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Do You Know Who the Swiss President Is? – Article by Bill Wirtz

Do You Know Who the Swiss President Is? – Article by Bill Wirtz

The New Renaissance HatBill Wirtz
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Doris Leuthard. That’s the name of the incumbent Swiss president in case you wondered or might need it in a general knowledge quiz any time soon. But how come a country this well known on the international stage happens to have such an unknown executive?

The Swiss Opposed Centralization from the Start

The beginning of the Swiss confederacy wasn’t about power.

From the 14th century on, while Europe was torn in territorial conflicts or the religious Thirty Years War of 1618 to 1648, the (originally) 8 cantons of the Old Swiss Confederacy were a microcosm of peace and prosperity. These cantons in themselves did have religious differences, but preferred to agree on a pact of mutual military assistance to protect the neutrality of the region and its peace. The Holy Roman Empire had granted this community of cantons imperial immediacy, meaning they were declared free from its rule while being a part of it. As the European royalties raised massive amounts of taxes to finance their decade-long wars, being Swiss was comparable to living in the first true tax haven: by any means the destruction in all of Europe made the differences that these cantons have look insignificant.

Later, religious differences in Switzerland grew, sparkling battles between Catholic and Protestant cantons. Each of these battles had winners, yet none were able to impose a true change of regime, as the cantons were too diverse to be governable. The cantonal governments refused to cooperate with each other: the only foreign policy they could agree on was that of neutrality, which ended up saving it from war.

The French Revolutionary army invaded the Confederacy in 1798 and established the Helvetic Republic, a centralized state, abolished cantonal sovereignty and feudal rights and reduced the cantons to administrative districts, all in the image of France itself. This French nation-building project failed 5 years later, as the population didn’t cooperate with any centralization attempts. The Helvetic Republic was incompatible with the Swiss mentality: the people demanded that government decisions be made at the canton level, not at the federal level.

Centralization and Switzerland’s Civil War

After decades of struggles over the centralization of power, a civil war ended the everlasting Swiss question of the legitimacy of a federal government. The Sonderbund War started in 1847 and was a fight between seven conservative and Catholic cantons who opposed the centralization of power and rebelled against the Confederation which had been in place since 1814. What followed was probably one of the least spectacular wars in world history: the federal army had lost 78 men and had 260 wounded. The Sonderbund conspiracy dissolved and Switzerland became the state it is today in 1848.

Think about this, the Swiss fight (which was marked by its incredible lack of violence in comparison to others) was purely over the rejection of the centralization of power, the skepticism of the responsibilities that a large entity has, while, mind you, we’re only talking about a country of 16,000 square miles. The result is a relatively neutral state which maintains a greater amount of freedom and prosperity than most European nations.

The Federal Council, Impotent by Design

The executive of the federal multi-party directorial republic is a body called the Federal Council. It is composed of 7 members (each one responsible for one of the seven departments in Switzerland) who are voted into their position by both chambers of the Federal Assembly. Their presidency and vice-presidency is rotating each year, their mandate is four years. The current council is composed of 2 social democrats, 2 center-right conservatives, 2 national conservatives, and one Christian-democrat (Doris Leuthard, who’s the current president).

While the Confederation of Switzerland was designed to follow the example of the United States when it comes to federalism and states’ rights, the Swiss avoided the concentration of the executive into one person. It is interesting to note that although every European country made (and makes) constant changes to their form of government, this council has not changed since 1848. The only political change has been made to the Federal Council, is the reversal of the Magic Formula, or also known as the Swiss consensus, a political custom which divided the 7 seats in the country between the four ruling parties. With the arrival of billionaire industrialist and EU-opponent Christoph Blocher and his Swiss People’s Party, this political agreement had been shaken up and, furthermore, made Switzerland’s accession to the European Union more and more unlikely.

The council shows unity towards to the public and most decisions are made by consensus. That is largely because their function is more decorative than functional, as most of the power is still held by the cantons. Decisions related to education and even levying taxes are made at the regional level. There is no executive action or veto which the federal government could use.

The president of Switzerland has little to no room in public political discourse. So if you don’t know who the new president of Switzerland is, don’t worry. Some Swiss people might not know either.

Localism Works in Switzerland

The Swiss cantons perform the balancing act of politics: the conservative cantons are those outside of the big cities such as Zurich, Geneva or Bern (the capital). The population in the smaller communities reject the tendency to govern from the capital. As a result, the Swiss have continuously rejected proposals like the ones phasing out nuclear energy.

This push for localism would be considerably more difficult if it wasn’t for the system of direct democracy that is very common in the Confederacy.

All federal laws are subject to a three to four step process:

  1. A first draft is prepared by experts in the federal administration.
  2. This draft is presented to a large number of people in an opinion poll: cantonal governments, political parties as well as many NGO’s and associations out of civil society may comment on the draft and propose changes.
  3. The result is presented to dedicated parliamentary commissions of both chambers of the federal parliament, discussed in detail behind closed doors and finally debated in public sessions of both chambers of parliament.
  4. The electorate has a veto-right on laws: If anybody is able to find 50,000 citizens who will sign a form demanding a referendum within 3 months, a referendum must be held. In order to pass a referendum, laws need only be supported by a majority of the national electorate, not a majority of cantons. It’s not unusual for Switzerland to have referenda on more than a dozen laws in any given year.

These referenda are the reason why the political majorities have decided to include their own opposition in government: if the majority does not seek a consensus, the oppositions can use a citizens initiative (referendum) to overturn any decision made on the national level.

The system of checks and balances through both the aggressively localist cantons and the tool of direct democracy has made Switzerland particularly resistant to the growth of government, and one of the few relatively liberty-minded bastions in Europe.

Bill Wirtz studies French Law at the University of Lorraine in Nancy, France.

This article was originally published on FEE.org. Read the original article.

Don’t Turn Foreign Tragedies into Domestic Tragedies – Article by Doug Bandow

Don’t Turn Foreign Tragedies into Domestic Tragedies – Article by Doug Bandow

The New Renaissance HatDoug Bandow
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Americans Enjoy Prosperity and Peace in a Dangerous World
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The Islamic State’s March attacks in Belgium reinforce Americans’ belief that we live in a dangerous world, perhaps the most dangerous ever. Thankfully, most of the horror bypasses the United States, which remains a global oasis.

Americans can help alleviate the ugliness elsewhere. But rarely can they remake other nations, at least not at a reasonable cost in lives and resources. Americans’ priority must remain safeguarding and uplifting the United States.

I recently visited the city of Erbil, Iraq. Briefly threatened by the Islamic State two summers ago, Erbil is the capital of largely autonomous Kurdistan. Today, the city operates without evident fear, though security remains heavy. The Kurdish people are spread throughout Iraq, Syria, Turkey, and Iran, and are the largest ethnic group without their own nation. They have suffered oppression and violence at the hands of all four states.

In Erbil, one government official spoke of fleeing his home with his family years ago as Saddam Hussein’s air force attacked from above. Hussein employed mustard gas against Kurdish civilians who opposed his brutal rule. The official’s father explained that they could count on no one else and should be prepared to die fighting. Many did.

Kurdistan remains largely separate from the Baghdad government and has become a sanctuary for others, especially religious minorities. I attended a training seminar on religious liberty organized by the group HardWired, headed by Tina Ramirez, who previously worked on Capitol Hill handling foreign policy and religious persecution. The meeting brought together people of all faiths to deepen their commitment to protecting the religious liberty of all.

Every group had suffered. Christians fled the Islamic State’s takeover of the Nineveh Plain. A Baha’i who lived close to Baghdad went to Turkey with her son. A Sunni judge got out of Mosul three days before the brutal ISIS takeover. Many in his family were not so lucky: the Islamic State detained his youngest brother for more than a year before beheading the 17-year-old. A Yazidi abandoned her home when her city was overrun by ISIS forces. Many people lost contact with friends or relatives left under Islamic State rule.

Even those who escape suffer. A church turned its grounds across the street from my hotel into a mini-refugee camp for 94 families. Homes went from tents to metal containers, but kitchens and bathrooms remain communal. People play soccer and volleyball in the common area, marking time while hoping to return home or find refuge abroad.

Even more people have been displaced by the Syrian conflict. The European migrant crisis is a result of millions fleeing their war-ravaged nation. Many have crossed into neighboring Turkey. Refugees make up an astonishing one-third of Lebanon’s population. Last summer, I visited Jordan’s Zaartari camp, home to some 80,000 people. Many residents have been there for years. Some, in a mix of frustration and desperation, return to Syria aflame.

Only today, decades into a widespread insurgency in eastern Burma, is there hope for the 50,000 residents of Mae La refugee camp, across the border in Thailand. For years, when I visited, children would tell stories of murdered parents, wrecked homes, and desperate flight across the Moei River. Few people could leave the camps and none could work legally.

Today, an uneasy peace has descended upon most of the land also known as Myanmar. In fact, it now may be freer politically than Thailand, which suffered a coup two years ago. Although the Burmese military retains much influence, it is yielding ground. In contrast, the Thai junta seems determined to hold on to power and to construct a faux democracy in which the generals will rule however the people vote.

In many other nations, the threat similarly is repression and persecution rather than conflict and war. Turkish journalists risk jail and ruin for criticizing the new sultan-wannabe, President Recep Tayyip Erdogan. A Christian minister’s wife lost a leg in a church bombing in Indonesia. Russians are arrested for demonstrating against the Putin government. Palestinian Christians are unable to worship in Jerusalem or to farm ancestral lands due to the Israeli occupation. Chinese students are angry over censorship and curious about the Tiananmen Square massacre.

Pervasive repression is evident in totalitarian systems, in which the state claims authority over almost every aspect of human life, including religious faith. North Korea, Eritrea — known as Africa’s North Korea — and Saudi Arabia come to mind. An accident of birth separates those with a future of freedom and opportunity from those who endure a modern form of serfdom.

Americans face many challenges, too, especially this political season. What believer in liberty could savor a presidential match-up between Hillary Clinton and Donald Trump? Or Bernie Sanders and Ted Cruz? It’s enough for many of us to consider committing ritual seppuku.

Nevertheless, the United States remains largely invulnerable to foreign attack. Only a couple of nations could launch a nuclear assault, and they would be annihilated in return. None can challenge America conventionally: indeed, Washington spends so much on the military to enable it to attack others, not to protect the homeland. Yet, America’s prosperous and populous allies, like the Europeans, prefer to fund generous welfare states rather than potent defenses.

Horrific conflicts elsewhere appropriately tug at Americans’ heartstrings, but that is no reason to turn foreign tragedies into domestic tragedies. Terrorism remains America’s most serious security concern, but it does not threaten the nation’s existence, as did conflict during the Cold War. Less promiscuous intervention abroad is the surest means to limit such attacks at home.

America’s economic dream of a constantly improving future has lagged, but the United States is not alone in that regard. And the wounds are largely self-inflicted: foolish regulatory, spending, and tax policies that weaken Americans’ ability to compete in the world. It’s a lesson that even Europe has had painfully to learn.

No one should wish America’s political system on anyone else, yet a similar populist uprising is occurring in many European nations. It’s a problem born of frustration with bipartisan elites who rig the game for their own benefit. Who can blame people for believing that it really doesn’t matter who they vote for? There is a permanent national government that works most assiduously to ensure its permanence, irrespective of the wishes of those it governs.

The ongoing populist response is fraught with danger. Nevertheless, American supporters of liberty remain alert, constitutional protections persist, checks and balances abound, and for at least two decades, Washington pols have perfected their ability to block and frustrate their opponents. Despite fevered claims this political season, America remains far from a fascist dictatorship.

There is much in America about which to be concerned and even anguished. Yet, traveling the world reminds one just how special Americans remain. Rather than give up in despair, we should remember our blessings and redouble our efforts to reclaim the Founders’ revolutionary legacy. We don’t need to try to remake the world, as so many people seem to desire. Rather, we should concentrate on reviving America.

Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.

This article was originally 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.

As Ukraine Collapses, Europeans Tire of US Interventions – Article by Ron Paul

As Ukraine Collapses, Europeans Tire of US Interventions – Article by Ron Paul

The New Renaissance HatRon Paul
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On Sunday Ukrainian prime minister Yatsenyuk resigned, just four days after the Dutch voted against Ukraine joining the European Union. Taken together, these two events are clear signals that the US-backed coup in Ukraine has not given that country freedom and democracy. They also suggest a deeper dissatisfaction among Europeans over Washington’s addiction to interventionism.

According to US and EU governments – and repeated without question by the mainstream media – the Ukrainian people stood up on their own in 2014 to throw off the chains of a corrupt government in the back pocket of Moscow and finally plant themselves in the pro-west camp. According to these people, US government personnel who handed out cookies and even took the stage in Kiev to urge the people to overthrow their government had nothing at all to do with the coup.

When Assistant Secretary of State Victoria Nuland was videotaped bragging about how the US government spent $5 billion to “promote democracy” in Ukraine, it had nothing to do with the overthrow of the Yanukovich government. When Nuland was recorded telling the US Ambassador in Kiev that Yatsenyuk is the US choice for prime minister, it was not US interference in the internal affairs of Ukraine. In fact, the neocons still consider it a “conspiracy theory” to suggest the US had anything to do with the overthrow.

I have no doubt that the previous government was corrupt. […] But according to Transparency International, corruption in the Ukrainian government is about the same after the US-backed coup as it was before. So the intervention failed to improve anything, and now the US-installed government is falling apart. Is a Ukraine in chaos to be considered a Washington success story?

This brings us back to the Dutch vote. The overwhelming rejection of the EU plan for Ukrainian membership demonstrates the deep level of frustration and anger in Europe over EU leadership following Washington’s interventionist foreign policy at the expense of European security and prosperity. The other EU member countries did not even dare hold popular referenda on the matter – their parliaments rubber-stamped the agreement.

Brussels backs US bombing in the Middle East and hundreds of thousands of refugees produced by the bombing overwhelm Europe. The people are told they must be taxed even more to pay for the victims of Washington’s foreign policy.

Brussels backs US regime change plans for Ukraine and EU citizens are told they must bear the burden of bringing an economic basket case up to European standards. How much would it cost EU citizens to bring in Ukraine as a member? No one dares mention it. But Europeans are rightly angry with their leaders blindly following Washington and then leaving them holding the bag.

The anger is rising and there is no telling where it will end. In June, the United Kingdom will vote on whether to exit the European Union. The campaign for an exit is broad-based, bringing in conservatives, populists, and progressives. Regardless of the outcome, the vote should be considered very important. Europeans are tired of their unelected leaders in Brussels pushing them around and destroying their financial and personal security by following Washington’s foolish interventionism. No one can call any of these recent interventions a success, and the Europeans know it.

One way or the other, the US empire is coming to an end. Either the money will go or the allies will go, but it cannot be sustained. The sooner the American people demand an end to these foolish policies the better.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

The Real Refugee Problem – And How To Solve It – Article by Ron Paul

The Real Refugee Problem – And How To Solve It – Article by Ron Paul

The New Renaissance HatRon Paul
September 7, 2015
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Last week Europe saw one of its worst crises in decades. Tens of thousands of migrants entered the European Union via Hungary, demanding passage to their hoped-for final destination, Germany.

While the media focuses on the human tragedy of so many people uprooted and traveling in dangerous circumstances, there is very little attention given to the events that led them to leave their countries. Certainly we all feel for the displaced people, especially the children, but let’s not forget that this is a man-made crisis and it is a government-made crisis.

The reason so many are fleeing places like Syria, Libya, Afghanistan, and Iraq is that US and European interventionist foreign policy has left these countries destabilized with no hopes of economic recovery. This mass migration from the Middle East and beyond is a direct result of the neocon foreign policy of regime change, invasion, and pushing “democracy” at the barrel of a gun.

Even when they successfully change the regime, as in Iraq, what is left behind is an almost uninhabitable country. It reminds me of the saying attributed to a US major in the Vietnam War, discussing the bombing of Ben Tre: “It became necessary to destroy the town in order to save it.”

The Europeans share a good deal of blame as well. France and the UK were enthusiastic supporters of the attack on Libya and they were early backers of the “Assad must go” policy. Assad may not be a nice guy, but the forces that have been unleashed to overthrow him seem to be much worse and far more dangerous. No wonder people are so desperate to leave Syria.

Most of us have seen the heartbreaking photo of the young Syrian boy lying drowned on a Turkish beach. While the interventionists are exploiting this tragedy to call for direct US attacks on the Syrian government, in fact the little boy was from a Kurdish family fleeing ISIS in Kobane. And as we know there was no ISIS in either Iraq or Syria before the 2003 US invasion of Iraq.

As often happens when there is blowback from bad foreign policy, the same people who created the problem think they have a right to tell us how to fix it – while never admitting their fault in the first place.

Thus we see the disgraced General David Petraeus in the news last week offering his solution to the problem in Syria: make an alliance with al-Qaeda against ISIS! Petraeus was head of the CIA when the US launched its covert regime-change policy in Syria, and he was in charge of the “surge” in Iraq that contributed to the creation of al-Qaeda and ISIS in Iraq and Syria. The idea that the US can salvage its disastrous Syria policy by making an alliance with al-Qaeda is horrific. Does anyone think the refugee problem in Syria will not be worse if either al-Qaeda or ISIS takes over the country?

Here is the real solution to the refugee problem: stop meddling in the affairs of other countries. Embrace the prosperity that comes with a peaceful foreign policy, not the poverty that goes with running an empire. End the Empire!

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

How the West Invented Individualism – Article by Roger McKinney

How the West Invented Individualism – Article by Roger McKinney

The New Renaissance Hat
Roger McKinney
April 1, 2015
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Inventing the Individual, by Larry Siedentop, Belknap Press, 2014

I lived in Morocco a few decades ago and needed some furniture for our apartment. A college student I had befriended, Hamid, offered to take my cash and negotiate with the dealer for me while I drank coffee in a nearby qahwa because, as he said, the price of the furniture would triple if the merchant glimpsed an American within a block of his store.

I hesitated to take Hamid’s offer only because I didn’t want to put him to so much trouble, but he mistook my pause for distrust. So he assured me that he could not cheat me because I had eaten dinner with him and his family and therefore enjoyed a status similar to that of a family member.

No Moroccan can cheat a family member or anyone who has eaten at their table. I gave Hamid my cash and later returned home to find a nice selection of furniture at a good, Moroccan, price.

Later, I met the owner of a construction firm who enlightened me further on business ethics in Morocco. He told me he spent a large part of his time thwarting the efforts of suppliers, customers, and employees to cheat him. The cleverness that went into dreaming up new ways to cheat him surprised me. He confirmed what Hamid had told me: cheating others is not considered unethical at all but a sign of an astute businessman. But cheating family members is immoral.

Moroccan business ethics might be appalling to westerners, but ancient Greeks and Romans would have understood and applauded them according to Larry Siedentop in his latest book, Inventing the Individual: The Origins of Western Liberalism.

In Siedentop’s words, the book is “… a story about the slow, uneven and difficult steps which have led to individual moral agency being publicly acknowledged and protected, with equality before the law and enforceable ‘basic’ rights.”

Like Moroccans, ancient Greeks and Romans cared little for non-family members. Those “… outside the family circle were not deemed to share any attributes with those within. No common humanity was acknowledged, an attitude confirmed by the practice of enslavement.”

The past is a foreign country but foreign countries are more foreign than politicians and economists in the West understand. The prize for the reader in Siedentop’s package is the understanding that the individualism at the core of classical liberalism is a new and rare gem.

When we fail to recognize its uniqueness, we project onto past and modern cultures our own values. Siedentop explains the failures of attempts at nation building by US politicians in the Middle East as well as the aborted efforts at economic development by mainstream economists without mentioning either.

Classical liberal individualism did not exist in the ancient world. Siedentop wrote, “Since the sixteenth century and the advent of the nation-state, people in the West have come to understand ‘society’ to mean an association of individuals.” For the ancient Romans and Greeks society consisted of a collection of extended families. The heads of the families, including family-based clans and tribes, held all the power and made all of the decisions. Only the heads of families could become citizens in the polis.

Antiquity had no notion of the powers of the government being limited by the rights of individuals, even for family heads. “Citizens belonged to the city, body and soul.” Women, children, slaves and non-citizens held no rights and lived only at the pleasure of the family head.

The ancients had no concept of the equality of man, either. Even for Plato and Aristotle, a natural hierarchy of humanity existed, much like the caste system of India. Some were born to rule, others to serve or fight. Submitting to the needs of the city as determined by the family heads was the only reason for existence and any person who failed to contribute to the cause could be legally killed — or worse — exiled. Politics and war became the noblest occupations while commerce was held in contempt.

Siedentop devotes just the first chapter to the culture of ancient Greece and Rome, but I think it’s the most important chapter because it forces the reader to face the stark contrast between that culture and the culture of the modern West. The story of the painfully slow gestation of individualism from its conception in early Christianity through the monastic movements, revolutions in church government, the creation of secular space, and finally its birth during the Reformation is rewarding, but the real value of the book lies in the understanding that this process took place only in the West and nowhere else in the world in history.

To grasp the impact of Siedentop’s thesis, readers need to place it alongside the works of Helmut Schoeck, Geert Hofstede, and Shalom H. Schwartz. Schoeck informs us that envy is the organizing principle of society and the enemy of individualism. Hofstede and Schwartz show that the distinguishing feature of the West today is the classical liberal individualism that the rest of the world not only does not share, but abhors. Within the West, the US stands out as an extreme outlier on individualism.

Of course, to round out the topic people need to read Hayek’s essay, “Individualism: True and False” to understand how socialists created a pseudo-individualism that is for the most part a resurrection of ancient Greek and Roman collectivism.

Classical liberal individualism does not exist in the modern world outside of the US and Europe, and it is dying here. The collectivist cultures of the rest of the world differ little from those of ancient Greece and Rome. If economists and politicians understood the uniqueness of classical liberalism, they would quit trying to pour new wine into old wine skins, which causes the old to explode. And they would mourn the rise of socialism.

Roger McKinney is an analyst for an HMO and teaches economics for a small private college.

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.

The Importance of Free Speech to Human Progress – Article by Iain Murray

The Importance of Free Speech to Human Progress – Article by Iain Murray

The New Renaissance Hat
Iain Murray
January 10, 2015
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From Principia Mathematica to Charlie Hebdo

 

The massacre of 12 cartoonists and journalists at Charlie Hebdo magazine in Paris this week should remind us to ask: Why is free speech so important?

It is more than an inalienable individual right; it is fundamental to human progress. That is why it is one of the most important institutions of liberty.

When we look at the history of the freedom of speech in the West, we see that early on it was tied up with the freedom of the press, which is why the terms are used interchangeably in American constitutional theory. Yet, for most of the West’s history, the idea of “publishing” was meaningless. Books were copied by hand, first by scribes hired by Roman nobles to copy books they liked, then by monks in medieval scriptoria, with the more ancient texts copied as practice for copying the more important religious texts. As a result, many texts were lost, with others surviving by mere chance.

Having assumed the role of guardian of learning, the medieval church was ill-disposed toward innovations that threatened its position. The suppression of early English versions of the Bible is a case in point. Information traveled slowly, impeding the progress of intellectual innovation.

The printing press changed all that, as it brought about the first series of real struggles over freedom of speech. Ideas could travel more quickly, and literacy exploded.

As people could finally read the Bible for themselves, Reformation movements grew all over Europe. Then they took to using the press to spread other ideas. In response, the church and its allies in positions of power took steps to restrain this new free press. In fact, early copyright law arose from efforts to regulate the production of printers.

It should not surprise us that early libertarians were often printers. “Freeborn John” Lilburne was first arrested for printing and circulating unlicensed books.

The great poet John Milton wrote perhaps the first great defense of free speech when the English republican Parliament reintroduced censorship via the Licensing Order of 1643 (censorship had effectively been abolished in 1640 along with the Star Chamber, which tried Lilburne). In his Areopagitica, Milton passionately demanded freedom of the press and tolerance of heterodox publications, saying, “Give me the liberty to know, to utter, and to argue freely according to conscience, above all liberties.”

The licensing order lapsed in 1694 as a result of the Glorious Revolution of 1685, which instituted a more liberal constitution in England and helped to inspire the American Revolution — and eventually the Bill of Rights and First Amendment. But the Areopagitica is still with us. Fittingly, the US Supreme Court cited it as an authority on the inherent value of false statements in the landmark case New York Times v. Sullivan:

Even a false statement may be deemed to make a valuable contribution to public debate, since it brings about “the clearer perception and livelier impression of truth, produced by its collision with error.” Mill, On Liberty (Oxford: Blackwell, 1947), p. 15; see also Milton, Areopagitica, in Prose Works (New Haven, CT: Yale, 1959), vol. 2, p. 561.

The free press opened new communication channels for theoretical innovation. It is often noted that Sir Isaac Newton was born the day Galileo died. What enabled Newton to take Galileo’s experiments and turn them into modern physics was the printing press. Newton published Principia Mathematica in 1687, and revised it in 1713 and 1726. The book was published by the Royal Society, founded in Oxford in 1660, which essentially invented peer review (see this here fascinating series of videos on the society’s role in the invention of modern science). Newton’s book spread throughout Europe, which would not have been possible under earlier regimes where printing was tightly controlled.

Central to the principle of a free press is the right to be wrong — which enables peer review and criticism in the first place. It is also central to scientific and technological innovation and experimentation, and therefore also central to economic progress, which has led to the great explosion in human welfare we have seen over the last two centuries. Free speech allows more ideas to “have sex,” to use Matt Ridley’s phrase, and that is why societies that are frightened by the consequences of this ideological sexual revolution are those with the most severe censorship laws.

At this point, one might argue that it is absurd to compare a “blasphemous” cartoon to the Principia Mathematica. But that would be a mistake. As Stephen Law has written for the Center for Inquiry, the point of such cartoons is not to cause offense, but something far greater:

More often than not, the lampooning is done with intention of shattering, if only for a moment, the protective façade of reverence and deference that has been erected around some iconic figure or belief, so that we can all catch a glimpse of how things really are.

It is exactly that goal — to help us determine what actually is, rather than what is simply asserted — that free speech and free inquiry make possible. As an institution of liberty, free speech must be defended wherever it is attacked. (My colleague Hans Bader has written elsewhere about letting down our guard.) Those who seek to suppress free speech want to keep mankind mired in poverty and ignorance, subject to their own whims and beliefs. They cannot be allowed to succeed.

Iain Murray is vice president at the Competitive Enterprise Institute.

This article was originally published by The Foundation for Economic Education.

The Great Fact: A Review of Deirdre McCloskey’s “Bourgeois Dignity” – Article by Bradley Doucet

The Great Fact: A Review of Deirdre McCloskey’s “Bourgeois Dignity” – Article by Bradley Doucet

The New Renaissance Hat
Bradley Doucet
September 20, 2014
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We live in astonishing times. We take it for granted, of course, which is good in a way because, well, we have to get on with the business of living and can’t spend every waking moment going, “Oh my God! This is amazing!” But it’s a good idea to stop and take stock from time to time in order to appreciate just how far we’ve come in the past 200 years or so—to show gratitude for just how much richer the average person is today thanks to the Industrial Revolution.
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“In 1800, the average human consumed and expected her children and grandchildren and great-grandchildren to go on consuming a mere $3 a day, give or take a dollar or two,” writes economist and historian Deirdre McCloskey in her excellent 2010 book, Bourgeois Dignity: Why Economics Can’t Explain the Modern World. That’s in modern-day, US prices, corrected for cost of living. Apart from a comparatively few wealthier lords, bishops, and the odd rich merchant, people were dirt poor, barely subsisting, unable to afford luxuries like elementary education for their kids—who had a 50% chance at birth of not making it past the age of 30. That’s the way it was, the way it had always been, and as far as anyone could tell, the way it always would be.

More Than 16 Times Richer

But thankfully, things turned out a little differently. There are seven times as many of us on the planet today, but we’re many times richer on average, despite pockets of enduring dire poverty here and there. According to McCloskey, “Real income per head nowadays exceeds that around 1700 or 1800 in, say, Britain and in other countries that have experienced modern economic growth by such a large factor as sixteen, at least.” And this is a very conservative estimate of material improvement, not taking into account such novelties as jet travel, penicillin, and smartphones.

This radical, positive change brought about by the Industrial Revolution is the “Great Fact” about the modern world. “No competent economist, regardless of her politics, denies the Great Fact,” writes McCloskey. But it does require explanation, and here there are many theories. What caused it? Why did it happen where and when it happened—starting in northern Europe around 1800—instead of in some other place, at some other time? And although modern economic growth has at least begun to reach most of the world, including now China and India, if we had a better understanding of its causes, perhaps we could do a better job of encouraging it to spread to the relatively few remaining holdouts.

What changed, argues McCloskey, is the way people thought about markets and innovation and the people who were engaged in the business of making new things and buying and selling them. “More or less suddenly the Dutch and British and then the Americans and the French began talking about the middle class, high or low—the “bourgeoisie”—as though it were dignified and free. The result was modern economic growth.” In other words, the material, economic fact has a non-material, rhetorical cause, which is why economics can’t explain the modern world. Our ideas changed, and we started innovating like never before, and an explosion of innovation drove the rapid economic growth of the past 200 years.

What Didn’t Cause the Industrial Revolution

Bourgeois Dignity is the second book of a trilogy. The first book, The Bourgeois Virtues (2006), which I have not read but now plan to, argued for the positive ethical status of a bourgeois life. The third book, Bourgeois Equality, due out in 2015, will present the positive case for the claim that it is a change in ideas and rhetoric that made the modern world—and that ideas and rhetoric could unmake it, too. As for this second book in the series, it presents the negative case by examining the materialist explanations for the Great Fact offered up by economists and historians from both the left and the right, and finding them all to be lacking.

Imperialism, for instance, did not bring about the modern world. The average European did not become spectacularly wealthy by historical standards simply by taking Africa’s and America’s wealth. Imperialism did happen, and it did make a few people rich and hurt a lot of people, especially in places like the Belgian Congo. But it did not raise the standard of living of average Europeans, who would have been better off if their leaders had allowed trade to flourish instead of supporting the subjugation of people in foreign lands. Besides which, empires had existed in other times and places without bringing about an Industrial Revolution. A unique effect cannot be the result of a routine cause. And it cannot either simply be the case that wealth was moved from one place to another, because there is much more wealth per person today than ever before, despite there being many more of us around.

International trade did not do it either, according to McCloskey. Trade is a good thing, as imperialism is a bad thing, but its effects are relatively small. And extensive trade, too, existed long before the 1800s, in places other than Europe and the United States, without launching the rapid material betterment of all. And for similar reasons, it wasn’t the case that people began saving more, or finally accumulated enough, or got greedier all of a sudden, or discovered a Protestant work ethic, or finally built extensive transportation infrastructure, or formed unions, or suddenly started respecting private property, or any of dozens of other explanations presented by economists and historians over the years.

Respect for Innovation and Making Money

Only innovation has the power to make people radically better off by radically increasing the output produced from given inputs, and only innovation was a truly novel cause, to the extent that it was taking place on an unprecedented scale two hundred years ago in northern Europe. And the reason that it began happening there and then like never before was a change in rhetoric—a newfound liberty, yes, but also a newfound dignity previously reserved for clergy and warriors. For the first time, in the 17th and 18th centuries, it became respectable, even honourable, to figure out new ways of doing things and to make money selling those innovations to other people, and so innovation and business were encouraged, and much of humanity was lifted out of dire poverty for the first time in history starting in the 19th century.

Ideas matter. Supported by bourgeois dignity, and despite the betrayal of a portion of the intellectual elite as of around 1848, we have continued to innovate and make money and lift more and more people out of poverty. There have been significant setbacks due to communism and fascism and two world wars, but almost everyone is much better off today than anyone dreamed was possible just a few short centuries ago. In order to continue spreading the wealth, and the opportunities for human flourishing that go with it, we need to defend the idea that business and innovation deserve to be free and respected, as Deirdre McCloskey herself has so admirably done in this fine volume.

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.
Superstitions Kill: An Analysis of Witch Hunts in Europe During 1480-1700 (2005) – Essay by G. Stolyarov II

Superstitions Kill: An Analysis of Witch Hunts in Europe During 1480-1700 (2005) – Essay by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
July 28, 2014
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Note from the Author: This essay was originally written in 2005 and published on in six parts on Associated Content (subsequently, Yahoo! Voices) in 2007.  The essay earned over 21,500 page views on Associated Content/Yahoo! Voices, and I seek to preserve it as a valuable resource for readers, subsequent to the imminent closure of Yahoo! Voices. Therefore, this essay is being published directly on The Rational Argumentator for the first time.  
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~ G. Stolyarov II, July 28, 2014

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The Factors, Motivations, and Superstitions Behind Witch Hunts

 

The persecution of “witches” in Europe was a horrid practice during a time when the modern values of toleration, reason, due process, and gender equality were far more seldom manifested than today.

When examining the causes of the witch craze from 1480 to 1700, consideration must be given to those attitudinal conditions which, in later eras of European history, were far less prominent. Among these were the expectation of religious orthodoxy and behavioral uniformity, the lack of restraints on politicians’ desires to thrive at the expense of their subjects and competitors, and a widespread distrust of women and the aged.

During the Pre-Enlightenment era, the ideas of individual intellectual and religious freedom were largely anathema to mainstream thought, and opposed by a both a Catholic church striving to re-assert its temporal authority and the leaders of the Protestant Reformation attempting to aggressively gain control over mass followings.

Pope Innocent VIII wrote “The Witch Bull” in 1484, during the late Renaissance, when the Catholic Church was infamous for its pomp, love of worldly wealth, political scheming, and economic corruption. Part of the motive for this edict may have been the restoration of the Church’s prestige in the eyes of many fervent Christians, who held great disappointment and frustration at the Church’s perceived departure from spiritual matters.

By embarking the Church on a quest to purge spiritually “tainted” individuals, the Pope might have hoped to restore the image of his organization’s intense religiosity, while the Church’s political and worldly authority only increased. Indeed, the Holy Inquisition, which was just beginning to arise during this time, was greatly empowered by The Witch Bull to spread its physical power to all places where suspicions of witchcraft were present, effectively giving the Church the doctrinal means to implement a near-absolute ideological stranglehold over the Catholic world.

The tremendous success of both the Catholics and the Protestants at using the fear of witches to entrench their domination over the masses could only have been made possible by the masses’ tremendous susceptibility to such irrational superstition. A diary from a young Protestant boy illustrates a child’s fear of supernatural terrors, such as the devils that perpetually tormented his mind. Children, not yet having had adequate exposure to the workings of reality, are even today often pervaded by fears of monsters and other bizarre harms emerging from the unknown, but this boy lived in an age when the adults did not discredit such worries.

Indeed, because one church or another exerted a monolithic control over people’s intellectual lives, an individual would grow up in an environment where his childhood fears would only be further fed and fueled by the messages emanating from the religious orthodoxy. Entire generations would grow up in this manner, convinced since their earliest days that any individual oddity, coincidence, or uncommon occurrence was a sign of supernatural evil. Such masses were willing audiences to whatever ideological craze churches would concoct to extend their authority over individuals’ lives.

Anti-Female Prejudices Displayed in The Malleus Maleficarum

 

The 1486 book, The Malleus Maleficarum (The Hammer of Witches) was among the most violently prejudiced writings in history; it claimed the inferiority of women to males in every respect and blamed on this inferiority women’s alleged susceptibility to witchcraft. This book’s teachings inspired a bloody series of witch hunts that ravaged Europe for the next two centuries.

According to Heinrich Kramer and Jacob Sprenger in The Malleus Maleficarum, female susceptibility to superstition and witchcraft has among its causes women’s excessive credulity. The devil prefers to target the more credulous since “the chief aim of the devil is to corrupt faith, therefore he rather attacks them” (1). Kramer and Sprenger thus imply that the devil seeks to destroy religious integrity in the largest number of souls, and that his odds of success at this are greatest when targeting women. Women’s impressionability, defined by Kramer and Sprenger as the readiness “to receive the influence of a disembodied spirit” (1), renders their souls wide open to the devil’s manipulations.

Moreover, according to Kramer and Sprenger, women’s general inability to keep a secret, illustrated by their “slippery tongues” (1), is claimed to be a cause for the frequent public exposure of their witchcraft. Continuing their presentation, Kramer and Sprenger assert that women are intellectually inferior to males, and in this respect analogous to children, devoid of the knowledge of such fine disciplines as philosophy, which could have shielded them from maleficent influences. Furthermore, women are portrayed as being more motivated by bodily lust than males, and are, throughout the text, characterized as having insatiable carnal demands. This is derived from the inherent nature of woman, who obtained this defect as a result of her formation from an improperly bent rib.

Kramer and Sprenger claim that “The Malleus Maleficarum portrays the vices of deviousness and envy as pervasive in women. Kramer and Sprenger contend that women’s displays of emotion are insincere, since “[w]hen a woman weeps, she labours to deceive a man” (2). Women’s constant conniving and treachery are due to the jealousy that even the best women exhibit toward both their female counterparts and males. Even among the holy women of the Bible, Kramer and Sprenger find numerous examples of this trend, and assert that its harm will be magnified even further if it is directed against males. Female witchcraft, then, is the material manifestation, by means of manipulation and treachery, of the rampant envy that women exhibit.

Though Kramer and Sprenger assert that women are susceptible to irrational superstition, it is they, the authors of The Malleus Maleficarum, who fell prey to the most disastrous of superstitions: superstitions that enabled the killing of thousands of innocent people.

Witch Hunts as a Form of Anti-Female Discrimination

 

The witch hunts that took place from 1480 to 1700 were in part facilitated by the negative perceptions of women during the time period of their occurrence. Alan Macfarlane’s statistics reveal that females typically comprised about 80% of the total amount of “witches” executed, implying that, for every male victim, four females lost their lives.

Writing The Hammer of Witches (Malleus Maleficarum),the monks Heinrich Kramer and Jacob Sprenger entrenched this misogynist bend into official witch-hunting doctrine. Kramer and Sprenger describe a woman as inherently more fallible than her male counterpart, and from her very nature as one originating from an improperly bent rib, prone to evil. However, Kramer and Sprenger also write that, though women are susceptible to evil influences, they can also be “very good” when they use their impressionable qualities in a certain manner.

Given the heavily patriarchal nature of their time period, the monks may have been suggesting that the proper place of a woman is to obey male influences, so that her imperfections may be compensated for by the males’ lack of such fallibilities. The threat of being branded a witch more readily than a male would be might have served as a deterrent for women from defying the commonplace expectations imposed on them by the social and religious paradigms surrounding them.

Women like Alice Prabury, who diverged from the expected role of a woman as a mundane housekeeper and instead obtained uncommon skills to cure people and animals of diseases, were targets for persecution. The Churchwardens of Gloucestershire may have filed their accusation of witchcraft against Prabury due to their disapproval of the excessive independence that the woman manifested, as exemplified in her refusal to tell others, including the representatives of the dominant paradigm, the unique means by which she went about to performing work.

Additionally, women, like Walpurga Hausmannin, who exercised initiative in romantic relationships, were suspect of being in league with the Devil. In the patriarchal society of that age, romantic advances by females were considered highly improper and threatening to the social order. Perhaps Hausmannin’s death was a result of the dominant paradigm’s attempt to criminalize such behavior under the guise of witchcraft, but with the true purpose of enforcing male domination in relationships.

The creative, individualistic, and independent women were most often the targets of the two-century-long spree of witch hunts. Such persecution unfortunately destroyed many talented individuals who could have lived fulfilling lives and made tremendous advances in the arts and sciences.

How Martin Luther and John Calvin Conducted Witch Hunts and Persecuted Dissenters

 

The early 16th-century Protestant reformers Martin Luther and John Calvin were not enlightened, forward-thinking individuals. They were brutal, superstitious, intolerant, and repressive individuals who exploited popular stereotypes of “witches” in order to persecute those who disagreed with their views.

The Protestants’ use of the witch craze to enforce religious orthodoxy was no less dramatic than that of the Catholics. One of Martin Luther’s tools for attracting a mass following to his breakaway movement from the Catholic Church was the use of powerful emotional imagery. Just as he compared Rome to Babylon and the Pope to the Antichrist following his rejection of papal authority during the Leipzig debate in 1519, Luther was ready to brand eccentric or ideologically divergent individuals as “the Devil’s whores.”

Luther, in his 1522 sermon, charged the “witches” with a litany of supernatural behaviors, including transformation into different animals, accusations which, to the rationally thinking mind, would be ludicrous indeed. This further demonstrates that Luther’s motive for breaking away from the Catholic Church was not to defend freedom of individual thought, but to establish a religious orthodoxy of his own.

Luther, in addition to his intense anti-Semitism, strived to encourage the adoption of his version of Protestantism as the state-sponsored religion of numerous German principalities, at the expense of the religious freedoms of those principalities’ citizens. His intolerance extended even to the Zwinglians in Switzerland, with whom he exhibited only a minor disagreement over transubstantiation. Luther would undoubtedly have been eager to use the fear of witches as yet another weapon to direct mass hostility against those whose views diverged with his own.

John Calvin’s description of witches in the Institutes of the Christian Religion even more transparently revealed his true motives of combating dissension from his version of Protestantism. Calvin draws, from his passage on witchcraft, the conclusion that “we have to wage war against an infinite number of enemies.” Calvin might have included under this category anyone who did not conform to the dicta of his strict church government in Geneva.

Calvin’s policy was to stringently oversee people’s private lives, church attendance, and intellectual expression, and ensure that nothing they said or did would displease God. It should therefore come as no surprise that Geneva experienced a far larger number of witch hunts than most other major European cities. H.C. Erik Midelfort’s statistics show Geneva as having experienced 95 cases of witch persecution over 125 years, almost two and a half times more than had occurred in the entire Department of the Nord in France during 137 years.

Calvin was frank about his use of the witch craze to enforce the power of his own theocratic order, stating in the Institutes that he had brought up the entire issue “in order that we may be aroused and exhorted,” i.e., rallied behind Calvin’s religious movement.

The Political Motives Behind Witch Hunts

 

Aside from religious motives, the witch hunts that took place from 1480 to 1700 were made possible by the time period’s lack of restraint for political practices that provided only a flimsy cover for outright theft of property and politicians’ wanton attempts to destroy both their subjects and each other.

The personal avarice of many politicians of the time period impelled them to seek to thrive at the expense of others’ lives and suffering. The canon Linden, in his account of the persecutions in Trier, Germany in 1592, describes many of the city’s prominent magistrates as victims of the witch hunts, while others, including numerous political officers and the men hired by them, grew wealthy off the confiscated possessions of victims.

Indeed, Linden’s description suggests that witchcraft was “mass produced” and that the furnishing of accusations was a profitable industry for those on the receiving end of the property. The vehemence of a large segment of the population in supporting the witch executions might have been reinforced by the material gains those people would expect to obtain from them, gains that Linden personally witnessed when observing such men as the executioners.

Linden, himself a canon, saw many of his fellow canons lose their lives in the witch-hunting frenzy, and evidently considered himself at risk as well. His critical attitude toward the persecutions further illustrates that the witch hunts were an attempt of one class of people to prosper at the expense of others, and recognized as such by their victims.

Political rivalries, too, were motives for accusations of witchcraft. Among the victims of such ploys was Mayor Johannes Junius, who, though entirely innocent, was confronted with a trial whose proceedings were clearly not aimed toward an objective determination of guilt or innocence, but rather at causing Junius to “confess something, whether it be true or not.” The trial was rigged against Junius, and there was to be no possible outcome but his death. Such a case could not have existed had Junius not possessed rivals who wanted him eliminated at all costs. A vacancy in the post of mayor could, after all, assist someone’s political ambitions, either to occupy the position or place into it a man acceptable to some religious or political faction with the means to carry out witch hunts.

Roger North’s account also shows that witch hunts were often approved of by officials who themselves feared persecution by the masses. North, the brother of a chief justice, clearly sympathizes with those judges who were intimidated by mass fervor into condemning individuals accused of witchcraft, lest the judges themselves became targets of mass rage.

Even though most judges and officials, especially in the late seventeenth century, toward the end of the witch-hunting period, were sufficiently educated and rational to recognize the belief in witchcraft to be an “impious vulgar opinion,” those who stood on their principles could often find their careers, reputations, and even lives at risk.

Hatred of the Elderly as a Motivation for Witch Hunts

 

The era of witch hunts (1480-1700) exhibited a noticeably smaller life expectancy than the modern age, and living until an age even as advanced as sixty was extremely rare. Older individuals were seen as abnormal and thus, to the conformist mindset prevalent at the time, a threat.

W. Fulbecke expressed this view in writing, claiming that the bodies of the old become increasingly decayed and impure, and thus susceptible to corruption and evil. Having no rational, scientific explanation for the aging process, Fulbecke suggests that people senesce because they are “by the Devil whetted for such a purpose.”

The scientific ignorance of the witch-hunting period thus provided fuel for the creation of severely negative stereotypes on the basis of which aged individuals were persecuted. H.C. Erik Midelfort’s statistics show that the median age of accused witches across Europe was most frequently sixty, and at least fifty-five.

Given a general state of physical incapacitation among the elderly of the pre-modern era due to the lack of adequate medical knowledge, another reason for the frequent witch hunts against the senile may have been the inability of many of the latter to support themselves independently.

An English householder, as described by Thomas Ady, had a reputation for accusing of witchcraft those elderly beggars who had come to his door asking for assistance. The householder considered it his religious duty to give his aid to the poor, and would ask God’s forgiveness for denying it to an elderly woman, but would subsequently accuse the same woman of witchcraft. Perhaps, by the invention of such charges, the householder attempted to eliminate those elderly beggars whom he would otherwise have been compelled to support out of his Christian principles, likely to the detriment of his own economic well-being.

But even in such a time, more scientifically oriented individuals, such as the physician Johan Wier, had attempted to “fight with natural reason” the cruelties inflicted upon the aged. Wier refers to commonsense observations regarding the harmlessness of old individuals and the natural origins of the diseases which often clouded their reasoning.

Wier’s ideas were progressive for his time, and were used to argue for the humane treatment of the elderly. Nevertheless, the pervasive dominance of religious dogma over rational thought during his era left a mark even on Wier, who attributes witches’ false confessions to devilish influence, as opposed to the physical, this-worldly threats of torture they were faced with.

As the Enlightenment swept through the Western world during the early 18th century, the attitudinal conditions facilitating the persecution of witches were steadily moderated or eliminated. Religious orthodoxy gave way to greater toleration for a variety of faiths, and even strains of thought such as deism and atheism, whose advocates would not be accused of witchcraft.

The ideas of universal natural rights of individuals to life, liberty, and property made due process a legal priority and rendered it tremendously difficult for politicians to employ transparently artificial charges to wantonly expropriate the population or eliminate their competitors. The belief in the limitless potential of the rational faculties of all individuals, male or female, young or old, rendered misogyny and hatred of the elderly far less prevalent than previously. Along with the ideas that fostered it, witchcraft was relegated to the dustbin of history.

Europe and Deflation Paranoia – Article by Frank Hollenbeck

Europe and Deflation Paranoia – Article by Frank Hollenbeck

The New Renaissance Hat
Frank Hollenbeck
April 30, 2014
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There is a current incessant flow of articles warning us of the certain economic calamity if deflation is allowed to show its nose for even the briefest period of time. This ogre of deflation, we are told, must be defeated with the printing presses at all costs. Of course, the real objective of this fear mongering is to enable continued national-government theft through debasement. Every dollar printed is a government tax on cash balances.

There are two main sources of deflation. The first comes from a general increase in the amount of goods and services available. In this type of deflation, a reduction in costs, in a competitive environment, leads to lower prices. The high technology sector has thrived in this type of deflation for decades as technical progress (e.g., the effect of Moore’s Law) has powered innovations and computing power at ever-decreasing costs. The same was true for most industries during much of the nineteenth century, as the living standard increased considerably. Every man benefited from the increase in real wages resulting from lower prices.

The second source of deflation is from a reduction in the money supply that comes from an increase in the desire of the public or banking sectors to hold cash (i.e., hoarding).[1] An uncomplicated example will make this point clearer. Suppose we have 10 pencils and $10. Only at an equilibrium price of $1 will there be no excess output or excess money.

Suppose the production cost of a pencil is 80 cents. The rate of return is 25 percent. Now suppose people hoard $5 and stuff money in their mattress instead of saving it. The price of a pencil will be cut in half, falling from $1 to 50 cents, since we now have a money supply of $5 chasing 10 pencils. If input prices also fall to 40 cents per pencil then there is no problem since the rate of return is still 25 percent. In this example, a drop in output prices forced an adjustment in input prices.

The Keynesian fear is that input prices will not adjust fast enough to a drop in output prices so that the economy will fall into a deflation-depression spiral. The Keynesian-monetarist solution is to have the government print $5 to avoid this deflation.

Yet, this money creation is distortive and will cause a misallocation of resources since the new money will not be spent in the same areas or proportions as the money that is now being “hoarded” (as defined by Keynesians). Furthermore, even if the government could find the right areas or proportions, it would still lead to misallocations, since the hoarding reflects a desire to realign relative prices closer to what society really wants to be produced. The printing of money may actually increase the desire to hold cash, as we see today. Holding cash may be the preferred choice over consumption or investment (savings) when relative and absolute prices have been distorted by the printing press.

Of course, no one is really asking the critical questions. Why does holding more cash change the money supply, and why did the public and banks decide to increase their cash holdings in the first place?[2] Without fractional reserve banking, neither the public nor the banks could significantly change the money supply by holding more cash, nor could banks extend credit faster than slow-moving savings. The boom and ensuing malinvestments would be a thing of the past and, thus, so would the desire to hold more cash during the bust phase of the business cycle. If central banks are really concerned about this type of deflation, they should be addressing the cause — fractional reserve banking — and not the result. Telling a drunk that he can avoid the hangover by drinking even more whiskey is simply making the situation worse.[3] The real solution is to have him stop drinking.

According to the European Central Bank’s Mario Draghi,

The second drawback of low inflation … is that it makes the adjustment of imbalances much more difficult. It is one thing to have to adjust relative prices with an inflation rate which is around 2%, another thing is to adjust relative prices with an inflation rate which is around 0.5%. That means that the change in certain prices, in order to readjust, will have to become negative. And you know that prices and wages have a certain nominal rigidity which makes these adjustments more complex.

Draghi is confusing the first source of deflation with the second. The recent low inflation in the Euro zone can be attributed primarily to a strengthening of the Euro, and a drop in food and energy prices.

Economists at the Bundesbank must be quietly seething. They are obviously not blind to the ECB’s excuses to indirectly monetize the southern bloc’s debt. Draghi’s “whatever it takes” comment gave southern bloc countries extra time. Yet, little has been done to reign in the size of bloated public sectors. Debt-to-GDP ratios continue to rise and higher taxes in southern bloc countries have caused an even greater contraction of the private sector. Many banks in southern Europe are technically bankrupt. Non-performing loans in Italy have gone from about 5.8 percent in 2007 to over 15 percent today. And, the situation is getting worse.

Greece recently placed a five-year bond at under 5 percent which was eight times oversubscribed. This highlights the degree to which the financial sector in Europe is now dependent on the “Draghi put.” As elsewhere in the world, interest rates in Europe are totally distorted and no longer serve the critical function of allocating resources according to society’s time preference of consumption, or even reflect any real risk of default.

The ECB will likely impose negative rates shortly but will discover, as the Fed and others did before it, that you can bring a horse to water but cannot make him drink. QE will then be on the table, but unlike the Fed, the ECB is limited in the choice of assets it can purchase since direct purchase of Euro government bonds violates the German constitution. One day, Germany and the southern bloc countries, including France, will clash on what is the appropriate role of monetary policy.

Germany would be wise to plan, today, for a possible Euro exit.

Notes

[1] Keynesians view holding cash, and even holding savings in banks as “hoarding,” but properly understood, only the equivalent of stuffing money in a mattress is hoarding.

[2] Fractional-reserve lending is inflationary, thus contributing to inflationary booms. In turn, banks hold more cash when they fear a confidence crisis, which is also a result of the boom.

[3] Since inflationary fractional-reserve lending is a source of the problem, additional lending of the same sort is not the solution.

Frank Hollenbeck teaches finance and economics at the International University of Geneva. He has previously held positions as a Senior Economist at the State Department, Chief Economist at Caterpillar Overseas, and as an Associate Director of a Swiss private bank. 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.

Dispatch from Ukraine – Article by Anonymous Ukrainian Journalist

Dispatch from Ukraine – Article by Anonymous Ukrainian Journalist

The New Renaissance Hat
Anonymous Ukrainian Journalist
January 27, 2014
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This article was originally published by the Foundation for Economic Education (FEE).

Note from FEE President Lawrence W. Reed: Events in Ukraine in recent days have gripped the hearts of people around the world. We at FEE are appalled at the repressive measures being taken by the Ukrainian state against protesters, particularly young people who are active there in the movement for peace, liberty, and representative government. We sincerely hope that the brutality of statism, on vivid and tragic display at this very moment in Ukraine, will be crushed by the forces of freedom and with a minimum of bloodshed. Below, we share with our readers a moving account of what’s happening from a Ukrainian journalist who is in Kiev on the front lines of the current upheaval. We withhold his name for his protection.

—Lawrence W. Reed, FEE president.

Dear friends—especially foreign journalists and editors,

These days I receive from you lots of inquiries requesting descriptions of the current situation in Kiev and overall in Ukraine, express my opinion on what is happening, and formulate my vision of at least the nearest future. Since I am simply physically unable to respond separately to each of your publications with an extended analytical essay, I have decided to prepare this brief statement, which each of you can use in accordance with your needs. The most important things I must tell you are as follows.

During the less than four years of its rule, Mr. Yanukovych’s regime has brought the country and the society to the utter limit of tensions. Even worse, it has boxed itself into a no-exit situation where it must hold on to power forever—by any means necessary. Otherwise it would have to face criminal justice in its full severity. The scale of what has been stolen and usurped exceeds all imagination of what human avarice is capable.

The only answer this regime has been proposing in the face of peaceful protests, now in their third month, is violence, violence that escalates and is “hybrid” in its nature: special forces attacks at the Maidan (the central square of Kiev, the Ukrainian capital) are combined with individual harassment and persecution of opposition activists and ordinary participants in protest actions (surveillance, beatings, torching of cars and houses, storming of residences, searches, arrests, rubber-stamp court proceedings). The keyword here is intimidation. And since it is ineffective, and people are protesting on an increasingly massive scale, the powers that be make these repressive actions even harsher.

The “legal base” for them was created on January 16, when the Members of Parliament, fully dependent on the President, in a crude violation of all rules of procedure and voting, indeed of the Constitution itself, in the course of just a couple of minutes (!) with a simple show of hands voted in a whole series of legal changes which effectively introduced dictatorial rule and a state of emergency in the country without formally declaring them. For instance, by writing and disseminating this, I am subject to several new criminal code articles for “defamation,” “inflaming tensions,” etc.

Briefly put, if these “laws” are recognized, one should conclude: in Ukraine, everything that is not expressly permitted by the powers that be is forbidden. And the only thing permitted by those in power is to yield to them. Not agreeing to these “laws,” on January 19 the Ukrainian society rose up, yet again, to defend its future.

Today in television newsreels coming from Kiev you can see protesters in various kinds of helmets and masks on their faces, sometimes with wooden sticks in their hands. Do not believe that these are “extremists,” “provocateurs,” or “right-wing radicals.” My friends and I also now go out protesting dressed this way. In this sense my wife, my daughter, our friends, and I are also “extremists.” We have no other option: We have to protect our life and health, as well as the life and health of those near and dear to us. Special forces units shoot at us, their snipers kill our friends. The number of protesters killed just on one block in the city’s government quarter is, according to different reports, either 5 or 7. Additionally, dozens of people in Kiev are missing.

We cannot halt the protests, for this would mean that we agree to live in a country that has been turned into a lifelong prison. The younger generation of Ukrainians, which grew up and matured in the post-Soviet years, organically rejects all forms of dictatorship. If dictatorship wins, Europe must take into account the prospect of a North Korea at its eastern border and, according to various estimates, between 5 and 10 million refugees. I do not want to frighten you.

We now have a revolution of the young. Those in power wage their war first and foremost against them. When darkness falls on Kiev, unidentified groups of “people in civilian clothes” roam the city, hunting for the young people, especially those who wear the symbols of the Maidan or the European Union. They kidnap them, take them out into forests, where they are stripped and tortured in fiercely cold weather. For some strange reason the victims of such actions are overwhelmingly young artists—actors, painters, poets. One feels that some strange “death squadrons” have been released in the country with an assignment to wipe out all that is best in it.

One more characteristic detail: In Kiev hospitals the police force entraps the wounded protesters; they are kidnapped and (I repeat, we are talking about wounded persons) taken out for interrogation at undisclosed locations. It has become dangerous to turn to a hospital even for random passersby who were grazed by a shard of a police plastic grenade. The medics only gesture helplessly and release the patients to the so-called “law enforcement.”

To conclude: In Ukraine full-scale crimes against humanity are now being committed, and it is the present government that is responsible for them. If there are any extremists present in this situation, it is the country’s highest leadership that deserves to be labeled as such.

And now turning to your two questions which are traditionally the most difficult for me to answer: I don’t know what will happen next, just as I don’t know what you could now do for us. However, you can disseminate, to the extent your contacts and possibilities allow, this appeal. Also, empathize with us. Think about us. We shall overcome all the same, no matter how hard they rage. The Ukrainian people, without exaggeration, now defend the European values of a free and just society with their own blood. I very much hope that you will appreciate this.