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Ten Principles of Classical Liberalism (2009) – Article by G. Stolyarov II

Ten Principles of Classical Liberalism (2009) – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
Originally Published November 8, 2009
as Part of Issue CCXVI of The Rational Argumentator
Republished July 24, 2014
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Note from the Author: This essay was originally published as part of Issue CCXVI of The Rational Argumentator on November 8, 2009, using the Yahoo! Voices publishing platform. Because of the imminent closure of Yahoo! Voices, the essay is now being made directly available on The Rational Argumentator.
~ G. Stolyarov II, July 24, 2014
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Fundamental Ideas in a Philosophy of Liberty

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I was recently asked to attempt a formulation of ten crucial principles of classical liberalism, the worldview which animated the American Revolution, the European Enlightenment, the Industrial Revolution, and the libertarian revival of free-market thought in the mid-to-late twentieth century. Classical liberalism – even when it is not explicitly espoused – still has considerable residual influence on the political and economic institutions of the Western world and is having an increasing impact outside the West as well. I see the principles of classical liberalism as primarily forward-looking. These ideas need not only characterize aspects of humanity’s past. They can also guide and ameliorate our future.

The following ten principles are not exhaustive, and they have been formulated broadly to account for differences in opinion on particulars within classical liberal circles. Although different people may apply and interpret these principles in somewhat different ways, a general agreement on even these ideas would go a long way toward advancing liberty, prosperity, and peace in the world.

Principle 1. The life of each individual is an absolute and universal moral value. No non-aggressive individual’s life, liberty, or property may be legitimately sacrificed for any goal.

Principle 2. Every individual owns his body, his mind, and the labor thereof, including the physical objects legitimately obtained through such labor.

Principle 3. Every individual has the right to pursue activities for the betterment of his life – including its material, intellectual, and emotional aspects – by using his own body and property, as well as the property of consenting others.

Principle 4. The rights of an individual to life, liberty, and property are inherent to that individual’s nature. They are not granted by other human beings, and they cannot be taken away by any entity.

Principle 5. The initiation of physical force, the threat of such force, or fraud against any individual is never permissible – irrespective of the position and character of the initiator. However, proportionate force may be used to retaliate and defend against aggression.

Principle 6. The sole fundamental purpose of government is to protect the rights of individuals by engaging in actions specifically delegated to the government by its constituents. Government is not the same as society, nor is the government entitled to sacrifice some non-aggressive individuals to advance the well-being of others.

Principle 7. Every individual has the absolute right to think and express any ideas. Thought and speech are never equivalent to force or violence and ought never to be restricted or to be subject to coercive penalties. Specifically, coercion and censorship on the basis of religious or political ideas are not acceptable under any circumstances.

Principle 8. Commerce, technology, and science are desirable, liberating forces that are capable of alleviating historic ills, improving the quality of human life, and morally elevating human beings. The complete freedom of trade, innovation, and thought should be preserved and supported for all human beings in the world.

Principle 9. Accidents of birth, geography, or ancestry do not define an individual and should not result in manmade restrictions of that individual’s rights or opportunities. Every individual should be judged purely on his or her personal qualities, including accomplishments, character, and knowledge.

Principle 10. There are no “natural” or desirable limits to human potential for good, and there is no substantive problem that is necessarily unsolvable by present or future human knowledge, effort, and technology. It is a moral imperative for humans to expand their mastery of the universe indefinitely and in such a manner as will reinforce the survival and flourishing of all non-aggressive individuals.

Read other articles in The Rational Argumentator’s Issue CCXVI.

Ludwig von Mises on War

Ludwig von Mises on War

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The New Renaissance Hat
Ludwig von Mises (1881-1973)
April 15, 2014
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The following are quotations on war by Ludwig von Mises (1881– 1973), who was the leading economist of the Austrian School. This list was first published as an article on the Mises Institute website and subsequently published on Le Québécois Libre.
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History has witnessed the failure of many endeavors to impose peace by war, cooperation by coercion, unanimity by slaughtering dissidents……. A lasting order cannot be established by bayonets. (Omnipotent Government, p. 7)  
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War……is harmful, not only to the conquered but to the conqueror. Society has arisen out of the works of peace; the essence of society is peacemaking. Peace and not war is the father of all things. Only economic action has created the wealth around us; labor, not the profession of arms, brings happiness. Peace builds, war destroys. (Socialism, p. 59)

The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another. (1st Ed. Human Action, p. 817 ; 3rd Ed. Human Action, p. 821)  
  
Economically considered, war and revolution are always bad business. (Nation, State, and Economy, p. 152) 
  
The market economy means peaceful cooperation and peaceful exchange of goods and services. It cannot persist when wholesale killing is the order of the day. (Interventionism: An Economic Analysis, p. 67)  
  
[A]ggressors cannot wage total war without introducing socialism. (Interventionism: an Economic Analysis, p. 70) 
  
War prosperity is like the prosperity that an earthquake or a plague brings. The earthquake means good business for construction workers, and cholera improves the business of physicians, pharmacists, and undertakers; but no one has for that reason yet sought to celebrate earthquakes and cholera as stimulators of the productive forces in the general interest. (Nation, State, and Economy, p. 154)  
  
War can really cause no economic boom, at least not directly, since an increase in wealth never does result from destruction of goods. (Nation, State, and Economy, p. 154) 
  
Whoever wishes peace among peoples must fight statism. (Nation, State, and Economy, p. 77) 
  
Modern society, based as it is on the division of labor, can be preserved only under conditions of lasting peace. (Liberalism, p. 44) 
  
Wars, foreign and domestic (revolutions, civil wars), are more likely to be avoided the closer the division of labor binds men. (Critique of Interventionism, p. 115) 
  
Modern war is not a war of royal armies. It is a war of the peoples, a total war. It is a war of states which do not leave to their subjects any private sphere; they consider the whole population a part of the armed forces. Whoever does not fight must work for the support and equipment of the army. Army and people are one and the same. The citizens passionately participate in the war. For it is their state, their God, who fights. (Omnipotent Government, p. 104)  
  
The existence of the armaments industries is a consequence of the warlike spirit, not its cause. (1st Ed. Human Action, p. 297; 3rd Ed. Human Action, p. 300)  
  
What basis for war could there still be, once all peoples had been set free? (Nation, State, and Economy, p. 34) 
  
The statement that one man’s boon is the other man’s damage is valid with regard to robbery, war, and booty. The robber’s plunder is the damage of the despoiled victim. But war and commerce are two different things. (1st Ed. Human Action, p. 662; 3rd Ed. Human Action, p. 666)  
  
It is certainly true that our age is full of conflicts which generate war. However, these conflicts do not spring from the operation of the unhampered market society. It may be permissible to call them economic conflicts because they concern that sphere of human life which is, in common speech, known as the sphere of economic activities. But it is a serious blunder to infer from this appellation that the source of these conflicts are conditions which develop within the frame of a market society. It is not capitalism that produces them, but precisely the anticapitalistic policies designed to check the functioning of capitalism. They are an outgrowth of the various governments’ interference with business, of trade and migration barriers and discrimination against foreign labor, foreign products, and foreign capital. (1st Ed. Human Action, p. 680; 3rd Ed. Human Action, p. 684)  
  
What has transformed the limited war between royal armies into total war, the clash between peoples, is not technicalities of military art, but the substitution of the welfare state for the laissez-faire state. (1st Ed. Human Action, p. 820; 3rd Ed. Human Action, p. 824) 

Under laissez-faire peaceful coexistence of a multitude of sovereign nations is possible. Under government control of business it is impossible. (1st Ed. Human Action, p. 820; 3rd Ed. Human Action, p. 824)  
  
Of course, in the long run war and the preservation of the market economy are incompatible. Capitalism is essentially a scheme for peaceful nations. (1st Ed. Human Action, p. 824; 3rd Ed. Human Action, p. 828)  
  
What the incompatibility of war and capitalism really means is that war and high civilization are incompatible. If the efficiency of capitalism is directed by governments toward the output of instruments of destruction, the ingenuity of private business turns out weapons which are powerful enough to destroy everything. What makes war and capitalism incompatible with one another is precisely the unparalleled efficiency of the capitalist mode of production. (1st Ed. Human Action, p. 824; 3rd Ed. Human Action, p. 828)  
  
Modern war is merciless, it does not spare pregnant women or infants; it is indiscriminate killing and destroying. It does not respect the rights of neutrals. Millions are killed, enslaved, or expelled from the dwelling places in which their ancestors lived for centuries. Nobody can foretell what will happen in the next chapter of this endless struggle. This has little to do with the atomic bomb. The root of the evil is not the construction of new, more dreadful weapons. It is the spirit of conquest. It is probable that scientists will discover some methods of defense against the atomic bomb. But this will not alter things, it will merely prolong for a short time the process of the complete destruction of civilization. (1st Ed. Human Action, p. 828; 3rd Ed. Human Action, p. 832)  
  
To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war. (1st Ed. Human Action, p. 828; 3rd Ed. Human Action, p. 832)  
  
Social development is always a collaboration for joint action; the social relationship always means peace, never war. Death-dealing actions and war are anti-social. All those theories which regard human progress as an outcome of conflicts between human groups have overlooked this truth. (Socialism, p. 279) 
  
But what is needed for a satisfactory solution of the burning problem of international relations is neither a new office with more committees, secretaries, commissioners, reports, and regulations, nor a new body of armed executioners, but the radical overthrow of mentalities and domestic policies which must result in conflict. (Omnipotent Government, p. 6) 
  
For only in peace can the economic system achieve its ends, the fullest satisfaction of human needs and wants. (Omnipotent Government, p. 50) 
  
If men do not now succeed in abolishing war, civilization and mankind are doomed. (Omnipotent Government, p. 122) 
  
If you want to abolish war, you must eliminate its causes. What is needed is to restrict government activities to the preservation of life, health, and private property, and thereby to safeguard the working of the market. Sovereignty must not be used for inflicting harm on anyone, whether citizen or foreigner. (Omnipotent Government, p. 138)  
  
Only one thing can conquer war – that liberal attitude of mind which can see nothing in war but destruction and annihilation, and which can never wish to bring about a war, because it regards war as injurious even to the victors. (Theory of Money and Credit, p. 433) 
  
The first condition for the establishment of perpetual peace is, of course, the general adoption of the principles of laissez-faire capitalism. (The Ultimate Foundation of Economic Science p. 137) 
  
He who wants to prepare a lasting peace must……be a free-trader and a democrat and work with decisiveness for the removal of all political rule over colonies by a mother country and fight for the full freedom of movements of persons and goods. (Nation, State, and Economy, p. 86) 
  
Liberalism rejects aggressive war not on philanthropic grounds but from the standpoint of utility. It rejects aggressive war because it regards victory as harmful, and it wants no conquests because it sees them as an unsuitable means for reaching the ultimate goals for which it strives. Not through war and victory but only through work can a nation create the preconditions for the well-being of its members. Conquering nations finally perish, either because they are annihilated by strong ones or because the ruling class is culturally overwhelmed by the subjugated. (Nation, State, and Economy, p. 87)  
  
Whoever on ethical grounds wants to maintain war permanently for its own sake as a feature of relations among peoples must clearly realize that this can happen only at the cost of the general welfare, since the economic development of the world would have to be turned back at least to the state of the year 1830 to realize this martial ideal even only to some extent. (Nation, State, and Economy, p. 151) 
  
The losses that the national economy suffers from war, apart from the disadvantages that exclusion from world trade entails, consist of the destruction of goods by military actions, of the consumption of war material of all kinds, and of the loss of productive labor that the persons drawn into military service would have rendered in their civilian activities. Further losses from loss of labor occur insofar as the number of workers is lastingly reduced by the number of the fallen and as the survivors become less fit in consequence of injuries suffered, hardships undergone, illnesses suffered, and worsened nutrition. (Nation, State, and Economy, p. 151 – 52)  
  
There are circumstances which make the consumption of capital unavoidable. A costly war cannot be financed without such a damaging measure….There may arise situations in which it may be unavoidable to burn down the house to keep from freezing, but those who do that should realize what it costs and what they will have to do without later on. (Interventionism: an Economic Analysis, p. 52) 
  
It is not the war profits of the entrepreneurs that are objectionable. War itself is objectionable! (Interventionism: an Economic Analysis, p. 74)
Remembrance Day 2038 – Short Story by Bradley Doucet

Remembrance Day 2038 – Short Story by Bradley Doucet

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The New Renaissance Hat
Bradley Doucet
November 11, 2013
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One hundred years ago, humanity was on the verge of global war. Hitler’s Germany had already annexed Austria, and Hirohito’s Japan had invaded China, Mongolia, and the USSR. Tens of millions of people would die in the ensuing Second World War, the deadliest conflict in human history. Today, we remember the fallen, both military and civilian, in this and other wars. We remember, and we give thanks for the current peace, which we have good grounds for believing will be an enduring one.

As recently as 25 years ago, such optimism would have seemed naïve. Though the world was already becoming much less violent in general, the terrorist attacks of September 11, 2001 were still an open psychic wound for many Americans, and isolated wars raged on in many regions. Fears of nuclear proliferation threatened to spark further conflicts in the already volatile Middle East.

But parallel to these political events and tensions, the global economy kept growing, spreading the benefits of industrialization and trade to more and more people in more and more countries. The more obvious the connection became between basic economic freedom and rising standards of living, the harder it became for even the most authoritarian regimes to resist the push for freer markets. Dire poverty has now been all but eradicated and real economic security is commonplace. And as people have more to live for, they are less willing to die for their countries. Pragmatic negotiations have become more attractive, and violent conflict less so.

The change that humanity has undergone can be summed up by a simple but profound slogan: Make trade, not war. As we have become more accustomed to seeing our neighbours as potential trading partners in positive-sum exchanges, killing them no longer seems to make a lot of sense. We remember today the wars of the past, that we might better appreciate our present peace and extend it indefinitely into the future.

Bradley Doucet is Le Québécois Libre‘s English Editor and the author of the blog Spark This: Musings on Reason, Liberty, and Joy. 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.

Illiberal Belief #22: Persuasion is Force – Article by Bradley Doucet

Illiberal Belief #22: Persuasion is Force – Article by Bradley Doucet

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The New Renaissance Hat
Bradley Doucet
October 13, 2013
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I must admit, I love a good television commercial. The creativity that goes into the best TV ad is as impressive and enjoyable to me as a quality drama, comedy, or documentary. “You feel sad for the Moo Cow Milker? That is because you are crazy. Tacky items can easily be replaced with better IKEA.” But damn those clever Swedes! They have, through the alchemy of advertising, forced me into outfitting my entire apartment with their stylish yet affordable household items.I kid, of course; but there is a certain line of thought out there that cannot abide advertising, and that credits it with all manner of evil. Advertising, they say, makes us fat by brainwashing us into wanting fast food and sugary cereal. It makes men want to buy beer, fancy cars, or anything else associated with hot women. (A current TV commercial makes fun of the “scantily-clad women washing car” cliché by having a group of sumo wrestlers wash a new Subaru.) Advertising makes women dissatisfied with their appearance and hence creates a need for fashion and beauty products that would not otherwise exist. Yes, because as we all know, humans do not naturally enjoy fatty, sugary foods, men would not drink beer or drive fancy cars in the absence of advertising, and women need corporations to teach them to care about their looks. Puh-lease.

Think of the Children

Advertising is about the transmission of information, and it is also about convincing people to buy something. In other words, it is a form of persuasion, but this use of persuasion is implicitly equated with the use of force by its detractors. Sometimes, as in the case of the French website RAP (“Résistance à l’Agression Publicitaire” or “Resistance to Advertising Aggression”), the equating of persuasion and force is explicit. The site features an illustration of a police officer brandishing a billy club accompanied by the slogan, “Ne vous laissez pas matraquer par la pub,” which translates, “Don’t let yourself be bludgeoned by advertising.”

Usually, though, the message is less overt, as it is on Commercial Alert’s website, whose slogan is “Protecting communities from commercialism.” The site complains about the psychology profession “helping corporations influence children for the purpose of selling products to them.” Here, the word “influence” seems none too menacing, but its effect is quickly bolstered by the words “crisis,” “epidemic,” “complicity,” and “onslaught.” Force may not be explicitly mentioned, but these words bring to mind infectious disease, crime, and violent conquest. Without coming right out and saying it, the implication is clear―although one could argue, ironically enough, that this effect was meant to be subliminal.

Now, are children more vulnerable than adults to the persuasive nature of advertising? Of course they are, especially when very young. But it is part of the job of parents (and later, teachers) to equip children with the tools necessary to judge competing claims and see through manipulative techniques. I’ll be the first to admit that there is room for improvement in this area―and a free market in education would go a long way toward providing that improvement―but as far as advertising goes, most kids are savvy to the more outlandish claims well before they even reach adolescence. As people grow up, they learn through experience that beer doesn’t bring babes (though a little may beneficially lower one’s own inhibitions) and that makeup will only get you so far. At any rate, treating all adults like children is hardly a fair way to deal with the fact that some minority of people will remain gullible their entire lives.

Of Words and Bullets

Many of those who really hate advertising share a worldview that involves rich, powerful corporations controlling everything. In fact, there is a sense in which this view has some merit, for it is true that large corporations often gain unfair advantage over their competitors, suppliers, and customers. When this happens, though, it happens through the gaining of political influence, which means the use of actual, legally sanctioned force to hogtie the competition, restrict consumers’ choices, or extract taxpayers’ hard-earned income. In a truly free market, the government would not have the authority to dole out special privileges, as it does in our mixed economies. Without any goodies to fight over, corporations would have no legal means of squashing competitors and could only succeed by being as efficient as possible and persuading customers to buy their products (and if their products do not satisfy, they will not get many repeat customers). To target this persuasion as a serious problem when actual, legal force is being used surely reveals an inverted sense of priorities, or at least a serious misunderstanding about the sources of society’s woes.

Another example of the implicit equating of persuasion with force is the thinking behind legislated limits on the amounts individuals can spend expressing their political views during an election―in essence, limits on political advertising. Here, as in commercial advertising, the purpose is clear: if persuasion is force, then the government is perfectly justified in countering that initiation of force with retaliatory force. If words are bullets, then words can be met with bullets. But it is clear what happens to free speech in such a scenario. Instead of competing voices clamouring for your attention, one monolithic government propaganda machine decides what can and cannot be said. In the political realm, this works against new or historically small parties trying to break through since they have a disproportionately hard time attracting many small contributions in order to pay for ads to get their message out. This leads to a situation in which a couple of largely indistinguishable parties become more and more firmly entrenched.

In fact, the notion that persuasion is force brings to mind nothing so much as George Orwell’s novel, 1984, in which the government has destroyed the precision of words by continually reinforcing its contradictory slogans: war is peace, freedom is slavery, ignorance is power, and love is hate. It is shocking to observe the smug self-righteousness of those who hold forth on the enormous manipulative power of advertising and who are so sure that they, of all people, have not been brainwashed. But in fact, it is they who have been, if not brainwashed, then at least misled about the relative power of advertising versus the average Joe’s ability to think and judge for himself. They have bought, hook, line, and sinker, the most superficial critique of capitalism, when our mixed form of capitalism has plenty of real abuses crying out for correction.

The Power of Persuasion

The point is not that persuasion is powerless. I am engaged in trying to persuade you of something right now, and if I didn’t think I had a chance of succeeding, I wouldn’t waste my time. The point, rather, is that persuasion must be met with persuasion, words and rhetorical techniques must be answered with more words and more rhetoric. If free competition is allowed in the marketplace of ideas, no one’s victory is assured, and we needn’t fret too much over the use of psychological tricks, because the trickster’s competitors can use them too, or overtly challenge them instead. (See Gennady Stolyarov II’s article “The Victory of Truth Is Never Assured!” for a related call to action.)

If we are still worried, though, it is undeniable that better education―freer education―would produce a less pliant population, especially important for the issue of political persuasion. The other thing that would help is fighting for full freedom of competition, in both commerce (no special government privileges) and politics (no limits on political speech). In other words, we need to eliminate the government’s use of force in the realms of education, commerce, and political campaigning. Agitating for the government to solve our problems for us with the use of more force will only make matters worse, and further infantilize us in the process.

Bradley Doucet is Le Québécois Libre‘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.
Mercantilism vs. Free Trade: The Early Years – Article by Chi-Yuen Wu

Mercantilism vs. Free Trade: The Early Years – Article by Chi-Yuen Wu

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The New Renaissance Hat
Chi-Yuen Wu
September 27, 2013
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Note from the Ludwig von Mises Institute (reprinted with permission, pursuant to a Creative Commons Attribution license): This selection is from Chapter II of Chi-Yuen Wu’s An Outline of International Price Theory, available in paperback and ebook editions in the Mises store.

In Chapter II, Wu discusses some early controversies in Mercantilist thought, and their effects on our thinking about free trade. It is interesting to read Wu’s summary of the debate between the interests of England-based manufacturers of clothing and the importers of clothing from the East India Company. In both cases, they are arguing from the position of special interest groups, but the arguments made by the East India Company, while not made in the spirit of any true devotion to free trade, are harbingers of later advances in our understanding of the value of free trade.

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The overseas discoveries in the last decades of the fifteenth century had widened the boundaries of international trade and had given rise to a change in its nature and an expansion of its volume. As a result of the opening of the new silver mines between 1540 and 1600 in America, Europe was supplied with an abundance of money metals and thus the establishment of a real price economy was facilitated. That change in commerce together with the extension in the use of money accelerated the development of the new spirit of private enterprise and paved the way for the triumph of the moneyed classes. In fact, the time had come for a transition from a number of local economies to a national economy, from feudalism to commercial capitalism, from a state of comparatively little trade to an epoch of extensive international commerce. That change in the economic structure is sometimes called by economic historians the “Commerical Revolution.”

In the world of thought, that change in the economic structure found its expression in what is known as “Mercantilism.”

… First of all, all mercantilists considered the benefit of the State as the end and object of economic activities, in their view the interests of the State had always to take precedence to the interests of the individual. The aim of all mercantilistic doctrines is to increase the economic power of the State. Moreover, the interests of the state were, in their eyes, by no means necessarily in harmony with the activities of the individual. According to them, wages, interest, industry, and trade should be regulated so as to benefit the State. Finally, the importance of “treasure” to a State was greatly emphasized. The reasons given in support of their advocacy of the accumulation of the previous metals changed from one time to another, but all mercantilists agreed that a nation must try by all means to increase its “treasure.” In general, they recognized that countries which did not possess gold or silver mines could not increase their stocks of the previous metals except by an annually recurring favorable balance of trade (if peaceful means alone were adopted). Consequently, they gave foreign trade the foremost place among the industries of a nation. …

The protection versus “free trade” controversy at the end of the seventeenth century was connected with the East India trade. In the latter half of that century the imports of Indian textiles into England were increasing, especially in the last two decades. Owing to the high costs of production, the English textile industries could not withstand the competition of the Indian imports. The result was that in the last decade of the century the English woolen and silk industries faced a grave crisis. Those industries were experiencing depression and unemployment, and complaints were made by the weavers and the public in general against the East India trade.

The best spokesmen of the weavers’ interests were John Cary and John Pollexfen. Like other mercantilists, they based their contention upon the conception of the State as an economic entity and stood for a definite national economic policy for the benefit of the state. … Cary and Pollexfen … judged the benefit of trade … by the nature of the exports and imports [rather] than by their quantity and value. In other words, “that Trade is advantageous to the Kingdom … which Exports our Product and Manufactures; which Imports to us such Commodities as may be manufactured here, or to be used in making our manufactures; which supplies us with such things, without which we cannot carry on our Foreign Trade; [and] which encourages our Navigation, and increases our Seamen.”

Judged by those criteria, the East India trade was said to be harmful and not beneficial to England … [Cary and Pollexfen] no longer valued foreign trade and the treasure brought by it for their own sakes but for the effects upon home industries and trade.

The ablest upholders of the East India Company were Josiah Child and Charles Davenant. They did not deny the obvious fact that the Indian trade was detrimental to certain industries, but they maintained that the fact was not a sufficient condemnation of the East India trade.

In place of those criteria, they tried to establish a new rule for testing whether a trade is beneficial to a state or not:

The best and most certain discovery … is to be made from the encrease or diminution of our Trade and Shipping in general. … Where-ever Trade is great and continuous so, and grows daily more great and encreaseth in Shipping, and … for a succession not of a few years, but of Ages, that Trade must be nationally profitable.

Using that criterion and facts that they had adduced to show that the East India trade had promoted the general prosperity of the nation, they were able to make out a case for the view that the East India trade was beneficial to the country.

Negatively, they tried to show that the proposal to prohibit the wearing of all Indian imported textiles in England would be detrimental to the nation.

However, they could not do so without sacrificing some part of their mercantilistic doctrines and approaching the doctrine of free trade. The following quotations perhaps sufficiently reveal their main arguments:

Trade is in its nature free, finds its own channel, and best directeth its own course: and all laws to give it rules and directions, and to limit and circumscribe it, may serve the particular ends of private men, but are seldom advantageous to the public.

For all trades have a mutual dependence one upon the other, and one begets another, and the loss of one frequently loses half the rest.

It should be noted they were not free traders at heart. They advocated leaving trade free from restraints only in so far as the argument served the purpose of their Company and their views constitute a mere case of special pleading.

Author Description from the Ludwig von Mises Bookstore:

Greatness often comes from the most unlikely corners. Chi-Yuen Wu began this treatise while a student at London School of Economics during the Great Depression, then returning to an anxious China, on the verge of war, and in the throes of economic instability, finished it from the remoteness of Western China after being displaced from his home.

Wu looked at the history of economic thought as a way to explain what was happening and why. Lionel Robbins, in the Preface, says “Few, can read his penetrating commentaries without feeling that he has added substantially to knowledge, both in his elucidations and in his presentation of the general perspective of development.”

Murray Rothbard considered Outlines of International Price Theories to be a seminal contribution to the theory of price and international trade.

War in the Middle East is Inherently Collectivist – Article by G. Stolyarov II

War in the Middle East is Inherently Collectivist – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
September 8, 2013
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Especially in light of the looming threat of a wasteful, counterproductive US military intervention in Syria, it is necessary to offer a resounding refutation to the recommendations of those who consider themselves individualists to engage in any sort of mass military action – commonly known as war, declared or not – against large numbers of people in the Middle East. Some such persons, especially those affiliated with the Ayn Rand Institute (ARI), advocate a foreign policy more aggressive and, in its consequences, far more destructive than even the actual interventionist measures undertaken by the United States federal government during the Bush and Obama administrations. In a recent speech at the 2013 Steamboat Institute Freedom Conference, Yaron Brook, ARI’s executive director, put forth his recommendation for solving the persistent threat of politicized Islamist regimes and the terrorism that stems therefrom: completely destroy either Iran or Saudi Arabia and threaten the surviving country into submission. Brook also reaffirmed his consideration of General William Tecumseh Sherman, one of the first practitioners of modern “total war” and an instigator of untold damage to the lives and property of innocent civilians during the American Civil War, as his personal hero.  As an advocate of reason, a person of conscience, and a staunch individualist, I strongly, emphatically object to this course of action. As foreign policy goes, I cannot think of one less productive, other than perhaps indiscriminately launching nuclear weapons everywhere.

In March 2012 I made a video, “Refuting Ayn Rand on War”, where I specifically described my objections to Rand’s and Brook’s advocacy of warfare. I refer there to some of Brook’s previously stated views, including his admiration of William T. Sherman, which he again articulated during his Steamboat Institute speech. While most of Brook’s speech is sympathetic in its emphasis on individual freedom and a rolling-back of the economic burdens imposed by the federal government domestically, his foreign policy would clearly undermine this path. Indeed, if one wishes to reduce the scope of the federal government and its intrusiveness into individuals’ lives, deep cuts on both the domestic and foreign fronts are needed. US government debt is already spiraling out of control, and it would not be practically feasible to balance the budget (avoiding increased taxation, inflation, or borrowing) without cutting military spending and eliminating numerous wasteful and deleterious foreign occupations. As long as self-proclaimed individualists, libertarians, and fiscal conservatives resist an enormous reduction in US military budgets and overseas intervention, at least one, and probably all, of the three consequences of continued budget deficits will inevitably occur.

But there is a deeper, moral case to be made against war in general. Some might allege that this time it is different. But when was it ever not different? The regime of the Soviet Union posed a far greater danger to liberty in the 20th century than rag-tag groups of fundamentalist Islamist terrorists and the regimes backing them ever could. Yet war between the United States and the Soviet Union was fortunately averted, aside from some admittedly destructive proxy wars, and billions of innocent people can live in relative peace and comfort today due to the avoidance of nuclear Armageddon through a more restrained foreign policy than the “hawks” of the Cold War era advocated.  I do not oppose targeted strikes that specifically eliminate violent terrorists and only such individuals. A good example of this was the raid that killed Osama bin Laden in 2011. However, a state of war is completely unnecessary to carry out such limited actions.

War attacks not just an armed band of terrorists, not just a regime, but an entire country and its people. This is especially true since the shift in the 19th century away from limited battlefield engagements involving professional armed servants (and mercenaries) of powerful interests competing for natural resources and prestige, and toward “total war” fueled by nationalistic and ideological animosities – where all of a country’s population is considered “the enemy” or at least an asset to “the enemy”. Such warfare is inherently collectivistic in its premise. It fails to recognize that individuals ruled by hostile regimes or terrorized by armed criminals still have minds of their own, that they may disagree with and indeed be oppressed by those regimes and criminals. Targeted assassinations of dictators and terrorist leaders are one matter, but indiscriminate “collateral damage” against peaceful civilians is morally unacceptable for an individualist. Anyone claiming to follow the philosophy of Ayn Rand, including Ayn Rand herself, should know (or, in Rand’s case, should have known) better.

The current case of violent crime fueled by fundamentalist Islamist ideology is no exception. The world has over a billion Muslims, who are overwhelmingly peaceful (like most adherents of all major religious and ideological systems), even if one legitimately considers them mistaken in their theological beliefs. Many prominent Muslims have condemned the attacks of September 11, 2001, and other attacks on peaceful civilians in the West. Some Muslims are secular in their political outlook and, indeed, have made efforts to maintain secular governments in the face of threats by Islamist political parties to implement sharia law and religiously motivated restrictions on personal freedom. The revolutions in Egypt, Tunisia, and Libya, despite their sub-optimal outcomes and the eventual emergence of dominant factions advocating the politicization of religion, were initially driven by freedom-respecting, secular, yet largely Muslim individuals. These people set the spark for the overthrow of the long-standing authoritarian tyrannies of Mubarak, Ben Ali, and Gaddafi. They now contend against political Islam in their troubled countries, but it is essential for any individualist to respect them and their plight, and for any government that even pretends to respect freedom to leave them alive to have any positive influence of which they are capable. Often, the infighting within the turmoil-ridden Middle East results in tragedy on all sides; surely, this ought to be the glaring lesson of the current Syrian situation. However, American bombs, missiles, and drones are surely not the answer. These weapons kill indiscriminately. Even drone attacks allegedly “targeted” toward terror suspects (still often without due process or convincing evidence of their criminal intent) end up killing far more innocent bystanders, including children, than actual would-be terrorists. Are the relatives, friends, and acquaintances of the victims going to acknowledge the “moral legitimacy” of their deaths by the brutal calculus of Yaron Brook and those who think like him? Or, more realistically, are they going to experience a justified outrage and forever despise the government – and, if they are themselves collectivists in mindset – the entire country and people whom they blame for these terrible killings?

There is no quick, easy solution to the turmoil in the Middle East, nor to the violent threats that such turmoil sometimes poses to the lives of people in the Western world. However, there are some clear changes of direction that can gradually curtail the major risks.  First, it is essential for governments in the Western world to refrain from actions that curtail the liberties of their own citizens, allegedly to respond to this threat. In fact, the terrorists and political Islamist regimes have won a greater victory than they could ever have achieved by force of arms, as a result of the pervasive civil-liberties violations instigated by Western governments since September 11, 2001. The omnipresent surveillance, the bodily violations at airports, the increasing militarization of the police force surely have more in common with a totalitarian regime than with the freedom that the fundamentalist terrorists allegedly hate. The more aggressive American military interventions become, the more animosity and blowback they generate, the more inclined Western governments will be to crack down on their own citizens’ freedoms further. Thus, militarism abroad directly causes unfreedom at home – as it has during every major war in American History, from Lincoln’s imprisonment of dissident newspaper editors during the Civil War, to Woodrow Wilson’s World War I propaganda machine and imprisonment of opponents of the military draft, to Franklin Roosevelt’s internment of 110,000 Japanese-Americans during World War II. The present period of the never-ending “War on Terror” is no exception. There is no way for a government to respect individualism and the rights of its own citizens while it turns civilians abroad into fodder for bombs and drone strikes.

Second, it is essential to treat “acts of terror” no differently from “ordinary” crimes – attacks on human lives and property. The criminal-justice system has various ways of dealing with gangsters, murderers, street muggers, arsonists, and common vandals. Domestically, the same standards should apply toward the same acts, no matter whether or not they were motivated by Islamist ideology. A person who bombs a building or a public event is a criminal murderer and should be dealt with accordingly. It is time to dismantle the exceptional category of “terrorist acts” as distinct from ordinary crime. That category is the linchpin by which all of our Constitutional freedoms have been rendered moot. As regards armed military-style groups operating abroad, it is acceptable to use truly targeted strikes limited to neutralizing members of those groups (and not “signature strikes” that attack an entire area, irrespective of the known presence of militants). But this is not war against an entire people or even a government; it is more akin to a targeted action. As former Representative Ron Paul has recommended since the September 11 attacks, issuing Letters of Marque and Reprisal specifically against such militants is a desirable, Constitutionally authorized remedy quite distinct from war.

Finally, to end the threat of militant attacks on Westerners, it is essential for the Middle East itself to become transformed over time, both economically and culturally, into a place where individual rights and intellectual progress are fundamentally respected and appreciated. Bombs could never effectuate such transformation; they only breed hatred and backlash. Instead, individuals and companies in the West should entice the Middle East to join them on a more enlightened trajectory. Commerce and cultural diffusion can bring economic opportunity and prosperity to millions who are currently in dire poverty. Ayn Rand recognized and appreciated the power of free-market capitalism to bring not just peace and prosperity, but moral elevation, to vast numbers of people. This should be the path embraced by decision-makers in the West, echoing the sage advice of Thomas Jefferson: “peace, commerce, and honest friendship with all nations, entangling alliances with none”. Over the coming decades, a steady application of this approach will diminish the militant threat, though not overnight. Still, it is a far preferable alternative to the recommendations of those whose policy of mass destruction would only fuel the fires of militant attacks and reduce Western governments, militaries, and their supporters to the same level of inhuman barbarism against which they are allegedly defending us.  True individualism – indeed, true humanism – would demand no less than a complete rejection of the killing of innocent civilians as a solution to any problem.

The Extraordinary Business of Life – Article by Sanford Ikeda

The Extraordinary Business of Life – Article by Sanford Ikeda

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The New Renaissance Hat
Sanford Ikeda
May 25, 2013
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I heard it again from this year’s commencement speaker: the common mistake of thinking economics is just about business and making money. I know I’m not the only economics teacher who every year has to disabuse his students (and many of his own colleagues from other disciplines) of that same error.

Economics is not business administration or accounting. Economics is a science that studies how people interact when the means at their disposal are scarce in relation to their ends. That includes business, of course, but a whole lot more as well.

Where Does That Notion Come From?

Well, for starters, perhaps from one of the greatest economists in history, Alfred Marshall. He opens his highly influential textbook, first published in 1890, with this statement:

“Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.” (Emphasis added)

This definition more or less prevailed until 1932, when another British economist, Lionel Robbins, defined economic science as being concerned with an aspect of all human action insofar as it involves making choices, not with a part of individual action. Economics, in other words, is the science of choice. Its starting point is not the “material requisites of wellbeing” but a person’s subjective valuation of her circumstances. Ludwig von Mises got it, which is why he called his magnum opus, simply, Human Action.

Similarly, Libertarianism Isn’t Pro-Business

An equally common mistake is to think that supporters of the free market are “pro-business” and favor so-called crony capitalism. But a consistent free-market supporter is neither pro-business nor anti-business, pro-labor nor anti-labor. A free market to us is what happens when you safeguard private property, free association, and consistent governance and then just leave people alone.

Part of the misunderstanding here might stem from the term “free market” itself. Since people tend to associate markets with buying and selling, jobs, and making (and losing) money, it’s perhaps understandable that they would think that advocates of the free market must be concerned mainly about business-related stuff: profits and losses, efficiency, and creating and marketing new products.

Indeed, I’ve met quite a few who claim to favor “free-market capitalism” merely because they believe in making as much money as possible in their lifetimes. It’s not surprising that many of these folks do tend to be pro-business and supporters of crony capitalism. I want to ask them not to be on my side.

Connotations aside, the free market encompasses far more than the stuff of business or a money-making scheme. Yes, it does include the essentials of private property, free association, and stable governance. But a dynamic market process that generates widespread material prosperity and promotes the pursuit of happiness would not be possible if it were based solely on the relentless pursuit of one’s narrow self-interest. Markets would not have gotten as far as they have today (with per-capita GDP up more than fiftyfold since 1700) if people didn’t also follow norms of honesty and fair play, trust and reciprocity. Such norms are without question partly the result of self-interest; few would trade with us if we weren’t honest and fair. But, as Adam Smith taught us, these norms also arise in large measure from a sense of sympathy, of fellow-feeling and fairness, that comes from our ability to see others as we see ourselves, and vice versa. This is why in most contexts I usually prefer the term “free society” to “free market.”

Bourgeois Virtue

But I think one good reason the association between business on the one hand and economics and classical liberalism on the other has been so persistent is that business and the free society arose together. That is, the liberal idea—that certain fundamental individual rights exist prior to and apart from the State—sparked one of the most momentous social changes in history: the commercial revolution and the emergence of the modern urban middle class. 

The triumph of liberty, of personal freedom, unleashed the creative potential of people, who found expression in art, religion, literature, but most of all—or at least most visibly—in the Marshallian “ordinary business of life.” The changes that have taken place in the past 500 years—scientific revolutions, religious reformations, political upheavals, artistic rebirths—were driven by the same human propensities as the commercial revolution and fueled by the wealth it produced. Indeed, the social and political changes of the past century—for women, workers, and minorities—would not have been possible without the entrepreneurial pressures of competition and innovation that forced radical changes in conventional thinking and socially conservative attitudes.

Tradition’s Worst Enemy

In short, business is the most dynamic social institution known to mankind. The critical and competitive attitudes that enable business to flourish erode custom and break old ties even as they foster new ones. The products of business tend to offend people whose sensibilities were refined by generations of tradition. The free market is tradition’s worst enemy.

Business has become part of the default mode of modern society. We take it for granted. We don’t realize what a radical, subversive force it is, to the point where it sounds strange to say so. But try to imagine a world without businesses and commerce. A world like the Dark Ages of, say ninth century Western Europe: static, grindingly poor, strictly hierarchical, socially intolerant, and, apart from the occasional battle or beheading, boring like you wouldn’t believe.

So, while it’s still a mistake to think economics and classical liberalism are somehow about studying and promoting business, maybe at a deeper level it’s not such a bad one to make after all. Business is subversive.

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.
Review of Gary Wolfram’s “A Capitalist Manifesto” – Article by G. Stolyarov II

Review of Gary Wolfram’s “A Capitalist Manifesto” – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
January 5, 2013
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While Dr. Gary Wolfram’s A Capitalist Manifesto is more an introduction to economics and economic history than a manifesto, it communicates economic concepts in a clear and entertaining manner and does so from a market-friendly point of view. Wolfram’s strengths as an educator stand out in this book, which could serve as an excellent text for teaching basic microeconomics and political economy to all audiences. Wolfram is a professor of economics at Hillsdale College, whose course in public-choice economics I attended. The book’s narration greatly resembles my experience of Wolfram’s classroom teaching, which focuses on the essence of an idea and its real-world relevance and applications, often utilizing entertaining concrete examples.

The book begins with several chapters on introductory microeconomics – marginal analysis, supply, demand, market equilibrium, opportunity cost, and the effects of policies that artificially prevent markets from clearing. The middle of the book focuses on economic history and political economy – commenting on the development of Western markets from the autarkic, manorial system of the feudal Middle Ages, through the rise of commerce during the Early Modern period, the Industrial Revolution, the emergence of corporations, and the rise in the 20th century of economic regimentation by national governments. One of the strengths of this book is its treatment of the benefits of free trade, from its role in progress throughout history to the theoretical groundwork of Ricardian comparative advantage. Enlightening discussions of constitutionalism and the classical idea of negative liberty are also provided. Wolfram introduces the insights of Ludwig von Mises regarding the infeasibility of central planning in solving the problem of economic calculation, as well as Friedrich Hayek’s famous “knowledge problem” – the dispersion of information among all the individuals in an economy and the impossibility of a central planner assembling all the information needed to make appropriate decisions. Wolfram further articulates the key insights of Frederic Bastiat: the seen versus the unseen in economic policy, the perils of coercive redistribution of wealth, the immorality of using the law to commit acts which would have been unacceptable if done by private individuals acting alone, and the perverse incentives created by a system where the government is able to dispense special privileges to a select few.

The latter third of the book focuses on such areas as money, inflation, and macroeconomics – including an exposition of the Keynesian model and its assumptions. Wolfram is able to explain Keynesian economics in a more coherent and understandable manner than most Keynesians; he thoroughly understands the theories he critiques, and he presents them with fairness and objectivity. I do, however, wish that the book had delved more thoroughly into a critique of Keynesianism. The discussion therein of the Keynesian model’s questionable assumptions is a good start, and perhaps a gateway to more comprehensive critiques, such as those of Murray Rothbard and Robert Murphy. A layperson reading A Capitalist Manifesto would be able to come out with a fundamental understanding of Keynes’s central idea and its assumptions – but he would not, solely as a result of this book, necessarily be able to refute the arguments of Keynes’s contemporary followers, such as Joseph Stiglitz and Paul Krugman. Wolfram mentions critiques of Keynesianism by Milton Friedman and the monetarist school, the concept of rational expectations precipitating a move away from Keynesianism in the late 1970s, and the “supply-side” interpretations of the Keynesian model from the 1980s. However, those viewpoints are not discussed in the same level of detail as the basic Keynesian model.

More generally, my only significant critique of A Capitalist Manifesto is that it is too brief in certain respects. It offers promising introductions to a variety of economic ideas, but leaves some significant questions arising from those areas unanswered. Wolfram introduces the history and function of the corporation but does not discuss the principal-agent problem in large, publicly traded firms with highly dispersed ownership. To anticipate and answer (and perhaps partially acknowledge the validity of) criticisms of the contemporary corporate form of organization, commentary on how this problem might be overcome is essential. Wolfram explains the components and computation of Gross Domestic Product and the Consumer Price Index but devotes only a small discussion to critiques of these measures – critiques that are particularly relevant in an electronic age, when an increasing proportion of valuable content – from art to music to writing to games – is delivered online at no monetary cost to the final consumer. How can economic output and inflation be measured and meaningfully interpreted in an economy characterized partially by traditional money-for-goods/services transactions and partially by the “free” content model that is funded through external sources (e.g., donations or the creators’ independent income and wealth)? Moreover, does Wolfram’s statement that the absence of profit (sufficient to cover the opportunity cost) would result in the eventual decline of an enterprise need to be qualified to account for new models of delivering content? For instance, if an individual or firm uses one income stream to support a different activity that is not itself revenue- or profit-generating, there is a possibility for this arrangement to be sustainable in the long term if it is also justified by perceived non-monetary value.

Wolfram’s discussion of inflation is correct and forms a strong link between inflation and the quantity of money (government-issued fiat money these days) – but I would have wished to see a more thorough focus on Ludwig von Mises’s insight that new money does not enter the economy to equally raise everybody’s incomes simultaneously; rather, the distortion due to inflation comes precisely from the fact that some (the politically favored) receive the new money and can benefit from using it while prices have not yet fully adjusted. (This can be logically inferred from Wolfram’s discussion of some of the “tools” of the Federal Reserve, which directly affect the incomes of politically connected banks – but I wish the connection to Mises’s insight had been made more explicit.) Wolfram does mention that inflation can be a convenient tool for national governments to reduce their debt burdens, and he also discusses the inflationary role of fractional-reserve banking and “tools” available to central banks such as the Federal Reserve. However, Wolfram’s proposed solutions to the problems of inflation remain unclear from the text. Does he support Milton Friedman’s proposal for a fixed rate of growth in the fiat-money supply, or does he advocate a return to a classical gold standard – or perhaps to a system of market-originated competing currencies, as proposed by Hayek? It would also have been interesting to read Wolfram’s thoughts on the prospects and viability of peer-to-peer and digital currencies, such as Bitcoin, and whether these could mitigate some of the deleterious effects of central-bank-generated inflation.

Wolfram does discuss in some detail the sometimes non-meritocratic outcomes of markets – stating, for instance, that “boxers may make millions of dollars while poets make very little.” Indeed, it is possible to produce far more extreme comparisons of this sort – e.g., a popular “star” with no talent or sense earning millions of dollars for recording-studio-hackneyed “music” while genuinely talented classical musicians and composers might earn relatively little, or even have their own work remain a personal hobby pursued for enjoyment alone. To some critics of markets, this may well be the reason to oppose them and seek some manner of non-market compensation for people of merit. For a defender of the unhampered market economy, a crucial endeavor should be to demonstrate that truly free markets (unlike the heavily politicized markets of our time) can tend toward meritocracy in the long run, or at least offer people of merit a much greater range of possibilities for success than exists under any other system. Another possible avenue of exploration might be the manner in which a highly regimented political system (especially in the areas of education) might result in a “dumbed-down” culture which neglects and sometimes outright opposes intellectual and esthetic sophistication and the ethic of personal productivity which is indispensable to a culture that prizes merit. Furthermore, defenders of markets should continually seek out ways to make the existing society more meritocratic, even in the face of systemic distortions of outcomes. Technology and competition – both of which Wolfram correctly praises – should be utilized by liberty-friendly entrepreneurs to provide more opportunities for talented individuals to demonstrate their value and be rewarded thereby.

Wolfram’s engaging style and many valid and enlightening insights led me to desire more along the same lines from him. Perhaps A Capitalist Manifesto will inspire other readers to ask similar questions and seek more market-friendly answers. Wolfram provides a glossary of common economic terms and famous historical figures, as well as some helpful references to economic classics within the endnotes of each chapter.  A Capitalist Manifesto will have its most powerful impact if readers see it as the beginning of their intellectual journey and utilize the gateways it offers to other writings in economics and political economy.

Disclosure: I received a free copy of the book for the purposes of creating a review.

Workplace Freedom and Right-to-Work Laws – Article by Edward W. Younkins

Workplace Freedom and Right-to-Work Laws – Article by Edward W. Younkins

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The New Renaissance Hat
Edward W. Younkins
December 14, 2012
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On Tuesday December 11, 2012 Michigan, the birthplace of the nation’s organized labor movement, became the country’s 24th right-to-work state. This short excerpt from pages 81-83 of my 2002 book, Capitalism and Commerce, explains the propriety of right-to-work laws.

Before the Norris-La Guardia and National Labor Relations Acts (NLRA) in the 1930s, the employment relationship consisted of voluntary exchange contracts between employers and employees. A return to the common law of contracts, property rights, and tort would permit each person to decide if he wanted to contract with or join any union for representation services. Under such an arrangement there would be competitors among labor organizations and the possibility of having workers represented by a variety of unions and other workers having no representatives. Instead, they would bargain for themselves as individuals.

Before these acts, an employer had the common-law right to fight the unionization of his company. The employer could enter into “yellow dog contracts” with the employees in which the two parties would agree not to have a union—one reason for such contracts was the desire of the employees to avoid the loss of work and wages that would occur during strikes. Because these agreements were voluntary, they must have been to the mutual benefit of both parties. In addition, before the 1930s, the employer was free to attempt to persuade workers that unionization would not be to their benefit. Also, in his efforts to gain loyalty to his firm, the employer could refuse to hire workers who wanted to engage in union-related activity. The employer also had the common-law right to establish a company union. Then, of course, the company always had the right to voluntarily agree to hire workers who belonged to a specific union.

Unions were subject to the antitrust laws before Norris-La Guardia—not so thereafter. The National Labor Relations Act then destroyed the common-law right of an employee to join a union of his own choosing or to represent himself. After such New Deal legislation, unions operated with the help of laws and court decisions to force employees to join them to gain a monopoly of particular jobs. Unions were free to use violence (picketing) against competing workers and intimidation against the employers through the strike.

After a union has been certified as an exclusive bargaining agent, it is presumed to have majority support indefinitely (unless there is a decertification election) even if all the workers who originally chose it are no longer with the company. Section 8(a) 3 of the National Labor Relations Act empowers unions with monopoly bargaining privileges to agree with employers that all workers represented by the unions must join the union or at least pay union dues. Section 14(b) of the Act permits states to forbid such arrangements. Twenty-one right-to-work states have chosen to do so by banning all forms of union security. In these states workers can be forced to have a union (selected by majority vote) represent them, but they cannot be forced to join or pay dues to any unions. However, in the twenty-nine other states, security clauses are permitted. In these states, workers who do not want to be represented by a union (but are forced to because of monopoly representation) may be compelled to pay for the unwanted representation or be fired. Nonunion (i.e., union-free) workers who don’t want to become members of a union may be forced to pay dues (or their equivalent) as a requirement of their employment.

If a union security agreement specifies a union shop then the worker must join the union after a probationary period. However, if it specifies an agency shop, the worker does not have to join the union but must pay dues or their equivalent. In an agency shop, workers do not have to become members, but they all must pay dues or “service fees” to the unions that represent them. Unions employ a free-rider argument to justify this coercion. They argue that, without the imposition of forced dues, some workers would choose to receive the benefits of union representation but not pay for them. The goal of compulsory union dues is apparently to prevent free riders. Of course, if a union simply represented those who wanted it, there would be no free-rider problem. The union’s free-rider problem stems from section 9-A of   the National Labor Relations Act that requires that a certified union be the exclusive representative that bargains with the employer for all workers, both union and non-union. Unions that have gained monopoly bargaining privileges by majority vote must represent all workers, whether those workers want it to or not. The unions created the free-rider problem themselves when they persuaded the authors of the NLRA to permit monopoly bargaining. They now use monopoly bargaining as an excuse for forced dues!

By empowering labor unions the government did away with the old common-law rules of contract, property, and tort that applied equally to all involved parties. They were replaced with a coercive legal framework designed to help labor union leaders attain their goals. As a result, common-law courts were replaced by administrative tribunals (e.g., the National Labor Relations Board) which could be relied upon to implement prounion policies. The government thus promoted unions by failing to apply laws of equal applicability to unions and employers alike, used its power to support unions, and allowed unions to use force in pursuit of their ends.

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.

How Government Sort of Created the Internet – Article by Steve Fritzinger

How Government Sort of Created the Internet – Article by Steve Fritzinger

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The New Renaissance Hat
Steve Fritzinger
October 6, 2012
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Editor’s Note: Vinton Cerf, one of the individuals whose work was pivotal in the development of the Internet, has responded to this article in the comments below. Read his response here.

In his now-famous “You didn’t build that” speech, President Obama said, “The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”

Obama’s claim is in line with the standard history of the Internet. That story goes something like this: In the 1960s the Department of Defense was worried about being able to communicate after a nuclear attack. So it directed the Advanced Research Projects Agency (ARPA) to design a network that would operate even if part of it was destroyed by an atomic blast. ARPA’s research led to the creation of the ARPANET in 1969. With federal funding and direction the ARPANET matured into today’s Internet.

Like any good creation myth, this story contains some truth. But it also conceals a story that is much more complicated and interesting. Government involvement has both promoted and retarded the Internet’s development, often at the same time. And, despite Obama’s claims, the government did not create the Internet “so all the companies could make money off” it.

The idea of internetworking was first proposed in the early 1960s by computer scientist J. C. R. Licklider at Bolt, Beranek and Newman (BBN). BBN was a private company that originally specialized in acoustic engineering. After achieving some success in that field—for example, designing the acoustics of the United Nations Assembly Hall—BBN branched out into general R&D consulting. Licklider, who held a Ph.D. in psychoacoustics, had become interested in computers in the 1950s. As a vice president at BBN he led the firm’s growing information science practice.

In a 1962 paper Licklider described a “network of networks,” which he called the “Intergalactic Computer Network.” This paper contained many of the ideas that would eventually lead to the Internet. Its most important innovation was “packet switching,” a technique that allows many computers to join a network without requiring expensive direct links between each pair of machines.

Licklider took the idea of internetworking with him when he joined ARPA in 1962. There he met computer science legends Ivan Sutherland and Bob Taylor. Sutherland and Taylor continued developing Licklider’s ideas. Their goal was to create a network that would allow more effective use of computers scattered around university and government laboratories.

In 1968 ARPA funded the first four-node packet-switched network. This network was not part of a Department of Defense (DOD) plan for post-apocalyptic survival. It was created so Taylor wouldn’t have to switch chairs so often. Taylor routinely worked on three different computers and was tired of switching between terminals. Networking would allow researchers like Taylor to access computers located around the country without having dedicated terminals for each machine.

The first test of this network was in October 1969, when Charley Kline, a student at UCLA, attempted to transmit the command “login” to a machine at the Stanford Research Institute. The test was unsuccessful. The network crashed and the first message ever transmitted over what would eventually become the Internet was simply “lo.”

With a bit more debugging the four-node network went live in December 1969, and the ARPANET was born. Over the next two decades the ARPANET would serve as a test bed for internetworking. It would grow, spawn other networks, and be transferred between DOD agencies. For civilian agencies and universities, NSFNET, operated by the National Science Foundation, replaced ARPANET in 1985. ARPANET was finally shut down in February 1990. NSFNET continued to operate until 1995, during which time it grew into an important backbone for the emerging Internet.

For its entire existence the ARPANET and most of its descendants were restricted to government agencies, universities, and companies that did business with those entities. Commercial use of these networks was illegal. Because of its DOD origins ARPANET was never opened to more than a handful of organizations. In authorizing funds for NSFNET, Congress specified that it was to be used only for activities that were “primarily for research and education in the sciences and engineering.”

During this time the vast majority of people were banned from the budding networks. None of the services, applications, or companies that define today’s Internet could exist in this environment. Facebook may have been founded by college students, but it was not “primarily for research and education in the sciences and engineering.”

This restrictive environment finally began to change in the mid-1980s with the arrival of the first dial-up bulletin boards and online services providers. Companies like Compuserve, Prodigy, and AOL took advantage of the home computer to offer network services over POTS (Plain Old Telephone Service) lines. With just a PC and a modem, a subscriber could access email, news, and other services, though at the expense of tying up the house’s single phone line for hours.

In the early 1990s these commercial services began to experiment with connections between themselves and systems hosted on NSFNET. Being able to access services hosted on a different network made a network more valuable, so service providers had to interoperate in order to survive.

ARPANET researchers led by Vint Cerf and Robert Kahn had already created many of the standards that the Internet service providers (ISPs) needed to interconnect. The most important standard was the Transmission Control Protocol/Internet Protocol (TCP/IP). In the 1970s computers used proprietary technologies to create local networks. TCP/IP was the “lingua franca” that allowed these networks to communicate regardless of who operated them or what types of computers were used on them. Today most of these proprietary technologies are obsolete and TCP/IP is the native tongue of networking. Because of TCP/IP’s success Cerf and Kahn are known as “the fathers of the Internet.”

Forced to interoperate, service providers rapidly adopted TCP/IP to share traffic between their networks and with NSFNET. The modern ISP was born. Though those links were still technically illegal, NSFNET’s commercial use restrictions were increasingly ignored.

The early 1990s saw the arrival of the World Wide Web. Tim Berners-Lee, working at the European high energy physics lab CERN, created the Uniform Resource Locator (URL), Hyper-Text Transfer Protocol (HTTP), and Hyper-Text Markup Language (HTML). These three technologies made it easier to publish, locate, and consume information online. The web rapidly grew into the most popular use of the Internet.

Berners-Lee donated these technologies to the Internet community and was knighted for his work in 2004.

In 1993 Mosaic, the first widely adopted web browser, was released by the National Center for Supercomputing Applications (NCSA). Mosaic was the first Internet application to take full advantage of Berners-Lee’s work and opened the Internet to a new type of user. For the first time the Internet became “so easy my mother can use it.”

The NCSA played a significant role in presidential politics. It had been created by the High Performance Computing & Communications Act of 1991 (aka “The Gore Bill”). In 1999 presidential candidate Al Gore cited this act in an interview about his legislative accomplishments,saying, “I took the initiative in creating the Internet.” This comment was shortened to: “I created the Internet” and quickly became a punchline for late-night comedians. This one line arguably cost Gore the presidency in 2000.

The 1992 Scientific and Advanced Technology Act, another Gore initiative, lifted some of the commercial restrictions on Internet usage. By mid-decade all the pieces for the modern Internet were in place.

In 1995, 26 years after its humble beginnings as ARPANET, the Internet was finally freed of government control. NSFNET was shut down. Operation of the Internet passed to mostly private companies, and all prohibitions on commercial use were lifted.

Anarchy, Property, and Innovation

Today the Internet can be viewed as three layers, each with its own stakeholders, business models, and regulatory structure. There are the standards, like TCP/IP, that control how information flows between networks, the physical infrastructure that actually comprises the networks, and the devices and applications that most people see as “the Internet.”

Since the Internet is really a collection of separate networks that have voluntarily joined together, there is no single central authority that owns or controls it. Instead, the Internet is governed by a loose collection of organizations that develop technologies and ensure interoperability. These organizations, like the Internet Engineering Task Force (IETF), may be the most successful anarchy ever.

Anarchy, in the classical sense, means without ruler, not without laws. The IETF demonstrates how well a true anarchy can work. The IETF has little formal structure. It is staffed by volunteers. Meetings are run by randomly chosen attendees. The closest thing there is to being an IETF member is being on the mailing list for a project and doing the work. Anyone can contribute to any project simply by attending the meetings and voicing an opinion. Something close to meritocracy controls whose ideas become part of the standards.

At the physical layer the Internet is actually a collection of servers, switches, and fiber-optic cables. At least in the United States this infrastructure is mostly privately owned and operated by for-profit companies like AT&T and Cox. The connections between these large national and international networks put the “inter” in Internet.

As for-profit companies ISPs compete for customers. They invest in faster networks, wider geographic coverage, and cooler devices to attract more monthly subscription fees. But ISPs are also heavily regulated companies. In addition to pleasing customers, they must also please regulators. This makes lobbying an important part of their business. According to the Center for Responsive Politics’s OpenSecrets website, ISPs and the telecommunications industry in general spend between $55 million and $65 million per year trying to influence legislation and regulation.

When most people think of the Internet they don’t think of a set of standards sitting on a shelf or equipment in a data center. They think of their smart phones and tablets and applications like Twitter and Spotify. It is here that Internet innovation has been most explosive. This is also where government has had the least influence.

For its first 20 years the Internet and its precursors were mostly text-based. The most popular applications, like email, Gopher (“Go for”), and Usenet news groups, had text interfaces. In the 20 years that commercial innovation has been allowed on the Internet, text has become almost a relic. Today, during peak hours, almost half of North American traffic comes from streaming movies and music. Other multimedia services, like video chat and photo sharing, consume much of people’s Internet time.

None of this innovation could have happened if the Internet were still under government control. These services were created by entrepreneurial trial and error. While some visionaries explored the possibilities of a graphically interconnected world as early as the 1960s, no central planning board knew that old-timey-looking photographs taken on ultramodern smart phones would be an important Internet application.

I, Internet

When Obama said the government created the Internet so companies could make money off it, he was half right. The government directly funded the original research into many core networking technologies and employed key people like Licklider, Taylor, Cerf, and Kahn. But after creating the idea the government sat on it for a quarter century and denied access to all but a handful of people. Its great commercial potential was locked away.

For proponents of government-directed research policies, the Internet proves the value of their programs. But government funding might not have been needed to create the Internet. The idea for internetwork came from BBN, a private company. The rise of ISPs in the 1980s showed that other companies were willing to invest in this space. Once the home PC and dial-up services became available, people joined commercial networks by the millions. The economic incentives to connect those early networks probably would have resulted in something very much like today’s Internet even if the ARPANET had never existed.

In the end the Internet rose from no single source. Like Leonard Read’s humble writing instrument, the pencil, no one organization could create the Internet. It took the efforts of thousands of engineers from the government and private sectors. Those engineers followed no central plan. Instead they explored. They competed. They made mistakes. They played.

Eventually they created a system that links a third of humanity. Now entrepreneurs all over the world are looking for the most beneficial ways to use that network.

Imagine where we’d be today if that search could have started five to ten years earlier.

Steve Fritzinger is a freelance writer from Fairfax,Virginia. He is the regular economics commentator on the BBC World Service program Business Daily.

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