Africa's New Free-Trade Agreement Could Mark the Dawn of a New Era

After the ravages of COVID-19, government-imposed lockdowns, and a tariff-touting US president, many countries will be tempted to turn inward, to limit their interactions with neighbours and people – but nothing could be worse. As Chris Hattingh explains in this guest post, the birth of the African Continental Free Trade Area, which could become the world’s biggest fully-realised free-trade zone by area, offers potent inspiration and a reminder that for any noteworthy economic recovery (never mind meaningful growth) to occur, the world needs more trade, not less...

Pic: Pixabay

Africa's New Free-Trade Agreement Could Mark the Dawn of a New Era

Guest post by Chris Hattingh

The African Continental Free Trade Area (AfCFTA) came into force on 1 January, 2021. Once it becomes fully implemented and operational by 2030, the AfCFTA could be the world’s biggest fully-realised free-trade zone by area. The bloc has a potential market of 1.3 billion people and a combined gross domestic product of $2.5 trillion. This moment should be celebrated as the AfCFTA could portend a new era of African openness, co-operation, trade, progress and innovation. The momentum of this new trade area thereof should be used to push African governments even further in the direction of free trade.

Whenever a nation restricts economic freedoms and civil liberties, humanity suffers. The ease with which people can trade with both their immediate neighbours, and people from all over the globe (from the simplest good and service, to the most complicated),  is a good indicator of a given government’s view of economic freedom. When countries have more barriers to trade, including arbitrary regulations, widespread corruption, and myriad tariffs, we find a generally lower quality of life.

Over time, the AfCFTA will aim to eliminate import tariffs on 97 percent of the goods traded on the continent itself, while also reducing non-tariff barriers. Tariffs serve to discourage not just the physical movement of goods across borders, but also act as a psychological barrier to the exchange of ideas. They also prevent the flow of crucial goods and services in the case of an emergency. In 2020 alone, tariffs and other levies made the movement of COVID-19-fighting equipment and medicines far slower and more expensive than it otherwise would have been. To grow, supply chains (of all types) require an environment of robust property rights, underpinned by the rule of law – the AfCFTA can encourage such an environment across the continent.

According to the African Export-Import Bank, the AfCFTA could boost intra-African trade to 22 percent of total trade, up from 14.5 percent in 2019. If African countries are to step up the maturing of their industries and wider economies, they need more goods to flow – and the added expertise and insights of various businesspeople and manufacturers will also increase once it is easier for them to move between different countries.

According to Alexander C. R. Hammond, “when African states trade with one another, the goods traded are almost three times more likely to be higher-valued manufactured products, when compared to the goods that leave the continent.” At the time of writing, all but one of the 55 African Union nations have signed to join the area, and more than half have ratified the accord. Through implementing the AfCFTA swiftly and effectively, the continent could set itself apart as a prime destination for investment and innovation.

It can also have the added benefit of dissuading all African governments from adopting yet more destructive, growth-inhibiting policies.

In his book Open: The Story of Human Progress, Johan Norberg writes, 

My argument is that under open institutions people will solve more problems than they create, no matter their personality traits, and it will increase the chance that the paths of people with different traits cross, and that their thoughts and work can cross-fertilise.

With its immense human potential, no longer should Africa be held back by unnecessary, antiquated barriers.

After the ravages of COVID-19 and government-imposed lockdowns (the number of people unemployed in South Africa, for example, is now more than 11 million), many countries will be tempted to turn inward, to limit their interactions with neighbours and people – but nothing could be worse. For any noteworthy economic recovery (never mind meaningful growth) to occur, the world needs more trade, not less.

The damage caused by the most recent curtailment of economic freedom – the COVID-19 government lockdowns – cannot be underestimated. The World Bank projected that the number of people in extreme poverty would increase by up to 115 million, which would mean a total between 703 and 729 million.

No amount of state stimulus will generate the kind of economic growth needed to lift people out of poverty. Indeed, you cannot stimulate an economy that is not allowed to operate in the first place. Only more economic freedom, through avenues such as trade, can actualize people’s economic potential.

Africa’s history is one marked by exploitation; exploitation by European powers, and exploitation by politicians and bureaucrats who, since independence, have implemented policies of ever-increasing government control. Misguided—indeed, immoral—economic policies that undermine freedom have real, negative consequences, especially for middle- and lower-income people. As mentioned above, the combined GDP of Africa is estimated at $2.5 trillion, barely higher than Italy’s.

That one European country with a vastly smaller population (and not even Europe's most productive) can have almost the same level of economic evaluation as nearly an entire continent, serves to indicate just how much Africa’s economic potential has been suppressed.

The symbolism of the AfCFTA itself indicates a new era for Africa, and the potential thereof cannot be underestimated.

* * * * 

Chris Hattingh is Project Manager at the Free Market Foundation. He has an MPhil in Business Ethics from Stellenbosch University. He is the author of published articles on consumer rights, economic freedom, inequality and individual freedom.

This article first appeared at the Foundation for Economic Education (FEE). It has been corrected and lightly edited.

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"Why had she always felt that joyous sense of confidence when looking at machines?"

"[Dagny] felt the sweep of an emotion which she could not contain, as of something bursting upward. She turned to the door of the [diesel combustion engine], she threw it open to a screaming jet of sound and escaped into the pounding of the [locomotive]’s heart. . . . 

    "Why had she always felt that joyous sense of confidence when looking at machines?—she thought. In these giant shapes, two aspects pertaining to the inhuman were radiantly absent: the causeless and the purposeless. Every part of the motors was an embodied answer to ‘Why?’ and ‘What for?’—like the steps of a life-course chosen by the sort of mind she worshipped. The motors were a moral code cast in steel. 

    "They are alive, she thought, but their soul operates them by remote control. Their soul is in every man who has the capacity to equal this achievement.”

          ~ Ayn Rand, from her novel Atlas Shrugged

[Hat tip Stephen Boydstun]

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"No witness to significant change can recognise them at their beginnings ..."

“It remains an irrefragable law of history that contemporaries are denied a recognition of the early beginnings of the great movements which determine their times.”

          ~ Stefan Zweig, from his great, great memoir of the Europe swept away by war

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Are you bored with all the winning yet, Trumpeters?

Pic from VoA

During his election campaign, Candidate Trump promised his hyperventilating supporters that his ascension "would usher in an era of nonstop winning." 'We will have so much winning if I get elected that you may get bored with the winning,' he told the poor deluded fools.

“We’re going to win so much,” he [once] declared ... “We’re going to win at trade, we’re going to win at the border. We’re going to win so much, you’re going to be so sick and tired of winning. . . . And I’m going to say ‘I’m sorry, but we’re going to keep winning, winning, winning.’”

Writing now in the ashes of the dumpster fire of his supporters' attempted Capitol Putsch, conservative Jeff Jacoby reviews the record after the four-year shit-show and concludes that, as President, the former reality-TV star has instead delivered more losing than any four-year term could normally contain.

Turns out instead that far from winning he's a lifetime loser. True, he had some wins: "tax reform, judicial confirmations, the crippling of ISIS, significant deregulation, and Middle East peace accords." But those few temporary victories are overshadowed by the avalanche of longer-term losses.

Let's look at the Loser's List:

    To begin with, there were the electoral losses. When Trump took office, his party controlled both houses of Congress. But in the 2018 midterms Republicans lost 41 House seats, along with their majority, as dozens of Trump-endorsed candidates went down to defeat. In 2020, the “winning, winning, winning” president lost his bid for reelection by solid majorities in both the popular vote and the Electoral College. For two months following the election, Trump’s lawyers filed a torrent of lawsuits challenging the outcome; they lost every one. Last week the two candidates he supported in the Georgia Senate runoffs were also defeated. When Trump leaves office, the White House and both houses of Congress will be in Democratic hands.

So much winning there that serious folk are even semi-seriously wondering if he were a Democratic Party plant!

Then there were the policy losses. 

Trump campaigned as an immigration hardliner who would build “a great, great wall on our southern border” that Mexico would pay for. But only a sliver of Trump’s proposed 1,000-mile wall was ever built — just 15 miles of barrier where none existed before. Most of the costs were borne by the Defense Department; none were paid by Mexico. 

    Trump lost on Obamacare, too. Scores of times he vowed to repeal and replace the Affordable Care Act. The penalty on individuals who don’t buy health insurance was scrapped, but otherwise Obamacare remains in force to this day.

    Nor was there a victory in Trump’s trade wars, which he had boasted would prove “easy to win.” The tariffs he imposed on foreign goods saddled American households with higher prices and ended up reducing US exports. Trump swore he would slash America’s trade deficit; instead, it grew bigger than ever.

So on each of his alleged priorities he scores a big round zero. Mind you, the first and last were at least good policy losses to lose. 

    Trump’s years in power have been replete with ideological losses as well.
Many presidents successfully use the “bully pulpit” to build support for their values and priorities. But Trump has managed to turn Americans against pretty much every position he promotes. “On nearly every major policy issue,” as Catherine Rampell observed in The Washington Post, “he has pushed the country . . . in the opposite direction of whatever his own stance is.”
    The more Trump fulminated against immigrants, for example, the more pro-immigration the public has become: According to Gallup, 77 percent of Americans now say immigration is good for the country, the highest level in decades. Though Trump has sharply curtailed the number of refugees admitted into the United States, the share of Americans who consider refugee admissions a priority has leapt from 62 percent in 2016 to 73 percent today.
    Trump has likewise driven up support for Obamacare. In 2016, a plurality of Americans disapproved of the law; today a majority of the public regard it favorably. The same is true on trade. After four years of Trumpian trade wars, American support for free trade is higher than it has been in decades. And while Trump spent much of 2020 railing against voting by mail, three-quarters of the public came around to supporting it. Conversely, the more Trump has expressed support for the Confederate flag and monuments to the Confederacy, the more Americans have said they should be removed.
    Trump’s presidency has been marked by an unparalleled variety of losing. He purported to be a law-and-order president but had no idea how to react to the killings of George Floyd and Breonna Taylor, the wave of looting and riots, or the sharp spike in homicides nationwide. He offered himself as a gifted manager but proved to be the opposite, with his appointees quitting or being fired with astonishing frequency. More than 360,000 American lives have been lost to the coronavirus pandemic he handled so ineptly — and he himself ended up in the hospital. And while the popularity of every president goes up and down, a majority of Americans have never approved of how Trump handled the job of president.

That's a whole lot of losing.  

Saddest of all, perhaps, is that someone whose slogan was “Make America Great Again” presided over a historic loss of respect for America around the world. In numerous countries, reported the Pew Center late last year, the percentage of people with a favourable view of the United States had fallen to an all-time low. If anything, America’s image has sunk even lower since Wednesday, when a Trump-incited mob stormed the Capitol in a violent attempt to override the results of the 2020 election.

And in that heartbeat, he went from being simply Toddler-in-Chief to a person who looked almost capable of inspiring his own Reichstag fire. History probably won't record him as the worst American president -- that would either be one of the disgusting pro-slavers who ushered in their Civil War over the issue -- or one of the twenty- and twenty-first century's many growers of big-government -- but in defiling everything he claimed to defend, and in creating zombies out of many once-intelligent pro-capitalists (several of whom were once my friends), he has changed the political landscape all around the world for the worse.

    One way or another, Trump will soon be gone. But the losses inflicted by the 45th president will not heal as quickly. Americans have traditionally been obsessed with winning, but maybe we have finally learned that decency matters more."

And who ever thought you'd hear an American say that!.thought 

[Emphasis added.]

Politics + religion = ?

 

"I am quite sure now that often, very often, in matters concerning religion and politics a man's reasoning powers are not above the monkey's."
        ~ Mark Twain, Autobiographical dictation, 12 September 1907

[Image: The Mark Twain House & Museum, hat tip Mark Twain]

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A reminder about free speech ...

A reminder...

For example...

"You don’t have a right to a Twitter account. Nobody does. It’s private property. To say you have a right to a Twitter account is like saying you have a right to go into your neighbour’s house & write on the living room walls." ~ Tim Sandefur

And ...

"1. Someone refuses to publish your words.
 2. The government makes it illegal for you to speak.
These are not the same thing. They should never be described by the same words such as 'thought suppression'." ~ Keith Weiner

"The right to speech is based on the right to property. No one has a right to another's property. Private property is not government." ~ Louise LaMontagne

[Hat tip Ayn Rand Centre UK] 

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A real wrecking ball ...

"In nominating Trump in 2016, many of his supporters said they wanted someone who would take a wrecking ball to the system. They got their wish. He and his stormtroopers have left behind an agenda in tatters, a Republican Party in ruins, and a Democratic Party in power. Future historians will conclude that, contrary to their current beliefs, Donald Trump was the greatest gift that the Democratic socialists could have wished for..."
        ~ Robert Bidinotto, on "The shocking, disgraceful assault on the US Capitol ... "

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'Lockdown sceptics should support this lockdown'

"[Britain's] Lockdown Three, I’m sorry to say (and I can hear the howls from sceptics as I write this), is justifiable, practically and ethically. Given the rollout of the vaccine, the emergence of the new variant and the plausible risk of the [UK's] healthcare system falling over, there is probably now no realistic alternative. Whatever one’s objections to the first two lockdowns, on both cost-benefit and libertarian grounds, it is at least a defensible position to acknowledge the merit of a brief lockdown during a maximum-speed vaccination campaign to minimise morbidity and mortality along the way.
    "The calculation is entirely different now from that of the previous two lockdowns. Given the vaccine, the variant and the healthcare situation, the current restriction can be supported (regretfully) without cognitive dissonance by those who opposed the previous lockdowns vehemently and vocally. It is either bad logic, bad faith or fundamentalism to argue otherwise."

        ~ Alastair Hames, from his op-ed 'Lockdown sceptics should support this lockdown'

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"Until a few months ago, American elections were the model for the world..."

"Until a few months ago, American elections were the model for the world: fair, transparent and the results implemented. That reputation was undermined tonight, when armed protestors targeted elected representatives and tried to stop the ‘sacred ritual’, as it was described by President-elect Joe Biden, of confirming the election result.
    "That we are witnessing such scenes speaks to the extent that President Trump has degraded his office – and our politics. And I write this as a lifelong Republican..."

        ~ Kate Andrews, from 'An attack on the principles that define[d] America'

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'Television,' by Roald Dahl

Sage advice here for families, in Roald Dahl's famous poem ...

The most important thing we've learned,
So far as children are concerned,
Is never, NEVER, NEVER let
Them near your television set --
Or better still, just don't install
The idiotic thing at all. 

 

In almost every house we've been,
We've watched them gaping at the screen.
They loll and slop and lounge about,
And stare until their eyes pop out.
(Last week in someone's place we saw
A dozen eyeballs on the floor.)
They sit and stare and stare and sit
Until they're hypnotised by it,
Until they're absolutely drunk
With all that shocking ghastly junk. 

 

Oh yes, we know it keeps them still,
They don't climb out the window sill,
They never fight or kick or punch,
They leave you free to cook the lunch
And wash the dishes in the sink --
But did you ever stop to think,
To wonder just exactly what
This does to your beloved tot?
IT ROTS THE SENSE INSIDE THE HEAD!
IT KILLS IMAGINATION DEAD!
IT CLOGS AND CLUTTERS UP THE MIND!
IT MAKES A CHILD SO DULL AND BLIND
HE CAN NO LONGER UNDERSTAND
A FANTASY, A FAIRYLAND!
HIS BRAIN BECOMES AS SOFT AS CHEESE!
HIS POWERS OF THINKING RUST AND FREEZE!
HE CANNOT THINK -- HE ONLY SEES! 

 

'All right!' you'll cry. 'All right!' you'll say,
'But if we take the set away,
What shall we do to entertain
Our darling children? Please explain!'
We'll answer this by asking you,
'What used the darling ones to do?
'How used they keep themselves contented
Before this monster was invented?'
Have you forgotten? Don't you know?
We'll say it very loud and slow:
THEY ... USED ... TO ... READ! They'd READ and READ,
AND READ and READ, and then proceed
To READ some more. Great Scott! Gadzooks!
One half their lives was reading books!
The nursery shelves held books galore!
Books cluttered up the nursery floor!
And in the bedroom, by the bed,
More books were waiting to be read!
Such wondrous, fine, fantastic tales
Of dragons, gypsies, queens, and whales
And treasure isles, and distant shores
Where smugglers rowed with muffled oars,
And pirates wearing purple pants,
And sailing ships and elephants,
And cannibals crouching 'round the pot,
Stirring away at something hot.
(It smells so good, what can it be?
Good gracious, it's Penelope.)
The younger ones had Beatrix Potter
With Mr. Tod, the dirty rotter,
And Squirrel Nutkin, Pigling Bland,
And Mrs. Tiggy-Winkle and-
Just How The Camel Got His Hump,
And How the Monkey Lost His Rump,
And Mr. Toad, and bless my soul,
There's Mr. Rat and Mr. Mole- 

 

Oh, books, what books they used to know,
Those children living long ago!
So please, oh please, we beg, we pray,
Go throw your TV set away,
And in its place you can install
A lovely bookshelf on the wall.
Then fill the shelves with lots of books,
Ignoring all the dirty looks,
The screams and yells, the bites and kicks,
And children hitting you with sticks-
Fear not, because we promise you
That, in about a week or two
Of having nothing else to do,
They'll now begin to feel the need
Of having something to read.
And once they start -- oh boy, oh boy!
You watch the slowly growing joy
That fills their hearts. They'll grow so keen
They'll wonder what they'd ever seen
In that ridiculous machine,
That nauseating, foul, unclean,
Repulsive television screen!
And later, each and every kid
Will love you more for what you did. 

 

~ Roald Dahl

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Radicals/Conservatives

"The radical of one century is the conservative of the next. The radical invents the views. When he has worn them out, the conservative adopts them."

          ~ Mark Twain, 'Notebooks and Journals', 1898

[Hat tip Mark Twain]

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True

 

[Hat tip Philosophy Matters]

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Right...

 

Read more here on rights versus privileges.

And on getting property rights right.

Here's a handy Cue Card on Rights.

And something very timely ...  "We hold these truths to be self-evident: that a whole lot of people were confused by the Bill of Rights and are so dim that they require a Bill of No Rights."

[Hat tip Charlotte Cushman]

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Reminder

 

[Hat tip aynrandorg]

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"I am a rational animal."

 

"They offer me their truth vs my truth; instead I choose objective truth.
    "They offer me their whim vs my whim; instead I choose reason.
    "They offer me black vs white, male vs female, young vs old, straight vs gay, instead I choose individualism.
    "They offer a sacrifice of myself to others vs a sacrifice of others to myself; instead I choose non-sacrificial trade.
    "They offer me anarchy vs totalitarianism; instead I choose freedom.
    "They offer me socialism vs fascism, instead I choose free-market capitalism.
    "They offer me conservative vs liberal; instead I choose individual rights with government limited to protecting them.
    "They offer false alternative after false alternative; but I think in objectively defined fundamental principles.
    "I am a rational animal."

          ~ Mark Conway Munro

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Heroes everywhere

"Let us in education always call the attention of children to the hosts of men and women who are hidden from the light of fame, so kindling a love of humanity; not the vague and anaemic sentiment preached today as brotherhood, nor the political sentiment that the working classes should be redeemed and uplifted. What is most wanted is no patronising charity for humanity, but a reverent consciousness of its dignity and worth." 

        ~ Maria Montessori, from To Educate the Human Potential

[Hat tip Carrie-Ann Biondi] 

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"The design here is to give each one the secure and peacable possession of his own property.”

"The first and chief design of every system of government is to maintain justice; to prevent the members of a society from incroaching on anothers property, or siezing what is not their own. The design here is to give each one the secure and peacable possession of his own property.”

          ~ Adam Smith, from his Lectures on Jurisprudence [emphasis mine]

[Hat tip Adam Smith Works]

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Rising prices are "a policy"

"The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy." 

          ~ Ludwig Von Mises, Economic Policy, p. 72

"... the printing presses were set in motion. Inflation ha[s] the great advantage of evoking an appearance of economic prosperity and of increase in wealth, of falsifying calculations made in terms of money, and so of concealing the consumption of capital. Inflation g[ives] rise to the pseudo-profits of the entrepreneur and capitalist which c[an] be treated as income and have specially heavy taxes imposed upon them, without the public at large -- or often even the actual taxpayers themselves -- seeing that portions of capital were thus being taxed away. Inflation ma[kes] it possible to divert the fury of the people to 'speculators' and 'profiteers'. Thus it prove[s] itself an excellent psychological resource of destructive [government] policy.”

          ~ Ludwig Von Mises, The Theory of Money & Credit

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Advice for Labour's would-be reformers

“It will be through raising high the prestige of your administration by success in short-range recovery that you will have the driving force to accomplish long-range reform.”

~ John Maynard Keynes pointing out, in his 1933 open letter to US President Roosevelt, that the best way to create the political capital required to pursue a reform agenda is to first encourage a strong economy

[Hat tip The Money Illusion]

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#Gridlock! #Winning!

"Joe Biden's main job will be to sit in the Oval Office and act like a responsible 

adult. If he manages to accomplish this even half the time, it will be an improvement.

"For NeverTrump, this is not the end—but it’s a great beginning. "I was a small-government Never Trumper. I regarded Donald Trump as unfit for office and wanted him out, but I didn’t want to sign on for the full Democratic party agenda. 

    "Which means that I’m part of a small sliver of [America] who got precisely what we wanted from this election: a victory for Joe Biden, but a narrow one that didn’t extend down the ballot and will almost certainly leave him without a Democratic Senate majority to work with. 

    "Finally, 2020 paid out for someone." 

          ~ Robert Tracinski, from his post '#NeverTrump #Winning'

[Hat tip Louise LaMontagne]

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[

Liberty Doesn’t Mean Freedom to Infect Other People

"The next question in regard to quarantine is somewhat different, because ... if someone has a contagious disease, against which there is no inoculation, then the government will have the right to require quarantine. What is the principle here? It’s to protect those people who are not ill, ... to prevent the people who are ill from passing on their illness to others. Here you are dealing with a demonstrable physical damage. Remember that in all issues of protecting someone from physical damage, before a government can properly act, there has to be a scientific, objective demonstration of an actual physical danger. If it is demonstrated, then the government can act to protect those who are not yet ill from contracting the disease; in other words, to quarantine the people who are ill is not an interference with their rights, it is merely preventing them from doing physical damage to others.” 

          ~ Ayn Rand, from a Q&A session in 1963

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Life is not a combination lock

 

A wise father is giving advice to his daughter, who wants to help her friend in some important life choices but terrified about offering the wrong advice. The mother tells the story ...

“'I understand how scary that must all seem,' he replied. 'Can I suggest trying to think of it another way?' ...  

    "'A lot of people think of life like some complicated, combination lock. Their goal is to figure out the one, right, intricate combination, and their fear is that if they don’t, they will face disaster. Instead, he explained, he sees the world as richly abundant with options and opportunities. You need not find some single, right solution; you need only be sensible with each step you take.'  

    "What matters [explains the mother] is who you are and what you bring to the journey. A person of good character, basic capabilities, and confidence in his own judgment will be able to navigate a course in countless directions. At every point, you must simply pursue the path that seems best, remain active-minded and reflective, make the most of what comes, and, if and when you find it necessary, change course again. In other words, my daughter didn’t need to – couldn’t in fact – anticipate all outcomes and definitively determine the right advice to give her friend. She could suggest what she thought was best and continue to support her along the way...  

    "[Many have] a parenting approach premised on this 'combination lock' approach to life. 'It is one that admits of endless variations, depending on the parents’ particular, narrowly-defined views of what constitutes the key to success. All of them take the form of, 'For my child to be successful, he/she must__________________. [Attend a top university? Stay in our hometown? Be a doctor or a lawyer?] It is a mentality that in some sense I can grasp, but to which I personally cannot, in any way whatsoever, relate.  

    Hearing my husband’s advice, my daughter made a fascinating connection. She said, 'So what you’re saying is, ‘The path is not narrow.’ "In her studies at a Catholic college, she had often heard reference to the Bible verse that reads, 'Enter through the narrow gate. For wide is the gate and broad is the road that leads to destruction, and many enter through it. But small is the gate and narrow the road that leads to life, and only a few find it.' I will confess that in some ways this proverb resonates with me, because I believe there are real and inescapable requirements to a full and flourishing life. But those requirements are broad principles, and there is a grave danger in being overly specific and prescriptive about what constitutes the 'path' to success.  

    "For her friend, the narrow path had become like a prison that prevented her from exploring who and what she wanted to be. For my daughter, it had set an impossible standard of certainty that she could never hope to achieve.  

    "What I wish for both of them is that they see a wide-open landscape of infinite opportunity, and that they feel a confidence in their own ability to make a beautiful life out of almost any course they choose. 

    "The path is not narrow. I would even say there isn’t a path at all, besides the one that can be marked behind you on the trail you pioneer." 

[Hat tip Lisa Van Damme]

"The essence of society is peace-making..."

 

“[I]n the long run war and the preservation of the market economy are incompatible. Capitalism is essentially a scheme for peaceful nations…. The emergence of the international division of labor requires the total abolition of war. (1st Ed. Human Action, p. 824; 3rd Ed. Human Action, p. 828) The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another.” (1st Ed. Human Action, p. 817 ; 3rd Ed. Human Action, p. 821)

“The market economy means peaceful cooperation and peaceful exchange of goods and services. It cannot persist when wholesale killing is the order of the day.” (Interventionism: An Economic Analysis, p. 67) 

"[T]he essence of so-called war prosperity; it enriches some by what it takes from others. It is not rising wealth but a shifting of wealth and income." (Nation, State, and Economy, p. 158)  

“War is harmful, not only to the conquered but to the conqueror. Society has arisen out of the works of peace; the essence of society is peacemaking. Peace and not war is the father of all things. Only economic action has created the wealth around us; labor, not the profession of arms, brings happiness. Peace builds; war destroys.” (Socialism, p. 59)

"Modern society, based as it is on the division of labour, can be preserved only under conditions of lasting peace." (Liberalism, p. 44)

[Hat tip Ed Younkins, Mises Celebration Group]

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"The man who holds that the universe does not consist of absolutes thinks he can get away with anything. The man who holds that it does knows that he can’t."

 

"There is a direct relationship between a man’s metaphysics [his view of the nature of reality] and his moral character. The man who holds that the universe does not consist of absolutes thinks he can get away with anything. The man who holds that it does knows that he can’t." 

          ~ Jim Ashley

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"The great thing about music, in general, is that it's the closest mathematics gets to affecting our hearts." #QotD

 

"The great thing about music, in general, is that it's the closest mathematics gets to affecting our hearts."

          ~ Howard Devoto

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Two views of what drives progress dominate: that it is driven by state action, or by individual entrepreneurialism and innovation. A recent book tries to turn the division on its head, arguing for the benefits of the 'entrepreneurial state.' But as Ethan explains in this post, this reveals a complete misunderstanding of how innovation and economic progress happen.

What Drives Progress: The State or the Market?

by Ethan Yang

“History never repeats itself," declared Mark Twain, "but it does often rhyme.”

A little over a hundred years ago, U.S. President Woodrow Wilson kicked off a drastic expansion of government power and scope with the general assumption that the state can scientifically plan society. Other wartime leaders around the world followed his lead. Two decades later, U.S. President Franklin Roosevelt greatly expanded on this idea -- with more government programs promising to solve all manner of societal ills, to bring a level of centralised progress that the market couldn’t (allegedly) provide. 

From those who favoured market-based mechanisms, advocated by economists such as Ludwig Von Mises, this sparked caution and critique. They pointed out that the market was far superior to the state in organising society. That the market process begins with each individual choice for 'this over that'; that individuals' differing wants are harmonised by voluntary exchange; that the price system tells producers what is most (and least) valued; that 'the market' itself is simply the sum of each individuals' valuation, directing human action to making the best use of the most highly-valued resources. 

This is the story of humanity, a struggle between the individual and the state. Those who believe in statism on one side and, on the other, those who understand the power of liberty unleashed.

Many of the Wilson and Roosevelt type of statists either never got to grips with the mechanism by which the self-correcting system of market prices delivers progress (dismissing the very notion as some kind of magic-ism). And they simply  assumed that progress would always emerge from the maw of government action.

The Keynesian statist would go one better, preaching that prosperity will emerge out of the expanded use of the government printing press. After World War Two, Keynesians and other thinkers of the big state braced for economic turmoil as people returned from war and government spending plummeted. Instead, the exact opposite happened, and as war finished the economy boomed. 

Anyone with eyes to see could understand that the state does not drive economic growth. In the latter half of the 20th century, sweeping market reforms confirmed the story, deregulation and 'more market' bringing prosperity to countries all around the world and savaging poverty worldwide as never before. Another blow to the idea of state-run industry. 

Some thought that the free-marketeers won the intellectual argument against the Keynesian brand of statism in the 1970s. This is when stagflation completely upended the assumption that inflation and unemployment are always inversely related. It turned out that simply using expansionary monetary policy to drive economic growth was not as good an idea as many people thought. But the arguments for the benefits of big government did not go away.

In 2013 Dr. Mariana Mazzucato, a leading economist of the Keynesian persuasion, published the oxymoronic The Entrepreneurial State, which makes the case that the public sector can do far more than it is currently doing; that the private sector necessarily needs generous guidance and intervention from the state; and that in many cases the state is equal if not superior to the market in generating efficient and innovative services to society.

Well, here we go again!

Mazzucato and her allies posit that society can be so much better if we ditched market-based principles and delegated more responsibility to the state. Think people like Senator Elizabeth Warren.

In response, economic heavyweights Dr. Deirdre McCloskey and Dr. Alberto Mingardi teamed up to write The Myth of the Entrepreneurial State. The book stands on its own in the ongoing debate over the market and the state. The book also serves as an outstanding work of economic history. 

The Idea of the Entrepreneurial State

In her praise of the so-called entreprenueurial state, Mazzucato argues that it is big government itself that makes the market possible, that "capitalism, the system that is usually thought of as being 'market' driven, has been strongly embedded in, and shaped by, the State from day one."

“Mainstream policy conceptions and prescriptions” [she argues] are “normative postulations for a permanent state planning for more markets, mainly organising ‘deregulation cum privatization’ rather than deliberate sets of conditional recommendations based on pondering alternatives and paths.” 

Essentially this suggests that mainstream economic thought is dominated by ideas put forth by those like Milton Friedman, who advocate for more privatisation and deregulation to create growth. 

Mazzucato believes that this is unpredictable and suboptimal. Rather we should allow big goverment's experts to ponder better alternatives with a scientific level of precision. Mazzucato likes to reference government programs like DARPA and The Manhattan Project as examples that the government can be very innovative.

This is an odd assertion. I would agree that many economists hold the belief that privatisation and markets are good. However, McCloskey and Mingardi point out that

“In the past century, government expenditure as a percentage of GDP drifted up towards 50 percent, compared with its pre-Keynesian level of 10 percent”… “ Democratically elected politicians, and behind them their constituents in the voting public were finally convinced that budget balance carried little or no normative weight.”

Sadly -- and contrary to Mazzucato’s point -- amongst policymakers and the commentariat there is no widespread consensus about the wonders of privatisation, instead we see sloppy paeans to never-ending government spending, and calls for ongoing never-ending expansion. [See for example the latest idiotic call by Bernard Hickey for the Reserve Bank to turn the printers on full-speed to pay bigger benefits.] Once you embrace the idea that innovation and big progress may only emanate from big government, one quickly forgets the real sources of growth and progress, and blind to the destruction teh growth of government causes.

This is how government works, especially in democracies. It’s sloppy, it’s imprudent, it’s cumbersome and it is utterly desensitised to important market forces. If you empower the state to take on more and more planning of society, this problem will only exacerbate. Nonetheless, say McCloskey and Mingardi:

Mazzucato, a loyal daughter of the left, is suspicious of private gain, of the sort you pursue when you are shopping, say, and is therefore suspicious of people doing things for a private reward. She wants the State, advised by herself, to decide for you.

In essence that is what the idea of the entrepreneurial state ultimately boils down to. A rationalisation of leftist political economy that has politicians and university professors jumping for joy. A very mild form of central planning that says that great things are possible as long as I am in charge.

What Drives Innovation

One of the main premises of those who believe in an entrepreneurial state is that central-bank credit drives economic activity, and that public investment drives innovation. Mazzucato contends that the government should exert a sort of directionality over private businesses to drive them towards some optimal point determined by experts.

However, this is a false view of how innovation and economic progress happens. 

First, the experiment with central-bank-created credit has now proceeded for just over half a century, in which we have seen a rapidly declining marginal productivity of debt (however you measure it, one dollar of new 'counterfeit capital' creates very much less than one dollar of economic growth), and a steady increase in financial-market turbulence.

Second, innovation comes not from the top down but from the bottom up. Free people acting in spontaneous and self-interested ways create the innovative products of tomorrow. Private firms jockeying for supremacy in handheld communication gave us the genius of the iPhone. Tesla produces some of the most advanced electric cars in the world available for mass consumption. Tesla CEO Elon Musk is the antithesis of the pondering bureaucrats that Mazzucato believes drive innovation. A man who offers four car models named S, 3, X, Y, sells flame throwers, privatised the space race, and now just launched a line of tequila.

Elon Musk’s rambunctious personality would be one representation of how innovation happens. Not by deliberate planning by experts but by the rambunctious and oftentimes chaotic enterprise of free individuals failing and succeeding, often many times in many ventures heading in many different directions. Another would be a James Watt, driven to perfect the steam engine that would eventually come to power a whole Industrial Revolution. Neither are going to work well, or innovate, under a bureucrat's direction.

Mazzucato and others like her contend however that it is the state that drives innovation. The authors disagree and state that the ultimate source of innovation is 

the liberal idea and its emancipation of human creativity.”

As statists lament over the alleged “normative postulation” regarding privatisation, McCloskey and Mingardi feel exactly the opposite. Getting the state out of the way of free individuals unleashes the driving force behind innovation.

Does Government Investment Contribute to Innovation?

One of the few convincing observations made by Mazzucato and others like her is that the advanced military research agency known as DARPA [Defence Advanced Research Projects Agency] invented things like the internet. Therefore, they argue, the state may be capable of impressive feats of innovation. If we invested more, then we would get even more spectacular results.

McCloskey and Mingardi offer a rebuttal that can be summarised as “important if true.” They write

The question is whether the American government envisioned anything like the internet. The answer is obvious: of course it didn’t. There was no “mission-oriented directionality.” The investments by the military look like Christopher Columbus’ voyages: the entrepreneurial State discovered the West Indies having left for the East Indies.

Furthermore, even when it stumbled upon what became the acorn from which the internet grew, the bureaucratic state had no idea it had any value whatsoever.

In the 1960s the Air Force considered how a decentralised communications grid distinct from the traditional telephone might operate. But the Department of Defense then terminated the research and took no action.

McCloskey and Mingardi also go on to point out that one of the leading developers of ARPANET, the technical foundation for the modern internet, observed that

DARPA "would never have funded a computer network to facilitate email", because [in their view] the telephone already served person-to-person communications perfectly.

Any government contribution to creating things like the internet was not only wholly unintentional, it may even have been detrimental. Innovation is a chaotic endeavor that leans less on the approval of experts, but instead requires a genuine test in the marketplace. If invention and progress rested on the opinions of whether a room full of PhD’s (or bureaucrats) thought it would be productive, we might not have made it past the horse-drawn plough!

One famous example is the advent of airborne flight which, after a failed test, government officials and many others understandably believed was not obtainable. Looking back, these comments seem comedic but if we allow the state and its army of experts to impose “directionality,” innovation would grind to a halt. 

In fact, in 1903 the New York Times predicted that flight was approximately 1-10 million years away. Then just a couple of months later two bicycle mechanics, Wilbur and Orville Wright made the first functional airplane in their garage, proceeding to change the world forever.

Innovation happens in the absence of state direction. It’s not innovative if it was completely planned.

The authors go even further to point out that, as regulations bog down progress in various industries, oftentimes innovation takes place simply to outmanoeuvre the state . This can partially explain things like the emergence of private equity over public equity in the world of finance. One of the key benefits of private equity is not having to abide by the cumbersome regulations that govern public financial markets. 

Key Points

This debate between whether or not the state can be a competent and worthy driver of innovation is a necessary one. Although the state continues to grow regardless of who wins this intellectual argument, it was thought that proponents of limited government had won this discussion in the late 20th century when the world experienced a sweeping wave of liberalisation.

Today we find ourselves at a crossroads, with much of the Western world embracing or starting to consider a view of government that sees it as much more than just a steward of our rights. They see the state as a force of positive and competent change in a capacity that McCloskey and Mingardi believe is only possible through the market. That a more powerful and unrestricted government can reliably be a steward of society.

The idea of an entrepreneurial state as proposed by Mazzucato is a romantic one. It’s an idea that people can come together and through sheer will can make innovation happen. That some very smart people with fancy degrees and prestigious titles can steer society to an optimal location. The only problem with that is just about everything.

ETHAN YANG
Ethan is an Editorial Assistant at the American Institute for Economic Research and a graduate of Trinity College. He received a BA in Political Science alongside a minor in Legal Studies and Formal Organisations.
He currently serves as Local Coordinator at Students for Liberty and the Director of the Mark Twain Centre for the Study of Human Freedom at Trinity College.
Prior to joining AIER, he interned at organizations such as the American Legislative Exchange Council, the Connecticut State Senate, and the Cause of Action Institute.
Ethan is currently based in Washington D.C.

This post is based on his article that first appeared at the AIER blog.

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Election fraud? "The answer is no."

"Bryan Caplan says that a good way to ascertain whether people are sincere in their claims (rather than just bullshitting) is to bet them on the issue at stake," notes the Money Illusion blog. "Most people won’t be willing to put money on the line for something they don’t truly believe."

In particular, "Lawyers caught lying in court can face some pretty severe penalties, so Trump’s lawyers have a strong incentive not to lie about claims of electoral fraud." And what do Orange Man's lawyers say in court?

During a Pennsylvania court hearing this week on one of the many election lawsuits brought by President Donald Trump, a judge asked a campaign lawyer whether he had found any signs of fraud from among the 592 ballots challenged.
The answer was no.

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"It does distort markets but that’s how monetary policy works...”

“It does distort markets but that’s how monetary policy works...”

~ central banker Eric Rosengren admits the obvious: that central banks and their policies distort markets: the key reason we find ourselves in a historic asset bubble. Adrian Orr take note.

[Hat tip Joumanna Bercetche and Sven  Henrich]

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On language, and tribalism ...

“Language is a conceptual tool—a code of visual-auditory symbols that denote concepts. To a person who understands the function of language, it makes no difference what sounds are chosen to name things, provided these sounds refer to clearly defined aspects of reality. But to a tribalist, language is a mystic heritage, a string of sounds handed down from his ancestors and memorised, not understood. To him, the importance lies in the perceptual concrete, the sound of a word, not its meaning…”

          ~ Ayn Rand, from her essay 'Global Balkanisation, in The Voice of Reason

[Hat tip Ayn Rand Centre UK]

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"Collectivist movements don’t care about individuals. Changing one mind? It means nothing to them. It’s just one more pawn available to manufacture other pawns..."

"Collectivist movements don’t care about individuals. Changing one mind? It means nothing to them. It’s just one more pawn available to manufacture other pawns, all marching lockstep in a single direction, just waiting to be sacrificed for the cause. We are building a movement of individualists. And in a movement of individualists, every success matters, because each person matters—and because none of us is a pawn.
    "Whenever I become overwhelmed by the difficulty of our mission and the seemingly insurmountable odds of success, I remind myself of the importance of the individual—and of the impact a single individual can have on the world....
    "I don’t mean to diminish the importance of politics. Politics is important. Freedom is important. And in many ways, there has never been a bigger opportunity to impact politics than there is today. "Twenty years ago, people were generally satisfied with a status quo that was drifting slowly in the direction of statism. Today, we are no longer drifting. We are running toward statism at full speed.
    "That will cause many who value freedom to turn to purely political causes and activist organizations promising fast results. They have been promising fast results for as long as I’ve been alive. But if the last few decades have made anything clear, it’s that we will not move in a pro-freedom direction until people value freedom—and they will not value freedom until they learn to value living by their own mind and for their own sake. The battle for freedom is a battle for philosophy."
          ~ John Allison, from his letter on behalf of the Ayn Rand Institute
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