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Fooled by GDP: Economic Activity versus Economic Growth – Article by Steven Horwitz

Fooled by GDP: Economic Activity versus Economic Growth – Article by Steven Horwitz

The New Renaissance Hat
Steven Horwitz
May 4, 2015
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Even the smartest of economists can make the simplest of mistakes. Two recent books, Violence and Social Orders by Douglass North, John Wallis, and Barry Weingast and Why Nations Fail by Daron Acemoglu and James Robinson both suffer from misunderstanding the concept of economic growth. Both books speak of the high growth rates in the Soviet economy in the mid-20th century. Even if the authors rightly note that such rates could not be sustained, they are still assuming that the aggregate measures they rely on as evidence of growth, such as GDP, really did reflect improvements in the lives of Soviet citizens. It is not clear that such aggregates are good indicators of genuine economic growth.

These misunderstandings of economic growth take two forms. One form is to assume that the traditional measurements we use to track economic activity also describe economic growth, and the other form is to mistake the production of material things for economic growth.

Often at the core of this confusion is the concept of gross domestic product (GDP). Although it is the most frequently used indicator of economic growth, what it really measures is economic activity. GDP is calculated by attempting to measure the market value of final goods and services produced in a particular geographic area over a specific period. By “final” goods and services, we mean the goods and services purchased by the end consumer, and that means excluding the various exchanges of inputs that went into making them. We count the loaf of bread you buy for sandwiches, but not the purchase of flour by the firm that produced the bread.

What GDP does not distinguish, however, is whether the exchanges that are taking place — even the total quantity of final goods — actually improve human lives.

That improvement is what we should be counting as economic growth. Two quick examples can illustrate this point.

First, nations that devote a great deal of resources to building enormous monuments to their leaders will see their GDP rise as a result. The purchase of the final goods and labor services to make such monuments will add to GDP, but whether they improve human lives and should genuinely constitute “economic growth” is much less obvious. GDP tells us nothing about whether the uses of the final goods and services that it measures are better than their alternative uses.

Second, consider how often people point to the supposed silver lining of natural disasters: all the jobs that will be created in the recovery process. I am writing this column at the airport in New Orleans, where, after Katrina, unemployment was very low and GDP measures were high. All of that cleanup activity counted as part of GDP, but I don’t think we want to say that rebuilding a devastated city is “economic growth” — or even that it’s any kind of silver lining. At best, such activity just returns us to where we were before the disaster, having used up in the process resources that could have been devoted to improving lives.

GDP measures economic activity, which may or may not constitute economic growth. In this way, it is like body weight. We can imagine two men who both weigh 250 pounds. One could be a muscular, fit professional athlete with very low body fat, and the other might be on the all-Cheetos diet. Knowing what someone weighs doesn’t tell us if it’s fat or muscle. GDP tells us that people are producing things but says nothing about whether those things are genuinely improving people’s lives.

The Soviet Union could indeed produce “stuff,” but when you look at the actual lives of the typical citizen, the stuff being produced did not translate into meaningful improvements in those lives.

Improving lives is what we really care about when we talk about economic growth.

The second confusion is a particular version of the first one. Too often, we think that economic growth is all about the production of material goods. We see this in discussions of the US economy, where the (supposed) decline of manufacturing is pointed to as a symptom of a poorly growing economy. But if economic growth is really about the accumulation of wealth — which is, in turn, about people acquiring things they value more — then material goods alone aren’t the issue. More physical stuff doesn’t mean that the stuff is improving lives.

More important, though, is that what really matters is subjective value. The purchase of a service is no less able to improve our lives, and thereby be a source of economic growth, than are the production and purchase of material goods. In fact, what we really care about when we purchase a material good is not the thing itself, but the stream of services it can provide us. The laptop I’m working on is valuable because it provides me with a whole bunch of services (word processing, games, Internet access, etc.) that I value highly. It is the subjective satisfaction of wants that we really care about, and whether that comes from a physical good or from human labor does not matter.

This point is particularly obvious in the digital and sharing economies, where so much value is created not through the production of stuff, but by using the things we have more efficiently and precisely. Uber doesn’t require the production of more cars, and Airbnb doesn’t require the production of more dwellings. But by using existing resources better, we create value — and that is what we mean by economic growth.

So what should we look at instead of GDP as we try to ascertain whether we are experiencing economic growth? Look at living standards: of average people, and especially of poor people. How easily can they obtain the basics of life? How many hours do they have to work to do so? Look at the division of labor. How fine is it? Are people able to specialize in narrow areas and still find demand for their products and services?

Economic growth is not the same as economic activity. It’s not about just making more exchanges or producing more stuff. It’s ultimately about getting people the things they want at progressively lower cost, and thereby improving their well-being. That’s what markets have done for the last two centuries. For those of us who understand this point, it’s important not to assume that higher rates of GDP growth or the increased production of physical stuff automatically means we are seeing growth.

Real economic growth is about improving people’s subjective well-being, and that is sometimes harder to see even as the evidence for it is all around us.

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Shut Out: How Land-Use Regulations Hurt the Poor – Article by Sanford Ikeda

Shut Out: How Land-Use Regulations Hurt the Poor – Article by Sanford Ikeda

The New Renaissance Hat
Sanford Ikeda
February 28, 2015
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People sometimes support regulations, often with the best of intentions, but these wind up creating outcomes they don’t like. Land-use regulations are a prime example.

My colleague Emily Washington and I are reviewing the literature on how land-use regulations disproportionately raise the cost of real estate for the poor. I’d like to share a few of our findings with you.

Zoning

One kind of regulation that was actually intended to harm the poor, and especially poor minorities, was zoning. The ostensible reason for zoning was to address unhealthy conditions in cities by functionally separating land uses, which is called “exclusionary zoning.” But prior to passage of the Civil Rights Act of 1968, some municipalities had race-based exclusionary land-use regulations. Early in the 20th century, several California cities masked their racist intent by specifically excluding laundry businesses, predominantly Chinese owned, from certain areas of the cities.

Today, of course, explicitly race-based, exclusionary zoning policies are illegal. But some zoning regulations nevertheless price certain demographics out of particular neighborhoods by forbidding multifamily dwellings, which are more affordable to low- or middle-income individuals. When the government artificially separates land uses and forbids building certain kinds of residences in entire districts, it restricts the supply of housing and increases the cost of the land, and the price of housing reflects those restrictions.

Moreover, when cities implement zoning rules that make it difficult to secure permits to build new housing, land that is already developed becomes more valuable because you no longer need a permit. The demand for such developed land is therefore artificially higher, and that again raises its price.

Minimum lot sizes

Other things equal, the larger the lot, the more you’ll pay for it. Regulations that specify minimum lot sizes — that say you can’t build on land smaller than that minimum — increase prices. Regulations that forbid building more units on a given-size lot have the same effect: they restrict supply and make housing more expensive.

People who already live there may only want to preserve their lifestyle. But whether they intend to or not (and many certainly do so intend) the effect of these regulations is to exclude lower-income families. Where do they go? Where they aren’t excluded — usually poorer neighborhoods. But that increases the demand for housing in poorer neighborhoods, where prices will tend to be higher than they would have been.

And it’s not just middle-class families that do this. Very wealthy residents of exclusive neighborhoods and districts also have an incentive to support limits on construction in order to maintain their preferred lifestyle and to keep out the upper-middle-class hoi polloi. Again, the latter then go elsewhere, very often to lower-income neighborhoods — Williamsburg in Brooklyn is a recent example — where they buy more-affordable housing and drive up prices. Those who complain about well-off people moving into poor neighborhoods — a phenomenon known as “gentrification” — may very well have minimum-lot-size and maximum-density regulations to thank.

When government has the authority to restrict building and development, established residents of all income levels will use that power to protect their wealth.

Parking requirements

Another land-use regulation that makes space more expensive is municipal requirements that establish a minimum number of parking spaces per housing unit.

According Donald Shoup’s analysis, parking requirements add significantly to the cost of housing, particularly in areas with high land values. For example, in Los Angeles, parking requirements can add $104,000 to the cost of each apartment. Parking requirements limit consumers’ choices and increase the cost of housing even for those who prefer not to pay for parking.

Developers typically build only the minimum amount of parking required by law, which indicates that those requirements are binding. That is, in a less-regulated environment, developers would devote less land to parking and more land to living space. A greater supply of living space will, other things equal, lower the cost of housing.

Smart-growth regulations

In the 1970s, municipalities enacted new rules that were designed to protect farmland and to preserve green space surrounding rapidly growing cities by forbidding private development in those areas. By the late 1990s, this practice evolved into a land-use strategy called “smart growth.” (Here’s a video I did about smart growth.)  While some of these initiatives may have preserved green space that can be seen, what is harder to see is the resulting supply restriction and higher cost of housing.

Again, the lower the supply of housing, other things equal, the higher real-estate prices will be. Those who now can’t afford to buy will often rent smaller apartments in less-desirable areas, which typically have less influence on the political process. Locally elected officials tend to be more responsive to the interests of current residents who own property, vote, and pay taxes, and less responsive to renters, who are more likely to be transients and nonvoters. That, in turn, makes it easier to implement policies that use regulation to discriminate against people living on low incomes.

Conclusion

Zoning, minimum lot sizes, minimum parking requirements, and smart-growth regulations demonstrably and significantly increase the cost of housing for everyone by raising construction costs and restricting the supply of housing.

The average household in the United States today, rich or poor, spends about a third of its income on housing. But higher home prices hit lower-income households disproportionately hard because a dollar increase in housing expenditure represents a larger percentage of a poorer household’s budget. Indeed, the bottom 20 percent of households spends around 40 percent of income on housing.

In other words, these land-use regulations are unfairly regressive. Relaxing or even removing them would be a step toward achieving greater equity.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.
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This article was originally published by The Foundation for Economic Education.
Inflation’s Not the Only Way Easy Money Destroys Wealth – Article by Frank Shostak

Inflation’s Not the Only Way Easy Money Destroys Wealth – Article by Frank Shostak

The New Renaissance Hat
Frank Shostak
October 14, 2014
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The US Federal Reserve can keep stimulating the US economy because inflation is posing little threat, Federal Reserve Bank of Minneapolis President Kocherlakota said. “I am expecting an inflation rate to run below two percent for the next four years, through 2018,” he said. “That means there is more room for monetary policy to be helpful in terms of … boosting demand without running up against generating too much inflation.”

The yearly rate of growth of the official consumer price index (CPI) stood at 1.7 percent in August against two percent in July. According to our estimate, the yearly rate of growth of the CPI could close at 1.4 percent by December. By December next year we forecast the yearly rate of growth of 0.6 percent.

Does Demand Create More Supply?

It seems that the Minneapolis Fed President holds that by boosting the demand for goods and services — by means of additional monetary pumping — it is possible to strengthen economic growth. He believes that by means of strengthening the demand for goods and services the production of goods and services will follow suit. But why should that be so?

If by means of monetary pumping one could strengthen the economic growth then it would imply that — by means of monetary pumping — it is possible to create real wealth and generate an everlasting economic prosperity.

This would also mean that world wide poverty should have been erased a long time ago. After all, most countries today have central banks that possess the skills to create money in large amounts. Yet world poverty remains intact.

Despite massive monetary pumping since 2008, and the policy interest rate of around zero, Fed policymakers seem to be unhappy with the so-called economic recovery. Note that the Fed’s balance sheet, which stood at $0.86 trillion in January 2007 jumped to $4.4 trillion by September this year.

Production Comes Before Demand

We suggest that there is no such thing as an independent category called demand. Before an individual can exercise demand for goods and services, he/she must produce some other useful goods and services. Once these goods and services are produced, individuals can exercise their demand for the goods they desire. This is achieved by exchanging things that were produced for money, which in turn can be exchanged for goods that are desired. Note that money serves here as the medium of exchange — it produces absolutely nothing. It permits the exchange of something for something. Any policy that results in monetary pumping leads to an exchange of nothing for something. This amounts to a weakening of the pool of real wealth — and hence to reduced prospects for the expansion of this pool.

What is required to boost the economic growth — the production of real wealth — is to remove all the factors that undermine the wealth generation process. One of the major negative factors that undermine the real wealth generation is loose monetary policy of the central bank, which boosts demand without the prior production of wealth. (Once the loopholes for the money creation out of “thin air” are closed off the diversion of wealth from wealth generators towards non-productive bubble activities is arrested. This leaves more real funding in the hands of wealth generators — permitting them to strengthen the process of wealth generation (i.e., permitting them to grow the economy).

Artificially Boosted Demand Destroys Wealth

Now, the artificial boosting of the demand by means of monetary pumping leads to the depletion of the pool of real wealth. It amounts to adding more individuals that take from the pool of real wealth without adding anything in return — an economic impoverishment.

The longer the reckless loose policy of the Fed stays in force the harder it gets for wealth generators to generate real wealth and prevent the pool of real wealth from shrinking.

Finally, the fact that the yearly rate of growth of the CPI is declining doesn’t mean that the Fed’s monetary pumping is going to be harmless. Regardless of price inflation monetary pumping results in an exchange of nothing for something and thus, impoverishment.

Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. His consulting firm, Applied Austrian School Economics, provides in-depth assessments and reports of financial markets and global economies. See Frank Shostak’s article archives.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Charity, Compulsion, and Conditionality – Video by G. Stolyarov II

Charity, Compulsion, and Conditionality – Video by G. Stolyarov II

Libertarians’ opposition to coercive redistribution of wealth does not mean that they are opposed to charitable giving that improves people’s lives.

In this video, Mr. Stolyarov analyzes why private charities are more effective in benefiting their intended recipients than programs which involve coercive redistribution of wealth. Paradoxically, it is the extreme conditionality of many coercive welfare programs that leads them to be less effective than the voluntary decisions of diverse individuals and organizations.

References

– “The Costs of Public Income Redistribution and Private Charity” – James Rolph Edwards – Journal of Libertarian Studies – Summer 2007
In Our Hands: A Plan To Replace The Welfare State (2006) – Book by Charles Murray

The Paradox of Public Assistance – Article by David J. Hebert

The Paradox of Public Assistance – Article by David J. Hebert

The New Renaissance Hat
David J. Hebert
January 26, 2014
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Let’s put ideology aside for a moment. One might not think it’s morally or politically justifiable to take from one person in order to help another. But for now, let’s ask another question: Does it help?

A lot of people see the existence of “poverty amid plenty,” wherein a few people have acquired a lot of wealth while the overwhelming majority struggles to make ends meet. The standard call is to provide some means of transferring those resources from the haves to the have-nots, either through a progressive tax policy or via some direct transfer program.

The problem with these policies is obviously not in their stated goals. Who could argue against the desire to help people? Nor is it, entirely, the coercive nature of redistribution. The real problem comes in the ability of welfare advocates to actually reduce poverty in an effective and long-lasting manner.

World Coyne

In his latest book, Doing Bad by Doing Good, Chris Coyne discusses problems with delivering effective humanitarian aid to other countries. Coyne identifies two potential problems: the planner’s problem and the incentive problem.

Briefly, the planner’s problem refers to the impossibility of people outside of a society actually to possess the information required to assist in fostering continued economic development. The incentive problem refers to the idea that the planners may face perverse incentives to go ahead and do something that the planner’s problem suggests is impossible to start with.

These points are all well and good, and should be well received at least by readers of this publication. But I think we can go further to urge that the problems Coyne identifies apply equally to issues related to domestic intervention.

Disconnect

The people who advocate most strongly for poverty relief programs are not, in fact, people who are poor. Rather, they are people who are typically either politicians seeking reelection or wealthy people who have some overwhelming desire to do something (usually they want to get other people to give them money to do something). They are not poor, but rather they simply do not like seeing poor people suffer and feel some desire to help. However, because they are not poor themselves, they have absolutely no idea what it is that poor people actually want.

Do they want shelter, clothing, and food? Yes. Do they want education, hygiene, and employment? Of course. But in what order, how much, and of what type? In a world of scarcity, the answers to these questions are of crucial importance if we are to find ways to help the most people as quickly and effectively as possible. And yet, the answers to these questions are wholly unknowable to outside observers.

Similarly, and perhaps more importantly, the incentive problem that the planners face also applies to domestic intervention. Politicians are people who, just like us, are primarily concerned with helping themselves. Given their position, what is in their interest might sometimes in be the interest of the “general public” (providing genuine public goods, the rule of law, etc.) but as James Buchanan and Gordon Tullock rightfully point out in their groundbreaking book, The Calculus of Consent, this is not guaranteed to be true at all times and in all cases. In fact, it may be the case that as a direct result of political involvement, incentives may direct their behavior in ways that enrich concentrated interests and impoverish poor people even more.

The War on Poverty

One answer is that the disparity might be much, much worse without government intervention—that is, the rich would be even richer and the poor would be even poorer. But another possibility is that the war on poverty directly contributes to a burgeoning underclass. How can we adjudicate between these positions?

On the surface, giving people aid seems like a straightforward proposition. We observe people suffering and then send resources to them to alleviate that suffering. On the other hand, as Buchanan pointed out in 1975, we run into problems in which the aid designed to alleviate poverty actually perpetuates it, creating dependency. This dependency, in turn, means that an increasing number of people derive the majority of their income from aid.

Paid to Be Poor

That some of the poor get most of their income from the government is not to argue that welfare recipients are lazy or don’t wish to work. Rather it suggests that the incentives they face may make them reluctant to accept employment opportunities at offered wages. We can think through this proposition logically: Suppose I offer you $240 per week in financial aid while you are between jobs. You would be receiving that money for zero hours of work per week. Being an honest person, you go out and look for work, eventually finding a job that pays you $8 per hour, or $320 per week working full time. Should you take that job?

On the one hand, you would receive more money by taking that job than you would by accepting the aid. However, economics teaches us the value in thinking at the margin. Doing so reveals that you would only receive an additional $120 per week in exchange for your 40 hours of work. In other words, taking into account your opportunity cost, you would really only be earning $3 per hour! While I certainly cannot speak for everyone, I feel reasonably confident in saying that few people in this country value their time at only $3 per hour. Realizing this, it is no puzzle why people receiving aid tend to stay unemployed for so long. The Cato Institute recently published a study offering evidence of the work versus welfare trade-off, which can be found here.

Politics and Perquisites

Now that we understand why domestic aid programs may lead to the perpetuation of poverty among the poor, we’re ready to discuss how they may lead to the enrichment of the already wealthy. When politicians decide to try to do something about an issue, one of the first things that they do is convene special hearings about the issue. Here, they call upon the testimonies of experts to try to figure out (1) what can be done and then (2) how best to do it.

The problem here is that the very people who are best equipped to detail how to solve the problem will typically explain that they themselves (or the people that they represent) are in fact the best to solve the problem and should be awarded the contract to solve the problem. We see this in government all the time. Take, for example, the company that was placed in charge of rebuilding Iraq after the US invasion in 2006: Halliburton, which was formerly run by then-Vice President Dick Cheney. Is it any wonder why this company was awarded these contracts? Kwame Kilpatrick, when he was mayor of Detroit, would routinely award offices and several perks to his friends and family members. Don’t forget about the legendary William Tweed, better known as “Boss Tweed.” The point here is not that all politicians are corrupt, but that knowing a politician who is in a position to award perks puts you in good stead to be the recipient of largesse. And, of course, if that’s true, you have very good reasons to create incentives for the politician to steer favors in your direction. It is the nature of politics.

What to Do

Evidencing the failure of domestic aid to help combat poverty, Abigail Hall has an excellent article, forthcoming in the Journal of Private Enterprise, detailing the failure of the Appalachian Regional Commission. This line of research might lead one to the sobering conclusion that there is little that can be done to alleviate the suffering of the poor. Nothing could be further from the truth, however.

We can take away a couple of things from this type of work:

1) The limits of what can be directly achieved through political means of alleviating poverty; and

2) The idea that the expansion of opportunity ultimately drives economic growth and helps the poor.

Rather than focusing on giving poor people the resources to live well, we should instead focus on removing the barriers that prevent people from discovering ways to be productive. Doing so would not only provide them with the tools to lift themselves out of poverty, but would also provide the basis of dignity.

David Hebert is a Ph.D. student in economics at George Mason University. His research interests include public finance and property rights.

This article was originally published by The Foundation for Economic Education.
Revolutionary France’s Road to Hyperinflation – Article by Frank Hollenbeck

Revolutionary France’s Road to Hyperinflation – Article by Frank Hollenbeck

The New Renaissance Hat
Frank Hollenbeck
December 15, 2013
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Today, anyone who talks about hyperinflation is treated like the shepherd boy who cried wolf. When the wolf actually does show up, though, belated warnings will do little to keep the flock safe.

The current Federal Reserve strategy is apparently to wait for significant price inflation to show up in the consumer price index before tapering. Yet history tells us that you treat inflation like a sunburn. You don’t wait for your skin to turn red to take action. You protect yourself before leaving home. Once inflation really picks up steam, it becomes almost impossible to control as the politics and economics of the situation combine to make the urge to print irresistible.

The hyperinflation of 1790s France illustrates one way in which inflationary monetary policy becomes unmanageable in an environment of economic stagnation and debt, and in the face of special interests who benefit from, and demand, easy money.

In 1789, France found itself in a situation of heavy debt and serious deficits. At the time, France had the strongest and shrewdest financial minds of the time. They were keenly aware of the risks of printing fiat currency since they had experienced just decades earlier the disastrous Mississippi Bubble under the guidance of John Law.

France had learned how easy it is to issue paper money and nearly impossible to keep it in check. Thus, the debate over the first issuance of the paper money, known as assignats, in April 1790 was heated, and only passed because the new currency (paying 3 percent interest to the holder) was collateralized by the land stolen from the church and fugitive aristocracy. This land constituted almost a third of France and was located in the best places.

Once the assignats were issued, business activity picked up, but within five months the French government was again in financial trouble. The first issuance was considered a rousing success, just like the first issuance of paper money under John Law. However, the debate over the second issuance during the month of September 1790 was even more chaotic since many remembered the slippery slope to hyperinflation. Additional constraints were added to satisfy the naysayers. For example, once land was purchased by French citizens, the payment in currency was to be destroyed to take the new paper currency out of circulation.

The second issuance caused an even greater depreciation of the currency but new complaints arose that not enough money was circulating to conduct transactions. Also, the overflowing government coffers resulting from all this new paper money led to demands for a slew of new government programs, wise or foolish, for the “good of the people.” The promise to take paper money out of circulation was quickly abandoned, and different districts in France independently started to issue their own assignats.

Prices started to rise and cries for more circulating medium became deafening. Although the first two issuances almost failed, additional issuances became easier and easier.

Many Frenchmen soon became eternal optimists claiming that inflation was prosperity, like the drunk forgetting the inevitable hangover. Although every new issuance initially boosted economic activity, the improved business conditions became shorter and shorter after each new issuance. Commercial activity soon became spasmodic: one manufacturer after another closed shop. Money was losing its store-of-value function, making business decisions extremely difficult in an environment of uncertainty. Foreigners were blamed and heavy taxes were levied against foreign goods. The great manufacturing centers of Normandy closed down and the rest of France speedily followed, throwing vast numbers of workers into bread lines. The collapse of manufacturing and commerce was quick, and occurred only a few months after the second issuance of assignats and followed the same path as Austria, Russia, America, and all other countries that had previously tried to gain prosperity on a mountain of paper.

Social norms also changed dramatically with the French turning to speculation and gambling. Vast fortunes were built speculating and gambling on borrowed money. A vast debtor class emerged located mostly in the largest cities.

To purchase government land, only a small down payment was necessary with the rest to be paid in fixed installments. These debtors quickly saw the benefit of a depreciating currency. Inflation erodes the real value of any fixed payment. Why work for a living and take the risk of building a business when speculating on stocks or land can bring wealth instantaneously and with almost no effort? This growing segment of nouveau riche quickly used its newfound wealth to gain political power to ensure that the printing presses never stopped. They soon took control and corruption became rampant.

Of course, blame for the ensuing inflation was assigned to everything but the real cause. Shopkeepers and merchants were blamed for higher prices. In 1793, 200 stores in Paris were looted and one French politician proclaimed “shopkeepers were only giving back to the people what they had hitherto robbed them of.” Price controls (the “law of the maximum”) were ultimately imposed, and shortages soon abounded everywhere. Ration tickets were issued on necessities such as bread, sugar, soap, wood, or coal. Shopkeepers risked their heads if they hinted at a price higher than the official price. The daily ledger of those executed with the guillotine included many small business owners who violated the law of the maximum. To detect goods concealed by farmers and shopkeepers, a spy system was established with the informant receiving 1/3 of the goods recovered. A farmer could see his crop seized if he did not bring it to market, and was lucky to escape with his life.

Everything was enormously inflated in price except the wages for labor. As manufacturers closed, wages collapsed. Those who did not have the means, foresight, or skill to transfer their worthless paper into real assets were driven into poverty. By 1797, most of the currency was in the hands of the working class and the poor. The entire episode was a massive transfer of real wealth from the poor to the rich, similar to what we are experiencing in Western societies today.

The French government tried to issue a new currency called the mandat, but by May 1797 both currencies were virtually worthless. Once the dike was broken, the money poured through and the currency was swollen beyond control. As Voltaire once said, “Paper money eventually returns to its intrinsic value — zero.” In France, it took nearly 40 years to bring capital, industry, commerce, and credit back up to the level attained in 1789.

Frank Hollenbeck, PhD, teaches at the International University of Geneva. See Frank Hollenbeck’s article archives.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Reflections on Victor Hugo’s “Les Misérables” – Article by Edward W. Younkins

Reflections on Victor Hugo’s “Les Misérables” – Article by Edward W. Younkins

The New Renaissance Hat
Edward W. Younkins
February 18, 2013
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This essay is not a review of Tom Hooper’s recently released film of the tremendously popular 1980s stage musical. However, the release of this film has given me the occasion to read and to reflect upon the original text of Victor Hugo’s 1862 classic, Les Misérables, a mosaic of social indictment, history, social philosophy, sentimentality, and spirituality.

Victor Hugo’s Les Misérables (1862) is the great prose epic of the nineteenth century. Interweaving the social and spiritual threads of human life, the novel has been influential in making people desire a more just world. In Les Misérables the author condemns the unjust class-based social structure in nineteenth-century France for turning good people into criminals and beggars. He makes a case that crime and poverty can be eliminated through universal education, a criminal justice system that is flexible and focused on rehabilitation rather than punishment, and the more equal and humane treatment of women. Despite these broad recommendations, Hugo offered no practical solutions for reforming schools, the police, the courts, and the prisons. Les Misérables is a call for a wiser and nobler civilization. When it was released, it inspired a great deal of sympathy for hapless people oppressed by the state. It was also viewed as a celebration of revolution against tyranny.

Les Misérables is an epic novel focused on characters fighting against their exploitation and oppression. We see the injustices and disproportionate sentences piled upon Jean Valjean, the abuses suffered by Fantine, the brutality foisted on Cosette, the maltreatment of Enjolras  and his fellow revolutionaries, the plight of homeless children, and so on. All of these are examples of society’s injustice toward the lower classes. Through these stories, the novel exudes sympathy from the reader for the most wretched in society. The message is that, if men murder and steal and women fall from grace out of desperation, it is not their fault because they can find no honorable path to sustainability within the constructs of society. Rather, it is the fault of society and its creations, the state and the law. The state and its legal system are shown to be disinterested in the conditions of the dangerous classes. Society is thus culpable for dehumanizing the poor and for the crimes committed by the dregs of society. Les Misérables chronicles the corruption of police power, shows that society gives the convict no chance for redemption, and illustrates how France’s prison system not only continues, but also accelerates, the downward spiral of criminals. On the one hand, Valjean represents suppressed and destitute people whose place in life is determined by positive laws created by society’s elite in order to perpetuate their own superiority. On the other hand, Valjean illustrates that it is possible for men to rise above their circumstances.

Bishop Myriel is not a typical bishop or even a conventional Christian. He operates on his own innate sense of morality—it is not provided by Christianity. True morality is higher than, and separate from, any particular religion. Religions pass away but God remains. Myriel acts out of genuine sympathy and caring for the weak and the downtrodden. The Bishop has chosen a consistent belief system and life path and has dedicated his life to the active service of humanity by performing good deeds and engaging in heartfelt charity. Myriel believes that it is each man’s duty to perform good acts despite the fact that he may never know if the good acts he has performed for people will lead them to change their lives for the good. His religious humanism is far from orthodox Christianity.

When Myriel, the Bishop of Digne, forgives Jean Valjean for the theft of the silver, he offers him his initial opportunity for redemption. After this incident, Valjean has a choice to make. He could either continue on a path of crime or he could follow the example set by the Bishop. Having learned from his past, Valjean goes on to help the poor and the wretched. He adopts a new life, identity, and mentality. His new life includes honesty, love of neighbor, love of enemy, and love of God. Throughout his life, the Bishop is always with him as symbolized by the candlesticks. Myriel acts as a model and an inspiration for Valjean for the rest of his life. Throughout the novel, Valjean imitates more and more the Bishop’s asceticism, renunciation of worldly pleasures, and emphasis on sacrifice.

The moral duty to help the poor that Valjean accepts does not come from any social institutions. Rather, it flows from an expansive notion of God. Valjean illustrates that reason is inadequate in the resolution of moral problems. However, thought does direct Valjean toward the consideration of a dilemma, but at every decision point his emotions serve as the guide to right behavior. The hero performs good deeds intuitively as if he is acting in response to an inner voice. This Kantian perspective is that each person has an inner voice (perhaps his conscience), the source of moral laws, that tells him what his duties (i.e., moral obligations) are. The message seems to be that faith can transform one’s life. For Valjean, merely believing in God is not enough. He does not just contemplate the divine. Having learned from his experiences, he goes on to act to help people by his own initiative. For him, God, fulfillment, and salvation are attainable without the help of any organized religion.

Choice is difficult for Valjean who has a double nature—he has the experience of a convict and the instincts of a saint. He is a product of the social conditions that led him to steal a loaf of bread for his sister’s family and his prison time for punishment of that crime. Despite that, he still has the potential for good in him. Over and over he has to choose between doing what is right and doing what is safe and secure. At virtually every turn Valjean doubts and questions himself before making the morally correct choice. Les Misérables is very much a story of a man’s conscience at war with itself. After meeting the radiantly spiritual Bishop Myriel, Valjean’s life becomes a continuing struggle between his activated moral sense and his life-long criminal tendencies.

As Monsieur Madeleine, Jean Valjean redeems himself by becoming an innovative entrepreneur who creates a successful manufacturing business that brings about progress and prosperity for an entire region. This successful and kind person voluntarily does good deeds to help the less fortunate. Valjean’s actions exhibit justice to individual people rather than observance of the requirements of some abstract legal order. In addition to providing a reasonable standard of living for his employees, he builds schools and hospitals with his own money and distributes a large share of his wealth to the poor. Then, of course, he takes care of Fantine and rescues, raises, and protects Cosette. Ironically, the tolerant Valjean sympathizes with others but is unable to sympathize with himself. He understands that, although a person can repent of a crime, he can never escape the dishonor from committing it.

Inspector Javert cannot accept transgressions of the law regardless of circumstances. He represents the idea of punitive secular justice and is solely concerned with detection and retribution. Javert is absolutely committed to rules and to their administration. As a defender of France’s legal system, he is dedicated to following the letter of the law rather than the spirit of the law. The well-intentioned, rigid, and dogmatic Javert wants to protect society from the criminal element and has total faith in the system of laws that he represents. Javert, the personification of public authority, contends that theft is wrong regardless of mitigating factors. Myriel, representing morality, would say that theft should be forgiven in the case when one acted to keep people from starving. Of course, our hero, Valjean, is caught between these two worldviews. Toward the end of the novel, Javert comes to understand that Valjean is concerned with a moral law higher than positive state law. At the end he empathizes with Valjean and comprehends that divine law has supremacy. Javert commits suicide because this realization disaffirms everything in his life that he believed in. The story of Javert provides a lesson about the limitations of the law of men. At the end of his life, Javert understands that Jean Valjean’s resistance to Javert’s tyranny is rooted in a belief in a higher power and law than the laws of men.

Enjolras and his diverse band of revolutionaries have a dream of a better world and do all they can to make that world a reality. They love man, tend to reject organized religions (including Christianity), and attempt to overturn the existing social order. Enjolras, the leader of the ABC (the Abaissé or the abased) Society wants to elevate men. The ABC’s 1832 revolt demanded legislation that would make possible liberty, justice, equal education, equal opportunity, and so on. Enjolras is a devoted, purposeful, political idealist who inspires others with his utopian vision of future progress. The other revolutionaries turn to Enjolras for the meanings behind their actions.

The novel teaches that individual men are dignified, honorable, and benevolent, but that social institutions are not, the result being the corruption of individual human beings. Like Rousseau and Turgot, Hugo subscribes to the idea of the natural goodness of man. All three believed in progress and in the perfectibility of man. They viewed progress as a basic law of the universe. Created by God, man has the capacity to become a civilized moral person if he is not corrupted by society. It is the corrupting influence of society that is responsible for the misconduct of the individual. If individuals are properly educated then they would not want to do evil.

Hugo maintains that society must be changed, but also that it is individuals who must first be transformed. It is these transformed individuals who can then foster the advancement of society. Accepting the Platonic idea that the individual’s soul is noble but the body is degraded, the author of Les Misérables teaches that one must achieve spiritual grandeur and a virtuous character in order to battle for justice in the here and now. Some individuals have the ability to triumph over evil both in themselves and in society and its institutions if they are willing to actively respond to the divine. In Les Misérables the life of each character influences others. It follows that, if each individual comprehends and accepts his influences on other persons, then society may become more just, caring, and merciful. Hugo contends that the requisite love of humanity can only come from faith in the divine. Faith in God is thus placed at the heart of this work. For Hugo, belief in God by acting people of good will is necessary to instill the social order with kindness and to make society more humane. Like Pascal, Hugo urges his readers to bet in favor of the existence of God and perhaps even in the possibility of an afterlife for the soul. In Les Misérables there are only a few exceptional virtuous individuals such as Myriel, Jean Valjean, and Enjolras, who can attain this level of existence. It follows that rehabilitation and elevation of the social order is most likely impossible given the above requirement and reality.

The novel’s ethic of social service emphasizes the alleviation of poverty. It portrays poor people being helped by the charitable works of a private individual (Valjean) rather than by government. Depicting the abject poverty of the poor, Les Misérables questions the morality of a political and economic system that permits children to be orphaned and homeless, mothers dying in the streets, and good men imprisoned for minor transgressions committed to feed their families. Hugo’s goal was to elicit his readers’ compassion and to stimulate their moral sensibilities by portraying how poverty brutalizes and dehumanizes people and how strict and relentless law enforcement creates the savages that it wants to eliminate. He wanted to educate the bourgeois and to awaken their consciousness and concern for France’s social problems. Hugo wanted people to take action to ease the burden of the less fortunate through good deeds and through changes in the social system. Les Misérables is Hugo’s plea for social change that vacillates between human and institutional reality and his hope for, and vision of, a better world.

In Les Misérables Hugo depicts that society is nothing more than the collection of individuals whose lives affect one another. For example, it is clear that Jean Valjean is concerned only with the individuals who make up society. In the novel, the circumstances and conduct of various seemingly randomly introduced characters converge and become intertwined with the struggles of Valjean. From the beginning of the story, there is a web of influence that builds as characters affect one another. Early on we see G______, a representative of the assembly during the French Revolution that dissolved the monarchy, humbling Bishop Myriel who recognizes his moral devotion to humanity and progress prompting the Bishop to redouble his own tenderness and love for the weak and the suffering. The network of interconnections grows as characters such as Valjean, Fantine, Cosette, Javert, Fauchelevant, the Thénardiers, Marius, M. Gillenormand, Colonel Pontmery, Champathieu, Enjolras, and others appear. The author brings many of these characters together toward the climax of the novel.

Les Misérables illustrates that in every idea, and that for every person, perspective is partial and, therefore, insufficient by itself alone. Hugo shows that the complexity of life requires that no one philosophy, perspective, emotion, tradition, or behavior is capable of providing a total picture of what it means to be human. Like Kant, Hugo laments the fact that a person can only perceive and comprehend things through his own consciousness. According to Kant, man’s knowledge lacks validity because his consciousness possesses identity. For Kant, knowledge, to be valid, must not be processed in any way by consciousness. Hugo, like Kant, seems to be looking for knowledge that could be called absolute, unqualified, pure, or diaphanous. Kant maintains that identity, which itself is the essence of existence, invalidates consciousness. To know what is true, a man would have to abandon his own nature, which is an absurd impossibility. It follows that for both Hugo and Kant, reason must be forsaken and the emotions must be embraced, if one wants to deal with the fundamental concerns of existence. Hugo does seem to imply that knowledge can be enhanced by dialectically relating each perspective with opposing viewpoints. However, he realizes that, even with this dialectic interaction, one’s knowledge would still be limited. Even when many angles of perspective can be coordinated simultaneously, one’s understanding of a process, experience, or event is still limited.

Les Misérables is a fascinating maze of characters, emotions, ideas, paradoxes, and antitheses. The novel co-mingles ever-shifting and blurred shades of criminality, heroism, misery, resilience, good, evil, irony, pathos, poetry, free will, providence, action, the social, the spiritual, and much more. Hugo thus deals with the emotions, hopes, fears, passions, and doubts that are reflective of people’s common humanity. Les Misérables is a detailed reporting of men’s feelings and ideas that transcend time and place. It follows that this great novel is as relevant today as when it was published more than 150 years ago.

Dr. Edward W. Younkins is Professor of Accountancy at Wheeling Jesuit University. He is the author of Capitalism and Commerce: Conceptual Foundations of Free Enterprise [Lexington Books, 2002], Philosophers of Capitalism: Menger, Mises, Rand, and Beyond [Lexington Books, 2005] (See Mr. Stolyarov’s review of this book.), and Flourishing and Happiness in a Free Society: Toward a Synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism [Rowman & Littlefield Pub Incorporated, 2011] (See Mr. Stolyarov’s review of this book.). Many of Dr. Younkins’s essays can be found online at his web page at www.quebecoislibre.org. You can contact Dr. Younkins at younkins@wju.edu.

More of Everything for Everyone – Article by Bradley Doucet

More of Everything for Everyone – Article by Bradley Doucet

The New Renaissance Hat
Bradley Doucet
July 4, 2012
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At any given time, I like to be reading one fiction and one non-fiction book. Rarely, though, do my choices dovetail as serendipitously as they did just recently when I was reading Abundance: The Future Is Better Than You Think (2012) by Peter H. Diamandis and Steven Kotler alongside The Diamond Age (1995) by Neal Stephenson. The former is a look at the world-changing technologies coming down the pipe in a variety of fields that promise a brighter future for all of humanity. The latter is a story set in such a future, where diamonds are cheaper than glass.If Stephenson’s world of inexpensive diamonds sounds farfetched to you, consider the entirely factual tale that Diamandis and Kotler use to kick off their book. Once upon a time, you see, aluminum was the world’s most precious metal. As late as the 1800s, aluminum utensils were reserved for the most honoured guests at royal banquets, the other guests having to make do with mere gold utensils. But in fact, aluminum is the third most abundant element in the Earth’s crust, behind oxygen and silicon. It makes up 8.3 percent of the mass of the planet. But it is never found in nature as a pure metal, and early procedures for separating it out of the claylike material called bauxite were prohibitively expensive. Modern procedures have made it so ubiquitous and cheap that we wrap our food in it and then discard it without so much as a second thought.

The moral of the story is that scarcity is often contextual. Technology, as the authors explain, is a “resource-liberating mechanism.” And the technologies being developed right now have the power to liberate enough resources to feed, clothe, educate, and free the world.

The Future Looks Bright

Peter Diamandis is the Chairman and CEO of the X PRIZE Foundation, best known for the $10-million Ansari X PRIZE that launched the private spaceflight industry. He conceived of the project back in 1993 after reading Charles Lindbergh’s The Spirit of St-Louis (1954) and learning about the $25,000 prize funded by Raymond Orteig that spurred Lindbergh to make the first ever non-stop flight from New York to Paris in 1927. Diamandis also holds degrees in molecular biology and aerospace engineering from MIT and a medical degree from Harvard.

Diamandis and his co-author, best-selling writer and journalist Steven Kotler, do not attempt to paper over the plight of the world’s poor, who still lack adequate clean water, food, energy, health care, and education. Still, there has been significant progress “at the bottom” in the past four decades. “During that stretch, the developing world has seen longer life expectancies, lower infant mortality rates, better access to information, communication, education, potential avenues out of poverty, quality health care, political freedoms, economic freedoms, sexual freedoms, human rights, and saved time.”

It is technology that has improved the lot of many of the world’s poor, and in Abundance, we get a quick tour of dozens of the latest exponential technologies that are poised to make serious dents in humanity’s remaining scarcity problems. There is the Lifesaver water purification system, the jerry can version of which can produce 25,000 litres of safe drinking water, enough for a family of four for three years, for only half a cent a day. There is aeroponic vertical farming—essentially a skyscraper filled with suspended plants on every floor being fed through a nutrient-rich mist—which requires 80 percent less land, 90 percent less water, and 100 percent fewer pesticides than current farming practices. There are advances that promise to make solar power more affordable and easier to store, which is going to be huge given that “[t]here is more energy in the sunlight that strikes the Earth’s surface in an hour than all the fossil energy consumed in one year.”

Stephenson’s The Diamond Age actually gets a mention in the chapter on education thanks to its depiction of what experts in artificial intelligence (AI) refer to as a “lifelong learning companion,” which has a central role to play in the novel. The Khan Academy has already shaken things up with its 2,000+ free online educational videos and two million visitors a month as of the summer of 2011. But things will be shaken up again soon enough by these AI tutors that “track learning over the course of one’s lifetime, both insuring a mastery-level education and making exquisitely personalized recommendations about what exactly a student should learn next.” With mobile telephony already sweeping the developing world and with smartphones getting cheaper and more powerful with each passing year, it won’t be long before there’s an AI tutor in every pocket.

Abundance, Freedom, and the Ultimate Resource

To sum up, in the world of the future, although there will be more humans on the planet, each one of us will be far wealthier on average than we are today. We will have more water, more food, more energy, more education, more health care, and make less of an impact on the natural environment to boot. And the healthy, educated, well-fed inhabitants of the world of tomorrow will be freer as well, no longer kept down by force of arms and blight of ignorance. We’ve already had a glimpse of what mobile phones and information technology can accomplish in last year’s Arab Spring, regardless of whether or not Egypt has made the most of the opportunity.

Not that we should be complacent, though. There are no guarantees, and any number of factors could derail us from the path we’re on. But there are powerful forces pushing us in a positive direction. The X PRIZE Foundation is doing its best to spur innovation with various prizes modelled after its initial success. Technophilanthropists like Bill Gates are also doing their part. And then there are the poor themselves, the bottom billions who are becoming the rising billions. As Diamandis and Kotler write, echoing the late Julian Simon, author of The Ultimate Resource:

[T]he greatest tool we have for tackling our grand challenges is the human mind. The information and communications revolution now underway is rapidly spreading across the planet. Over the next eight years, three billion new individuals will be coming online, joining the global conversation, and contributing to the global economy. Their ideas—ideas we’ve never before had access to—will result in new discoveries, products, and inventions that will benefit us all.

I still have a hundred pages or so to go in The Diamond Age, so I don’t know how that story turns out. But in the real world, all signs point to technology-fuelled increases in abundance and freedom in the poorest regions of the planet over the next couple of decades. Abundance encourages us to do everything we can to help those technologies develop and spread, to the benefit of the entire human race.

Bradley Doucet is Le Quebecois Libré‘s English Editor. A writer living in Montreal, he has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also writes for The New Individualist, an Objectivist magazine published by The Atlas Society, and sings.
Commonsense Wisdom from African Farmers – Article by Kelvin Kemm

Commonsense Wisdom from African Farmers – Article by Kelvin Kemm

The New Renaissance Hat
Kelvin Kemm
June 19, 2012
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If you want to learn what farmers think (and need), talk to African farmers – not to bureaucrats, environmental activists or politicos at the Rio+20 United Nations summit in Rio de Janeiro. You’ll get very different, far more honest and thoughtful perspectives.

The recent (May 24) Food, Agriculture and Natural Resources Policy Analysis Network conference in Pretoria, South Africa brought together delegates from agricultural communities in many African countries. FANRPAN’s primary objective is to improve food security in Africa, by ensuring that small-scale farmers can become more productive. Their obvious enthusiasm and commonsense views were heartening.

FANRPAN chair Sindiso Ngwenya of Zambia gave an incisive presentation, pointing out that agriculture is the key to reducing poverty and ensuring food security in Africa. “We call upon the world to assist us,” he said, “not by treating us as beggars, but by treating us as equals.”

Ngwenya criticised many First World attempts to use climate change, biodiversity and sustainable development arguments to prevent African agriculture from advancing. “If you are using implements that were there before Christ, how much chance do you have?” he wanted to know.

And why would anyone think these UN-EU-US issues are important to African farmers and families who are trying to feed their families and neighbors, and improve their living standards by exporting their products?

Africa does not need foreign aid in the form of handouts, Ngwenya emphasized. African farmers need modern technology and reliable, affordable electricity. They need the world to buy African produce. Instead, far too often, European and other First World countries impose rules or block African exports, using a multitude of excuses that can no longer be tolerated.

FANRPAN has decided to go “Africa-wide,” Ngwenya announced. Africa is huge –larger than the United States, China, India and Europe combined. And yet 60% of its arable land is not used at all. On the arable land that is used in most African countries, crop yields are typically a quarter of the norm in South Africa. What’s needed, he said, are modern farming methods, seeds, fertilizers and equipment –at the level of every individual farmer.

Referring to the 2011 COP-17 world environment congress in Durban, South Africa, Ngwenya pointed out that the FANRPAN slogan is “No agriculture, no deal.” However, agriculture, and particularly the advancement of rural African agriculture, was not included in past COP objectives. Many delegates criticised this, saying it reflected the First World’s hope that Africa and African agriculture will remain primitive and underdeveloped, so that rich countries can praise Africans for being “sustainable” and protecting the planet.

Africans are being told by First World activists, politicians and pressure groups to “stay in tune with nature,” delegates noted – when this attitude really reflects a well-fed First World’s maneuver to retard African agricultural improvements.

When it came to the eternal climate change saga, FRANRPAN delegates emphasized “climate-smart agriculture” and noted that Africa has always experienced dramatic weather and climate variations. What’s needed now, they stresse, is sensible, fact-based science, to predict and adapt to local and regional climate cycles and variations.

Equally impressive was learning that a group of small-scale farmers from Burkino Faso had paid their own way to attend a meeting in Windhoek, Namibia, nearly 3,000 miles (4,500 kilometers) away, to present a petition calling for the development of evidence-based policies, to replace what to now have been emotional, harmful and oppressive policies, rules and treaties.

The delegates said they were tired of the First World telling them what to do, based on First World interests and perceptions. They understand all too well that calls for “sustainable development,” “biodiversity” and climate change “prevention” really mean demands for policies and practices that ensure sustained poverty and malnutrition.

FRANRPAN CEO Dr. Lindiwe Sibanda emphasized that the real work is done on the ground, at the level of individual countries – and “policy comes from people.” Individual countries must come to their own conclusions about what works for them, and countries must align their policies to ensure food security for their people, she said. Modern methods and technologies are also required, to enhance intra-Africa food trade and enable countries to export what they are good at producing.

Her enthusiasm was praised by a farmer who spoke from the floor, with a strong French accent. “There’s a lack of resources for small farmers to come here,” he said, even for important meetings like this, but he was glad he had spent the time and money to be there. Certainly, those that did attend exhibited enough excitement and enthusiasm for the millions who could not join them.

Chairman Ngwenya wrapped up the proceedings by criticising the apparently intentional side-stepping of agricultural issues during COP-17. The First World must stop impeding African farmers and end “the paralysis by analysis,” he said. Absolutely right.

There is far too much First World smoke and mirrors, telling Africans they are saving the planet – when the real intention is to stop them from acquiring modern technology and electricity that would allow them to surge to middle class or even rich country status.

This FANRPAN conference serves notice to the United Nations Environment Programme, Rio+20 Sustainable Development Summit, Europe, United States and other obstructionists that Africa has caught on to what they are doing – and is no longer willing to play their game.

That’s good news for every African, Asian, Latin American and other poor family that wants to eat better, live better and have the freedom to pursue their dreams.

Dr Kelvin Kemm is a nuclear physicist and business strategy consultant in Pretoria, South Africa. He is a member of the International Board of Advisors of the Committee For A Constructive Tomorrow (CFACT), based in Washington, DC (www.CFACT.org). Dr. Kemm received the prestigious Lifetime Achievers Award of the National Science and Technology Forum of South Africa.

Illiberal Belief #11: The Environment Is Steadily Deteriorating – Article by Bradley Doucet

Illiberal Belief #11: The Environment Is Steadily Deteriorating – Article by Bradley Doucet

The New Renaissance Hat
Bradley Doucet
May 13, 2012
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There are plenty of potential sources of concern when it comes to the environment. We are polluting the air we breathe and the water we drink; we are depleting the oceans of fish; we are punching holes in the ozone layer; we are warming the climate to dangerous levels—and all of these problems, we are given to believe, are only getting worse.

Taken together, these worries, along with the ones discussed in more detail above, make up what Danish statistician Bjorn Lomborg referred to as The Litany in his controversial(1) 2001 book, The Skeptical Environmentalist. Lomborg plumbs the available data and the environmentalists’ arguments on each of these issues and discovers, to his surprise, that things are not as bad as they are made out to be. Like forest cover, air and water quality are generally improving in the developed world, and have been for decades. The ozone problem had a fairly simple and affordable solution which has been implemented. As for the climate issue, even setting aside the serious uncertainties contained in computer models, it will be much easier for us to adapt to future warming than to try, largely in vain, to prevent it. Our trillions of dollars, Lomborg emphasizes, would be far better spent dealing with more pressing problems like poverty in the developing world—and, he adds, helping the world’s poor climb out of poverty would have the additional benefit of allowing them the relative luxury of caring about and improving the state of their forests and the quality of their air.

We need not choose between improving the environment and alleviating world poverty, for the two categories of problems stem from the same kinds of causes. It is inadequately secure property rights and protectionist trade policies that keep the world’s poor from improving their lot; it is the absence of adequate property rights that threatens the ocean’s fisheries; it is irrational government policies that give polluters the right to pollute and forbid those whose property is polluted from seeking damages; it is government subsidies that lead to the wasteful use of water and other resources. We don’t often hear it in the media, but the solution to global poverty and to the environmental problems that do exist is one and the same: greater economic freedom.

1. Readers who are curious about this controversy are invited to visit www.greenspirit.com to see the debate between Lomborg and Scientific American, and decide for themselves which party is trying to clarify the issues and which is trying to muddy the waters.

Bradley Doucet is Le Quebecois Libré‘s English Editor. A writer living in Montreal, he has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also writes for The New Individualist, an Objectivist magazine published by The Atlas Society, and sings.