nuanced light, the conclusion is that it still bites pretty hard.
The New Minimum Wage Literature
Broadly speaking, the new literature states that there are minimal employment losses following increases in the minimum wage. It was initiated twenty years ago by the works of Alan Krueger and David Card who found that, in Pennsylvania and New Jersey, a change in the minimum wage had not led to losses in employment. This caused an important surprise in the academic community and numerous papers have found roughly similar conclusions.
These studies imply that the demand for labor was quite inelastic – inelastic enough to avoid large losses in employment. This is a contested conclusion. David Neumark and William Wascher are critical of the methods underlying these conclusions. Using different estimation methods, they found larger elasticities in line with the traditional viewpoint. They also pointed out Card and Krueger’s initial study had several design flaws. With arguably better data, they reversed the initial Card and Krueger conclusion.
These critics notwithstanding, let us assume that the new minimum wage literature is broadly correct. Does that mean that the minimum wage is void of adverse consequences? The answer is a resounding no.
This is because of an important nuance that has been lost on many in the broader public. In a meta-analysis of 200 scholarly articles realized by Belman and Wolfson, there are no statistically discernable effects of “moderate increases” on employment. The keyword here is “moderate” because the effects of increases in the minimum wage on employment may be non-linear. This means that while a 10% increase in the minimum wage would reduce teen employment by 1%, a 40% increase will reduce teen employment by more than 4%. A recent study by Jeremy Jackson and Aspen Gorry suggests as much: the larger the increase of the minimum wage, the larger the effects on employment.
If labor costs increase moderately, the strategy to reduce employment may be relatively inefficient. The increase of labor costs needs to reach a certain threshold before employers choose to fire workers. Below such a threshold, employers may use a wide array of mechanisms to adjust.
Adjustment channels
Employers on their respective markets face different constraints. This diversity of constraints means that there is no “unique” solution to greater labor costs. For example, if the demand for one’s products is quite inelastic, labor costs can be passed on to consumers through an increase in prices. While this may not necessarily hurt workers at the minimum wage, it impoverishes other workers who have fewer dollars left to spend elsewhere. This is still a negative outcome of the minimum wage – its just not a negative outcome on the variable of employment.
In other cases, employers might reduce employment indirectly by reducing hours of work. This is an easy solution to use for employers who cannot, for a small increase in labor costs, afford to fire a worker. Even Belman and Wolfson – who are sympathetic to the idea of increasing the minimum wage – concede that increases in the minimum wage do lead to moderate decreases in labor hours. More skeptical researcher, like Neumark and Wascher, find that the effects on hours worked is much larger. Again, the variable affected is not employment measured as the number of people holding a job. However, a reduction in the number of hours worked is a clearly a perverse outcome.
Another effect is that employers might reduce expenses associated with their workers. Even Card and Krueger, in their book on the minimum wage, recognize that employers may opt to cut on things like discounted uniforms and free meals. An employer facing a 5% increase in the minimum wage will see his labor costs increase, but firing an employee means less production and lower revenues. Thus, firing may not be an option for such a small increase. However, cutting on the expenses associated with that worker is an easy option to use. This means fewer marginal benefits and on-job training. Employers adjust by altering the method of compensation. For example, economist Mindy Marks estimated that a 1$ increase of the minimum reduced by 6.2% the probability that a worker would be offered health insurance. Again, employers adjust and the effects are not seen on employment. Nonetheless, these are undisputedly negative effects.
The effect may also be observed on the type of employment. Employers may decide to substitute some workers by other types of workers. Economist David Neumark pointed that, subsumed in the statistical aggregate of “labor force” is a shift in its shift. In his article, written for the Employment Policies Institute, he stated that “less skilled teens are displaced from the job market, while more highly skilled teens are lured in by higher wages (even at the expense of cutbacks in their educational attainment)”. Another example could be that a higher minimum wage induces retired workers to return to the labor force. Employers, at the sight of a greater supply of experienced workers, prefer to hire these individuals and fire less-skilled workers. In such case, “total employment” does not change, but the composition of employment is heavily changed. The negative effects are clear though: less-skilled workers are not allowed to acquire new skills through experience.
Conclusion
None of these adjustment mechanisms in response to “moderate increases in the minimum wage” are desirable. Yet, all of these channels would allow us to conclude that there are no effects on employment. To misconstrue the ability of employers to select multiple channels of adjustments other than reducing employment as the proof that the minimum wage has no negative effects is perverse in the utmost. The statement that “moderate increases in the minimum wage has no statistically significant effects on employment” is merely a positive scientific statement with no normative implications whatsoever. If anything, the multiple adjustment mechanisms suggest that the minimum wage still hurts and that is both a positive and normative statement.
Notes On Liberty 