On the weekend in which America should have had something to celebrate, a speech by former slave Frederick Douglass reminds us that the birth a nation dedicated to liberty was and still is something to celebrate for every being who aspires to be human ...
They were peace men; but they preferred revolution to peaceful submission to bondage. They were quiet men; but they did not shrink from agitating against oppression. They showed forbearance; but that they knew its limits. They believed in order; but not in the order of tyranny. With them, nothing was ‘settled’ that was not right. With them, justice, liberty and humanity were ‘final;’not slavery and oppression. You may well cherish the memory of such men. They were great in their day and generation. Their solid manhood stands out the more as we contrast it with these degenerate times... Fellow-citizens! there is no matter in respect to which, the people of the North have allowed themselves to be so ruinously imposed upon, as that of the pro-slavery character of the Constitution. In that instrument I hold there is neither warrant, license, nor sanction of the hateful thing; but, interpreted as it ought to be interpreted, the Constitution is a GLORIOUS LIBERTY DOCUMENT. Read its preamble, consider its purposes. Is slavery among them? Is it at the gateway? or is it in the temple? It is neither. While I do not intend to argue this question on the present occasion, let me ask, if it be not somewhat singular that, if the Constitution were intended to be, by its framers and adopters, a slave-holding instrument, why neither slavery, slaveholding, nor slave can anywhere be found in it... take the Constitution according to its plain reading, and I defy the presentation of a single pro-slavery clause in it. On the other hand it will be found to contain principles and purposes, entirely hostile to the existence of slavery... Allow me to say, in conclusion, notwithstanding the dark picture I have this day presented of the state of the nation, I do not despair of this country. There are forces in operation, which must inevitably work the downfall of slavery. “The arm of the Lord is not shortened,” and the doom of slavery is certain. I, therefore, leave off where I began, with hope.
Today's quote is dedicated to the letters I, R and D, and the colour Green ...
"You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth; and that wealth is less likely to be produced when people see that it is going to be confiscated."
"A striking and ironic feature of socialism -- both its advantage and ... its fatal flaw -- is its inherent anti-populism. Unlike democracy, which is forced to be responsible to the average voter, socialist governments can afford to ignore and even harm the interest of the majority, often justifying these actions under some grand but empty banner."
"When you destroy art you kill a part of yourself. That part is never replaced. If you continue, piece by piece dies until there is nothing left. You didn’t destroy art but only yourself. Even a requiem now will have no meaning to you. Hope is only for those who strive for better alternatives." ~ artist Michael Newberry .
French economist Frederic Bastiat must be rolling over in his grave because there are still people who think you can boost an economy by destroying wealth.
The latest ignoramus, as observed by Dan Mitchell, is one Felix Salmon who, in a piece for Axios, "reveals he still believes in this primitive form of Keynesian economics."
There’s one big non-political reason why luxury stores were targeted by looters [says Salmon]: Their wares can now be sold for top dollar, thanks to the rise of what is often known as the “circular economy.” …Instead of stealing goods they need to live,looters are increasingly stealing the goods they can most easily sell online. …Economically speaking, looting can have positive effects. Rebuilding and restocking stores increases demand for goods and labor, especially during a pandemic when millions of workers are otherwise unemployed. …The circular economy helps to reduce waste and can efficiently keep luxury goods in the hands of those who value them most highly.
As Mitchell responds, it would have been more correct (though thoroughly immoral) to say that the looting had a positive effect on the looters.
But it definitely doesn’t have a positive effect on merchants (who lose money in the short run and probably have higher insurance payments thereafter), on consumers (who are likely to pay more for products in the future), or on the overall economy (because of the unseen reductions in other types of economic activity). Let’s wrap up with a cartoon on the topic:
"Events in Minneapolis might have initially seemed like a historic lightning rod that could launch a deeper discussion about how to achieve social change, uniting us all in fighting discrimination. Instead, it is fast turning into a quagmire of censorious intolerance. If you want to initiate a broader debate about racism, is it really healthy to create an atmosphere in which it is not only statues that are being toppled but a range of cultural artefacts, TV series, celebrities, columnists and controversial broadcasters."
"To suppress free speech is a double wrong. It violates the rights of the hearer as well as those of the speaker. It is just as criminal to rob a man of his right to speak and hear as it would be to rob him of his money.”
"Robert Peel, the British prime minister who established the Metropolitan Police Service, which is considered the template for the modern civilian law enforcement authority, said, 'The police are the public and the public are the police.' He meant that they should be an integral part of the community to which they belong, and he would have been horrified at the division that has arisen between his progeny in America and the people they are meant to serve. [Americans] shouldn't stand for an out-of-control police, but we should [all] realise that it is merely the symptom of an out-of-control government." ~ Kiwiwit from his post 'The Real Problem with Police Violence in America' .
So it starts with tearing down statues of slave traders and it ends with a school in Sussex ditching its plan to name one of its houses after JK Rowling because she has dared to criticise the cult of transgenderism. What a deranged week this has been. Statues toppled or defaced by middle-class mobs haughtily taking offence on behalf of all black people. Classic comedy shows erased from streaming services. People cancelled for wrongthink on everything from white privilege to genderfluidity. Anyone who thinks this has anything to do with George Floyd needs to give their head a shake. This is the zeitgeist of intolerance intensifying. Enough. Institutions under pressure to censor need to start showing some backbone [says Spiked's Brendan O'Neill], and the rest of us need to offer solidarity to all victims of the woke witch-hunt. Freedom depends on it.
No backbone was shown in Dunedin, where the owner of the Captain Cook pub -- where many a Flying Nun band got their start -- announced that it will be changing its name from The Captain Cook -- one of many reactions worldwide to Black Lives Matter protests sparked by the death of George Floyd in the United States. That link is as tenuous as the reason for the change: "For some people," said the owner, "Captain Cook is as offensive as a Nazi flag."
It's the owner's perfect right to change the name. It's our's to wonder how a death in the United States ends up with one of the Enlightenment's greatest explorers linked with the Nazi flag. A man who in "ten years, in three voyages of discovery of high risk and prodigious burden, ... achieved what surely ranks as one of the greatest expansions of the known world (superbly chronicled in J.C. Beaglehole’s edition of Cook’s journals)."
The other marker which emerges from the journals is Cook’s humanity. For a man of initially-limited horizons and trammelled with great responsibility, Cook often showed keen understanding, a remarkably non-judgemental attitude and a willingness to see things from the other person’s point of view. It made him a shrewd and scientific observer, and gave him a claim to fineness of character.
"Fineness of character." I recommend you read the entire post at that link, to consider whether equating this fine man with a foul flag says more about today's protests (and protestors) than it does about Cook and his achievements.
You would think from reading continuing media reports here about reactions to James Cook however that he did little more in his long life but come to New Zealand to commit "hara or atrocities" -- two words used recently on Radio New Zealand to discuss this man's contribution to history.
The commemoration last year of Cook's first visit here threw up the "worst" of what Cook allegedly did here. In October last year, RNZ recounted how an "expression of regret" on the part of the Crown is to be given, as part of the 250-year commemorations of Cook's arrival to these shores, to "leaders of Gisborne iwi." This is accompanied on the RNZ website (our "public broadcaster") by "related stories" with a headline "He Was a Barbarian," and another recounting how graffiti on a James Cook statue in Gisborne is "an act of activism that prompts debate about New Zealand's history" inciting a "hard but necessary korero.".
If this is a "debate" over Cook's legacy then, if this sort of media coverage were any sort of guide, it began as a very one-sided one -- and it has continued that way.
Acknowledge as you must that the killing of any innocent is a tragedy. And indeed that is just how Cook saw these five deaths, as we will see. But all such incidents happen within a context that, if our "korero" is to be an honest one, must be part of every account.
That First Encounter
It may surprise readers to learn that Cook was down here in the Pacific not to rape and pillage but to carry out astronomical measurements and, while down here, to explore the botany and geography and to map the coastline of this country -- a place of whom the rest of the world knew little about the inhabitants other than that four of Abel Tasman's crew had been killed by them in 1642. This being the main reason for Tasman spending little more time here, scarpering as soon as the slaughter started.
And as fearful as Cook's crew must have been of their imminent first encounter, imagine how it must have appeared to those on land:
To picture how those undreamed-of strangers must have appeared to the Maori, we must imagine what our reactions would be if we suffered a Martian invasion. According to one Maori chief, Te Horeta Taniwha, who as a small boy was present when Cook came to Mercury Bay, the Maori at first thought the white men were goblins and their ship a god. Eighty years later, the old man recalled their astonishment when one of the goblins pointed a walking-stick at a shag and, amidst thunder and lightning, the bird fell down dead. "There was one supreme man in that ship. We knew that was the lord of the whole by his perfect gentlemanly and noble demeanour.' [1]
A startling and wholly unexpected encounter for the locals! So how did this noble and gentlemanly figure oversee the death of (what is said to be) nine men at Poverty Bay? Recall that this was Cook's first encounter with a people of whom little was known other than a slaughter. He had come prepared, inviting on the voyage a friendly Tahitian called Tupia to help with interpretation. Cook's Endeavour arrived in Poverty Bay after first sighting East Cape two days earlier, anchoring "in a deep bay where it was hoped to find wood, water and fresh provisions."
The natives were numerous -- "a strong raw-boned, well-made active people..." as Cook described them -- and their speech was near enough to Tahitian for Tupia to be able to talk with them. Far from being friendly, however, they were insolent and aggressive, and showed little wish to trade. This was their first contact with white men, and they had yet to learn the chastening power of firearms. There were minor skirmishes ashore in which two Maori were killed and several wounded. When a fishing canoe came near the ship's boats Cook ordered those in it to be brought aboard, forcibly if need be, so that Tupia could explain to them the visitor's desire for peace and friendship. Not surprisingly the natives resisted. A volley was fired and four were killed. Cook's conscience about the affair was uneasy, and his excuse that otherwise he and his companions would have been "knocked on the head" must have sounded thin even to himself. [Ships Botanist Joseph] Banks was shocked. He wrote that it was the most disagreeable day his life had yet seen, and added: "Black be the mark for it." In their brief time ashore he and [his assistant] Solander collected a meagre forty plants, and they were glad to get away from the place. So was Cook. He named it Poverty Bay, "because it afforded us no one thing we wanted," and the unhappy name has stuck. On its shores now stands the town of Gisborne. [2]
So now you have some wider context on which to judge this debate, and the beginning of some context to deduce whether commemorating Cook should be more celebration or commiseration.
An impression by naturalist Alexander Sporing of Endeavour's 1769
encounter with the defiant occupants of a Maori war canoe,
Could It Have Been Better?
Could things have happened differently? Could that first encounter have been beeter? Of course -- as both Cook and Banks agreed at the time. Indeed, they had hoped fervently it would be so -- and in many later landings on this voyage it was so, especially as Cook discovered (as many rugby-playing nations have since discovered too) that, despite their obvious love of fighting, "the main purpose of the Maori [haka] was to demonstrate their courage by insulting the white man rather than actually to attack them."[3]
And it could have been a whole lot worse -- as it had been for those local inhabitants who had encountered Cortez in Mexico, Pizarro in Peru, or the Belgians in the Congo - or for those Maori who almost at the same time, encountered the likes of French sea captain Jean-Francois Marie De Surville -- or for the crew of Tobias Furneaux, or Marion du Fresne and his crew.
First contacts between two entirely unknown cultures invite trouble. There is no reason to believe Cook wished to kill anyone, and every reason to believe he intended only peace and fervently regretted what happened.
Cook's Legacy
If this is a debate, then let us make a case for this man and his legacy. He is much, much more than the cartoon figure appearing on NZ websites in recent days. To paraphrase George Reisman, "Those who do not understand the place of Cook have been intellectually barbarized by corrupt education."
Cook left New Zealand on this first voyage having observed a people mired in war, slavery and human sacrifice, yet still "deeply impressed with what he had seen of New Zeland and its people." [4] With this voyage, and his mapping and reports -- and those of Banks and other scientists accompanying him on this voyage -- he left behind a people now connected, through the small amount of trade conducted and the great amounts to come, to the international division of labour. And with it Western Civilisation.
Whatever the accomplishments of Maori in their eight centuries here, what Cook and other explorers brought with them was this link to this wider accomplishment grafted out over many millennia. Over those millennia, savagery was steadily (if irregularly) diminished around the globe. As it has here in New Zealand.
This is not trivial. Without it, human progress on the scale we all now take for granted would not be possible.
Those who deny [this] demonstrate that they have not made the knowledge and values that constitute Western Civilization their own. They are self-confessed and self-made aliens living in the midst of Western Civilization yet preferring to all of the knowledge and values that constitute it, the meagre, primitive state of knowledge and values constituting the culture of “indigenous peoples,” who are at a level comparable to that of people who lived many thousands of years ago, with no knowledge of reading or writing, and hardly any knowledge of science, mathematics, philosophy, music, or art. Whoever, in the words of Ludwig von Mises, prefers life to death, health to disease, and wealth to poverty, is logically obliged to prefer Western Civilization and its offshoots of individual freedom and capitalism to all other civilisations and cultures that have ever existed.
'The Death of Cook,' 1785, by Francesco Bartolozzi, William Byrne, John Webber [public domain]
Correcting the Debate
Cook himself was killed at Kealakakua Bay, Hawaii, murdered by another misunderstanding, "sacrificed by the priests of Hawaii. They had made a living god of him and had then realised their error, and the only way to prove him mortal in the sight of the people was to kill him. Many great men have died for the same reason." [5] The man known as to Britons as "the ablest and most renowned navigator this or any other country has produced" was dead. It was said that on hearing the news "all Britain mourned,"
and not only Britain but her friends and her enemies and the whole western world. No-one could be sure how the people of his favourite island, Tahiti, would have reacted, for in their eyes he was a demi-god and presumably immportal ... Cook was essentially a man of peace. He never commanded a ship of the line, and he never fought in a major naval engagement; yet apart from Nelson he remains today the most famous of all Britain's captains ... He was a natural leader of men, a peerless seaman and navigator, a superb cartographer, an acute and accurate observer, and the foremost explorer os his own age. He died knowing that his acheivements in three historic voyages made between 1768 and 1779 could never be surpassed or even again be equalled, for he had left comparatively little for others to do.
"It is almost impossible," say the authors of The Voyages of Captain Cook, "to overstate Cook's contribution to geographical knowledge":
On the negative side, he silenced forever those theorists ... who insisted that there must be a great southern continent to counterbalance the land mass of the northern hemisphere, and he disproveed the theory that there existed a practical north-west passage around the top of America... On the positive side, he discovered and charted much of the Pacific that we know today, from the west coast of Canada and the Hawaiian islands to New Caledonia; he established, by sailing around it, that New Zealand was no part of a mythical continent but two large, narrowly separated islands; he disproved the Dutch belief that "New Holland" was entirely barren by traversing the whole length of its fertile eastern coast, thus paving the way for British settlement there eighteen years later; and he confirmed that a strait separated New Guinea from what is now Australia. He did much more however. He pioneered and perfected the use of the chronometer to determine longitude, and so took a lot of the guesswork out of navigation. He showed by practical example how scurvy, the greatest single scourge of seafarers, could be controlle and conquered. He wrote simply and informatively about the places he visited and with humanity and insight about the people he met and how they lived. His accounts of his voyages, illustrated by the various artists who accompanied him, became best-selling books which not only broadened the knowledge and mental horizons of the many who read them but lent such apparent weight to the theories of Rousseau and other philosophers of teh back-tonature school that it took several decades of earnest missionary propaganda to tarnish the poppular image of the 'noble savage.' And as father of modern marine surveying he esatablished a tradition and fouded a line that extended through Vancouver, Bligh, Broughton, Flinders, Owen, Fitzroy and others far into the nineteenth century. It is remarkable enough that any one man could have achieved so much, but in Cook's case it is even more remarkable ... for he came into the world with no advantage at all save his own intelligence and will.[6]
He was a great man, an Enlightenment-era hero, and a world-historical figure. That an apology is now possible for what he himself abundantly regretted in that first encounter is a measure of how the world and New Zealand's place in it has changed since then, not least because of him and the values he both represented and helped bring here.
And since we can all now share a similar sense of humour, here's Billy T. James' own reconstructions of those historic "first contacts" ...
[1] Keith Sinclair, A History of New Zealand (1991), p. 32-3 [2] Rex & Thea Rienits, The Voyages of Captain Cook (1968), p.43 [3] Ibid, p. 45 [4] Ibid, p. 50-51 [5] Ibid, p. 152 [6] Ibid, p. 12-14
[NB: This post is based on one made last year at the time of commemorations for Cook's first visit.]meaMeaw .
"Permanent mass unemployment destroys the moral foundations of the social order. The young people who, having finished their training for work, are forced to remain idle, are the ferment out of which the most radical political movements are formed. In their ranks the soldiers of the coming revolutions are recruited."
"Every record has been destroyed or falsified, every book has been rewritten, every picture has been repainted, every statue and street and building has been renamed, every date has been altered. And that process is continuing day by day and minute by minute. History has stopped. Nothing exists except an endless present in which the Party is always right." ~ Winston Smith in George Orwell's 1984.
"Racism is the lowest, most crudely primitive form of collectivism. It is the notion of ascribing moral, social or political significance to a man’s genetic lineage — the notion that a man’s intellectual and characterological traits are produced and transmitted by his internal body chemistry. Which means, in practice, that a man is to be judged, not by his own character and actions, but by the characters and actions of a collective of ancestors. "Racism claims that the content of a man’s mind (not his cognitive apparatus, but its content) is inherited; that a man’s convictions, values and character are determined before he is born, by physical factors beyond his control. This is the caveman’s version of the doctrine of innate ideas — or of inherited knowledge — which has been thoroughly refuted by philosophy and science. Racism is a doctrine of, by and for brutes. It is a barnyard or stock-farm version of collectivism, appropriate to a mentality that differentiates between various breeds of animals, but not between animals and men." ~ Ayn Rand, from her essay 'Racism'
You've heard the logical fallacy so many times you've stopped acknowledging it. Yet all the exhortations to "go out and spend" to "save" the economy are mercilessly satirised in this piece of poetic brilliance by Patrick Barrington that appeared in 'Punch' two years before Keynes's encomium to irresponsibility first appeared:
I Want To Be A Consumer
“And what do you mean to be?” The kind old Bishop said As he took the boy on his ample knee And patted his curly head. “We should all of us choose a calling To help Society’s plan; Then what do you mean to be, my boy, When you grow to be a man?”
“I want to be a Consumer,” The bright-haired lad replied As he gazed up into the Bishop’s face In innocence open-eyed. “I’ve never had aims of a selfish sort, For that, as I know, is wrong. I want to be a Consumer, Sir, And help the world along.
“I want to be a Consumer And work both night and day, For that is the thing that’s needed most, I’ve heard Economists say, I won’t just be a Producer, Like Bobby and James and John; I want to be a Consumer, Sir, And help the nation on.”
“I want to be a Consumer And live in a useful way; For that is the thing that’s needed most, I’ve heard Economists say. There are too many people working And too many things are made. I want to be a Consumer, Sir, And help to further Trade.
“But what do you want to be?” The Bishop said again, “For we all of us have to work,” said he, “As must, I think, be plain. Are you thinking of studying medicine Or taking a Bar exam?” “Why, no!” the bright-haired lad replied As he helped himself to jam.
“I want to be a Consumer And do my duty well; For that is the thing that’s needed most, I’ve heard Economists tell. I’ve made up my mind,” the lad was heard, As he lit a cigar, to say; “I want to be a Consumer, Sir, And I want to begin today.”
"Racism is not dead, but it is on life support -- kept alive by politicians, race hustlers and people who get a sense of superiority by denouncing others as 'racists'." ~ Thomas Sowell, discussed in the 'Q+A with Thomas Sowell'
When you multiply laws excessively, says philosopher Greg Salmieri, when you insist that police can stop and arrest people for the most trivial manufactured offences, you multiply by the thousand the chances for fatal police encounters. "What government does is wield force; and force should only be wielded judiciously and when it's appropriate. And it's deadly dangerous to have it in areas [of life] where it doesn't belong."
Full video here:
And the problem of containing government force is compounded when due process is so routinely ignored. Everyone is innocent until proven guilty, Iona Italia reminds us,
and even if manifestly guilty the job of a policeman is to secure the perp, not to indulge his sadism. Only enough violence should ever be used to protect people if they are directly threatened & to make a safe arrest. Not an iota more. A policeman is not a judge, nor an executioner. It's not up to him to decide who deserves what treatment. It's vital that the police treat everyone in accordance ONLY with what the situation demands.
There is no conceivable way that there will be reform of policing in the US without bipartisan leadership to confront everything from qualified immunity to militarisation to legacy racism to criminilisation of micro-economic regulation [i.e., all the petty intrusions Salmieri is talking about]. And that isn’t remotely Trump or Biden.
"New Zealand has so far remained outside the American policing asylum. From 1941 to 2015, police in New Zealand shot and killed 29 people. Adjusting for population size, police here take about 37 years to kill as many people as American police kill every year. ... Said [former] Police Commissioner Mike Bush: "... People tend to join the New Zealand police because they want to help people, not shoot them'." ~ Eric Crampton, from his report 'The Outside of the Asylum' .
"It's stunning how tribal Americans have become. The Left gets its marching orders from MSM, the Right from Fox and White House. Then they go out and -- repeat, repeat, repeat. No argument, no thinking, just talking points..." ~ Yaron Brook .
"The nation’s draconian response to the coronavirus was questionable, given it is an island with a massive moat and a small population spread over an area the size of Italy. Despite those obvious advantages, the stringency of its lockdown was higher than practically any other country... Deaths per million were the same as Australia’s — just four. "In any case, it wasn't outsized compassion that drove the lockdown sledgehammer but the brutal reality of an underfunded health system. With about 140 intensive care beds and few ventilators ... it was woefully underprepared." ~ Adam Creighton, from his oped 'Flightless Economy to Land With a Thud'
"Experts are often called in, not to provide factual information or dispassionate analysis for the purpose of decision-making by responsible officials, but to give political cover for decisions already made and based on other considerations entirely."
~ Thomas Sowell, from his book Intellectuals and Society .
"The penny has finally dropped that there is an effectively infinite number of ways to rearrange the atoms and bits in the world into useful combinations, and that returns can increase forever. At the same time, people have spotted that the societies that do the most innovating are the ones with the most freedom for people to exchange ideas... "In a year marred by economic collapse and the worst pandemic in a century, it is more important than ever that we remember this lesson. Top-down, state organisations from the Chinese Communist Party to the World Health Organization to the Food and Drug Administration to Public Health England have repeatedly misled the public and strangled the experimentation and technological innovation needed to react to the COVID-19 outbreak, or to address the economic consequences of the pandemic. "From testing, to cures, to developing a vaccine, to creative and practical methods of physical distancing, the solution to the current crises is more innovation, not less. "That means more freedom, not less." ~ Matt Ridley, from his post 'The solution to the current crises' ,
The world has just experienced a hint of what life would be like without the market, notes David Smither in this guest post. Let's never take it for granted again.
Our Living Standards Are Not a "Given." They Are a Gift We Owe to Commerce and Production
by David Smither
It’s an odd fact of the human condition that we take even extraordinary things for granted. As soon as a good thing becomes commonplace, we assume that its presence is just the ordinary state of affairs, and we forget to be grateful for it. On the other hand, the loss of a good thing often causes us to appreciate it anew. This may never be more true than when your air conditioner goes out right before summer hits in Texas.
Recently, my central AC unit stopped blowing cold air. Being springtime in Houston, this was a big deal that was going to get bigger very rapidly as summer began to swelter. I did some preliminary tests, and determined that the compressor was dead. I could have replaced the compressor and extended the life of the rest of the unit, but since the whole system was pushing twenty years old, I decided it would be a better investment to chuck it all out and start from scratch.
As I write this, a crew of HVAC technicians is gutting my system and one of their colleagues is en route with a brand new unit. They are doing great work, and I’m deeply grateful that the market provides these services, and that I don’t have to be an expert in air conditioning to fix my problem. Given all the variables, I value their expertise more than my money, and am happy to pay these competent men to do the work for me.
This is what the division of labor in the economy is all about. Some people specialise in one thing so that others don’t have to. They offer their expertise to the market—which is properly understood not as an ethereal abstraction but simply as the aggregate of other human beings who consume goods and services—and ask a fair price in compensation.
Other people specialise in other things, and so on and so forth. No one forces anyone to do anything, but the net result is that society is enriched with a plethora of specialised knowledge. This knowledge is maintained and constantly improved by the competent men and women who provide their specialised services to consumers who, like me, value the providers' services more than their money. This is as near a miracle as we may reasonably hope for in economic life.
Under such circumstances, it is literally true to say that commerce is always a win-win for the parties involved. Suppliers value customers’ money more than their own inventory and time, and customers value suppliers’ goods and services more than their own money. This misalignment of subjective valuation is what motivates trade to happen in the first place. The net result of this is new value creation in the world.
If this were not the case, transactions simply wouldn’t occur. Why would we trade anything for anything else unless we valued the latter more than the former? This is perhaps most clear in barter trades wherein two goods of equal monetary value are exchanged. In such cases, the traders clearly value the other good more than their own, otherwise they would just keep their original thing and forego trading.
In monetary commerce, money is exchanged for goods and services. The physical world doesn’t change, it only gets rearranged. And yet, by the miracle of commerce, the parties to the transaction feel enriched, better off after the trade than they were before. This is as near to magic as anything I know of. (Air conditioning in the Texas summertime being a near second.)
“Oh c’mon,” you say. “Magic? Really?” Yes, really. Think about it. Before you engage in trading, whether in business or in personal life, you are in possession of some goods. If you are selling, you may own widgets you are hoping to sell, or perhaps you possess expertise and the tools required to provide some service to eager recipients of your skills. You own such goods. If you are buying, you own your money.
Enter human desire, that infinite well of creative production that stimulates us to make the world a better place. Sellers desire customers’ money more than the stuff they are selling. Buyers desire the sellers’ stuff more than their money. These desires are subjective, personal, even intimate. Desire is not an objective thing in the physical world; it is a psychological state that motivates human action which in turn transforms the physical world.
This is truly astonishing. Here we have an immaterial reality—human desire—as the principle of action that transforms the material world. Even more amazing is that the end result of commercial transactions is a net increase of the subjective valuation of the world. Every trade makes the world more valuable.
This is an inescapable conclusion of logic. If trading partners value each other’s goods more than their own, then the subjective “market cap” of each trading partner is raised by every commercial transaction. The only reason why we aren’t constantly bowled over with awe about this is that we are so spoiled by the generosity of the market that we take it all for granted.
The ordinary marketplace is really an extraordinary thing, constituted by countless individual transactions motivated by countless personal goals. It is not a “given”, it is a gift, and we ought to reflect and cultivate our sense of gratitude for it.
As it happens, the world has just experienced a tiny hint of life without the market, in the form of the widespread economic shutdown occasioned by the SARS-CoV-2 pandemic. Whatever other lessons we learn from the whole ordeal, we should all agree that a dramatic decrease in our economic lives is a terrible thing to be avoided by all means.
When the dust finally settles, we will (or we ought to) be far more grateful for toilet paper than we ever have before. But this is merely one humorous example of a good we all take for granted. Central air and heating is another. These and a million other goods and services support and enrich our lives every day. These things need not exist—they spring into being through the network of individual transactions that we collectively refer to as “the market”.
So the next time you engage in trade, whether in business or in personal life, reflect a moment on the miracle of commerce and say an emphatic “Thank you” to your trading partner for their contribution to your standard of living. Even more powerfully, next time you are doing your job and have an opportunity to serve a client or colleague, recognize that you are benefitting their standard of living and be thankful for the opportunity to add value to someone else’s life.
David Smither is a sourcing & procurement leader in the energy sector. A lifelong student and lover of liberty, he writes to promote the culture, economics, and politics of freedom. He studied philosophy at the University of St. Thomas in Houston. He works in Houston for a global manufacturing business, and resides there with his wife and children. To stay up to date with David’s work visit www.DavidASmither.com. This post first appeared at the Foundation for Economic Education.
"Of course, people can be compelled to do a great deal that is against their interest by threatening them with guns and grenades. But no great society will ever be built with such coercion. It is far better and more lasting to persuade people to your point of view. And if you cannot do so, then what basis do you have for believing that your point of view is worthwhile?"
As the man once said, “The best way to destroy the capitalist system is to debauch the currency.” That man was John Maynard Keynes, whose playbook -- either intentionally or not -- every government everywhere is using to rescue everyone (they think) from the economic calamity of the virus. Flooding the world with newly-created money to stabilise what is un-stabilisable. Even National's new leader, What's-His-Name, endorses the approach.
Central Banks Are Destroying What Was Left of Free Markets
by Alasdair Macleod
President Reagan memorably said that the nine words you don’t want to hear are “I’m from the government, and I’m here to help.” Governments in all the major jurisdictions are now making good on that unwanted promise and are taking responsibility for everything from our shoulders.
Those receiving subsidies and loan guarantees are no doubt grateful, though they probably see it as the government’s duty, and their right. But someone has to pay for it. In the past, the redistribution of wealth through taxes meant that the haves were taxed to give financial support to the have-nots, at least that was the story. Today, through monetary debasement nearly everyone benefits from monetary redistribution.
This is not a costless exercise. Governments are no longer robbing Peter to pay Paul. They are robbing Peter to pay Peter as well. You would think this is widely understood, but the Peters are so distracted by the apparent benefits they might or might not get that they don’t see the cost. They fail to appreciate that "printing" money is not just the marginal source of financing for excess government spending, but that it has now become mainstream.
There is almost a total absence in the established media of any commentary on the consequences of monetary inflation, and in a cry for more, to stave off a "deflationary" collapse, we even have so-called financial experts warning us of the need for central banks like the Reserve Bank and the US Federal Reserve (the Fed) to introduce negative interest rates.
Yes, there are deflationary forces, because banks wish to reduce their loan exposure at a time of increasing risk. But we can be sure that central banks and their political masters will do everything they can to counter the trend of contracting bank credit by increasing base money. There can only be one outcome: the debasement and eventual destruction of fiat currencies.
Monetary Destruction
There is an aspect of the destruction brought about by monetary policy which is almost never considered by policymakers, and that is how it distorts the allocation of capital and leads to its misallocation. In free markets, capital is scarce; if the consumer is to be properly served and the entrepreneur is to maximise his profits, it must be used to greatest effect .
Capital comes in several forms and encompasses every aspect of production: principally an establishment, machinery, labour, semi-manufactured goods and commodities to be processed, and money. An establishment, such as a factory or offices, and the availability of labour are relatively fixed in their capacity. Depending on their deployment and capacity they produce a limited amount of goods. It is just one form of capital, money and credit, which central banks and the banking system now provide, and which in its unbacked form is infinitely flexible. Consequently, attempts to stimulate production by monetary means still run into the capacity constraints of the other forms of capital.
Monetary policy has been increasingly used to manipulate capital allocation since the early days of the Great Depression. The effect has varied, but it has generally come up against the constraints of the other forms of capital. Where there is excess labour, it takes time to retrain it with the specialised skills required, a process hampered by trade unions ostensibly protecting their members, but in reality resisting the reallocation of labour resources. Government control over planning and increasingly stifling regulations, again putting a brake on change, mean that changes and additions to the use of establishments have lengthened the time before entrepreneurial investment is rewarded with profits. Government intervention has also discouraged the withdrawal of monetary capital from unprofitable deployment, or malinvestments, lengthening recessions needlessly.
When the advanced nations had strong industrial cores, the periodic expansions of credit and their subsequent sudden contractions led to observable booms and busts in the classical sense, since production of labour-intensive consumer goods dominated production overall.
There have been two further developments. The first was the abandonment of the Bretton Woods agreement in 1971, which led to a substantial rise in prices for commodities. The broad-based UN index of commodities rose from 33 to 157 during the decade of the 1970s, a rise of 376 percent.1 This input category of production capital compared unfavourably with US consumer price increases of 112 percent over the decade, the mismatch between these and other categories of capital allocation making economic calculation a fruitless exercise. The second development was the liberation of financial controls in the mid-eighties, London’s Big Bang and the repeal of America’s Glass-Steagall Act of 1933, allowing commercial banks to fully embrace and exploit investment banking activities.
The banking cartel increasingly directed its ability to create credit toward purely financial activities mainly for their own books, thereby financing financial speculation while de-emphasising bank credit expansion for production purposes for all but the larger corporations. Partly in response, the nineties saw businesses move production to low-cost centres in Southeast Asia, where all forms of production capital, with the exception of monetary capital, were significantly cheaper and more flexible.
There then commenced a quarter-century of expansion of international trade replacing much of the domestic production of goods in the US, the UK, and Europe. It was these events that denuded America of its manufacturing, not unfair competition as President Trump has alleged, and Germany’s retention of manufactures proves this. But the effect has been to radically alter how we should interpret the effects of monetary expansion on the US economy and others, compared with Hayekian triangles and the like.
It's the Business Cycle, Jim, But Not As We've Known It
Business cycle research had assumed a capitalistic structure of savers saving and thereby making monetary capital available to entrepreneurs. Changes in the propensity to save sent contrary signals to businesses about the propensity to consume, which caused them to alter their production plans. Based on the ratio between consumer spending and savings, this analytic model has been corrupted by the state and its licensed banks by replacing savers with former savers now no longer saving, and even borrowing to consume.
Today, the inflationary origins of investment funds for business development are hidden through financial intermediation by venture capital funds, quasi-government funds, and others. Being mandatory, pension funds continue to invest savings, but their beneficiaries have abandoned voluntary saving and run up debts, so even pension funds are not entirely free of monetary inflation. Insurance funds alone appear to be comprised of genuine savings within an inflationary system.
Other than pension funds and insurance companies, Keynes’s wish for the euthanasia of the saver has been achieved. He went on to suggest there would be a time
“when we might aim in practice…at an increase in the volume of capital until it ceases to be scarce, so that the functionless investor will no longer receive a bonus.”2
Now that everywhere bank deposits pay no interest, his wish has been granted. But Keynes did not foresee the unintended consequences of his inflationist policies which are now being visited upon us. Among other errors, he failed to adequately account for the limitation of non-monetary forms of capital, which leads to bottlenecks and rising prices as monetary expansion proceeds.
The unintended consequences of neo-Keynesian policy failures are shortly to be exposed. The checks and balances on the formation and deployment of monetary capital in the free market system have been completely destroyed and replaced by inflation. So, where do you take us from here, Mr. Powell, Mr. Bailey, Ms. Lagarde, Mr. Kuroda?
Taking Stock
We can now say that America, the nation responsible for the world’s reserve currency, has encouraged policies which have turned its economy from being a producer of goods with supporting services as the source of its citizens’ wealth, into little more than a financial casino. The virtues of saving and thrift have been replaced by profligate spending funded by debt. Unprofitable businesses are being supported until the hoped-for return of easier times, which are now gone.
Cash and bank deposits (checking accounts and savings deposits) are created almost entirely by inflation and currently total $15.2 trillion in the US, while total commercial bank capital is a little under $2 trillion. This tells us crudely that the $13 trillion sitting in customer accounts can be attributed to bank credit inflation. Increasing proportions of those customers are financial corporations and foreign entities, and not consumers maintaining cash and savings balances.
On the other side of bank balance sheets is consumer debt, mostly off balance sheet, but ultimately funded on balance sheet. Excluding mortgages, the total U.S. consumer debt in mid-2019, comprising credit card, auto, and student debt, was $3.86 trillion -- amounting to an average debt of $27,571 per household, confirming the extent to which consumer debt has replaced savings.3
At $20.5 trillion, bank balance sheets are far larger than just the sum of cash and bank deposits, giving them a leverage of over ten times their equity. Bankers will be very nervous of the current economic situation, aware that loan and other losses of only 10 percent wipe out their capital. Meanwhile, their corporate customers are either shut down, which means that most of their expenses continue while they have no income, or they are suffering payment disruptions in their supply chains. In short, bank loan books are staring at disaster. Effectively, the whole banking system is underwater at the same time that the Fed is extolling them to join with it in rescuing the economy by expanding their balance sheets even more.
The sums involved in supply chains are considerably larger than the US’s GDP. Onshore, it is a substantial part of the nation’s gross output, which captures supply chain payments at roughly $38 trillion. Overseas, there is a further mammoth figure feeding into the dollar supply chain, taking the total for America to perhaps $50 trillion. The Fed is backstopping the foreign element through currency swaps and the domestic element mainly through the commercial banking system. And it is indirectly funding government attempts to support consumers who are in the hole for that $27,571 on average per household.
In short, the Fed is committed to rescuing all business from the greatest economic collapse since the Great Depression and, probably greater than that, to funding the US government’s rocketing budget deficits and funding the maintenance of domestic consumption directly or indirectly through the US Treasury, while pumping financial markets to achieve these objectives and preserve the illusion of national wealth.
Clearly, we stand on the threshold of an unprecedented monetary expansion. Part of it will be, John Law–style, to ensure that inflated prices for US Treasuries are maintained. At current interest rates, debt servicing was already costing the US government 40 percent of what was expected to be this year’s government deficit. Even without bond yields rising, that bill will now rise beyond control. Assistance is also being provided to the corporate debt market. Blackrock has been deputed to channel the Fed’s money-printed investment through ETFs (exchange-traded funds) specializing in this market. So not only is the Fed underwriting the rapidly expanding US Treasury market, but it is underwriting commercial dollar debt as well.
In late 1929, a rally in the stock market was prolonged by a similar stimulus, with banks committed to buying stocks and the Fed injecting $100 million in liquidity into markets by buying government securities. Interest rates were cut. And when these attempts at maintaining asset prices failed, the Dow declined, losing 89 percent of its value from September 1929.
Today, similar attempts to rescue economies and financial markets by monetary expansion are common to all major central banks, with the possible exception of the European Central Bank (ECB), which faces the unexpected obstacle of a challenge by the German Federal Constitutional Court claiming primacy in these matters. There is therefore an added risk that the global inflation scheme will unravel in Europe, which would rapidly lead to funding and banking crises for the spendthrift member states. Doubtless, any financial contagion will require yet more money printing by the other major central banks to ensure that there are no bank failures in their domains.
Whither the Exit?
So far, few commentators have grasped the implications of what amounts to the total nationalisation of economies by monetary means. They have only witnessed the start of it, with the Fed’s balance sheet reflecting the earliest stages of the new inflation which has seen its balance sheet increase by 61 percent so far this year. Not only will the Fed battle to fund everything, but it will also have to compensate for contracting bank credit, which we know stands at about $18 trillion.
The Fed must be assuming that the banks will cooperate and pass on the required liquidity to save the economy. Besides the monetary and operational hurdles such a policy faces, it cannot expect the banks to want responsibility for the management of businesses that without this funding would not exist. The Fed, or some other government agency, then has to decide on one of three broad options: further support, withdrawing support, or taking responsibility for business activities. This last option involves full nationalisation.
We must not be seduced into thinking that this is an outcome that can work. The nationalisation of failing banks and their eventual privatisation is not a good precedent for wider nationalisation, because a bank does not require the entrepreneurial flair to estimate future consumer demand and to undertake the economic calculations to provide for it. The state taking over business activities fails for this reason, as demonstrated by the collapse of totalitarian states such as the USSR and the China of Mao Zedong.
That leaves a stark choice between indefinite monetary support or pulling the rug from under failing businesses. There are no prizes for guessing that pulling rugs will be strongly resisted. Therefore, government support for failing businesses is set to continue indefinitely.
At some stage, the dawning realisation that central banks and their governments are steering into this economic cul-de-sac will undermine government bond yields, despite attempts by central banks to stop it, even if the deteriorating outlook for fiat currencies’ purchasing power does not destroy government finances first.
Earlier in the descent into the socialisation of money, nations had opportunities to change course. Unfortunately, they had neither the knowledge nor the guts to divine and implement a return to free markets and sound money. Those opportunities no longer exist, and there can be only one outcome: the total destruction of fiat currencies, accompanied by all the hardships that go with it.
"Beijing's approach to Hong Kong shows better than any other aspect of policy how the Chinese leadership has shifted away from economic pragmatism and toward political & ideological control. "The crisis in HK is entirely a creation of the Xi regime's obsession with control over every aspect of Chinese society. If HK had been left alone, it would be a quiet, prosperous city aiding Chinese development. But Xi couldn't tolerate a HK free of his surveillance state. "So Xi will sacrifice HK as a global financial center & risk international condemnation just to get his hands on the place. So instead of an ally in China's econ progress, Xi will create a HK stripped of talent & foreign finance. Very short-sighted. "You see this same insistence on control in other parts of Xi's econ policy: the preference of SOEs & state targeting, the dearth of market opening, etc. All will cost China growth. But the gutting of HK is easily the saddest consequence." ~ Michael Schuman on the national security draft bill Beijing is imposing on Hong Kong
"The greatest problem in politics is what we call the Crisis Crisis—the never-ending series of crises, real or imagined, that are hyped by the media and lead to cures too often worse than the disease. It’s a perpetual problem because it’s so deeply rooted in human psychology, as Robert Higgs explained in a 2005 essay, 'The Political Economy of Fear.' “'To tell people not to be afraid is to give them advice that they cannot take,' Higgs wrote. 'Our evolved physiological makeup disposes us to fear all sorts of actual and potential threats, even those that exist only in our imagination. The people who have the effrontery to rule us, who call themselves our government, understand this basic fact of human nature. They exploit it, and they cultivate it'.”
~ John Tierney on 'The Politics of Fear' .
“The need to bring down to our own wretched level, to deface, to deride and debunk any splendour that is towering above us, is probably the saddest urge of human nature.” ~ Simon Leys, from his collection of essays The Hall of Uselessness .
"Capitalism is not the system of the past; it is the system of the future—if mankind is to have a future. Those who wish to fight for it, must discard the title of 'conservatives.' 'Conservatism' has always been a misleading name ... Today, there is nothing left to 'conserve': the established political philosophy, the intellectual orthodoxy, and the status quo are collectivism. Those who reject all the basic premises of collectivism are radicals in the proper sense of the word: 'radical' means 'fundamental.' Today, the fighters for capitalism have to be, not bankrupt 'conservatives,' but new radicals, new intellectuals and, above all, new, dedicated moralists."
