What is Wrong with Us? by Roberto Diego

Copyright 2008 Roberto Diego. No part of this article can be reproduced in any manner without written permission of the author. You are free to distribute links to this page of quote it briefly. Publisher interest is welcomed. robdiego@aol.com

This is Part 1 of an article that discusses the four basic reasons that our society is committing suicide.

I think I could start every essay that I write with the observation that we are a nation committing suicide. Though our nation was so carefully constituted and the result was a nation of success, affluence and open expression, it is also true that the secular nature of our society is under attack by religionists on the right and environmentalists on the left. One political party uses entitlement programs to build a framework for a welfare state while the other would like to enshrine God as the source of our laws. Most people are on the edge, not knowing where to stand on major issues and preferring instead to compromise with people who have no love for this country. Everywhere we have dueling forces and nothing is getting done. What is wrong with us?

If we stop using fossil fuels will the result be beneficial? We can answer this question in two ways, one by looking back and, two by looking forward. What was the world like before we began using petroleum? If we look back to pre-automotive times, most people got around by means of walking or horse transportation. This meant that our technology was based upon having horses, buying them, feeding them, housing them and ensuring that they were healthy. A man with a horse had an advantage over men without horses. He could travel farther in a shorter period of time and he could do more types of work with a horse than a man without a horse.

Of course, there was a downside to horses. In addition to their care and maintenance there was the pollution that they created in the form of horse manure that populated nearly every town in the country. Not only did the pollutant smell badly it was also a chore to clean up. But, it goes without saying that mankind, since the horse began to be used in prehistory was a boon to mankind. Is this what the environmentalists want us to bring back?

What happened when we began to transition from horse power to automotive power? When fossil fuels became available for use, they reduced man’s physical output of energy while at the same time increasing the amount of work done. You had a flourishing for those men who learmed how to use that new source of energy. Because of automotive power, our society gained hundreds of new industries, new jobs, new mobility, new cities, new opportunities and an overall improvement in the lives of people. So much energy was released that the time of the late 1800s and early 1900s was one of the most exciting and hopeful time in history. This flourishing also brought cleaner cities which meant less disease and significant increases in leisure and enjoyment. Automotive power has been a boon to mankind and that is why it is hated by those who hate human progress.

Originally, many of the time and energy saving automobiles that man built, as well as some of his factories, gave off waste that polluted the environment. Some extraction processes, such as with coal, which was another energy producing product, were difficult to perform and many men lost their lives in the work. But as men began to experience these issues, new production processes enabled man to gradually produce less pollution and safer mines. This is a result of the fact that capitalism brings about constant improvement of products and services due to the demands of consumers.

Looking forward, I am being generous to them when I say that environmentalists hope that restricting our use of fossil fuels will drive the price of energy so high that other forms of energy use will come to the forefront. At present, the prospect of this happening within the next 20 years is not likely – so we are looking at an economic depression for at least 20 years forward that will not reduce carbon emissions globally and that will cause the deaths of many people. Not only will we decline economically but the government will not be able to provide all of the services that it is now providing due to lower tax revenues.

No one is asking the question of how politicans assumed for themselves the right to block free people in a free economy from making their own economic decisions. What has happened, of course, is that the so-called threat of global warming has turned us into a fascist state where government has the power to stop human progress that it deems threatening to the planet. Our government is now keeping Americans from being successful because it wants to protect the environment in dirt floored hovels in some jungle in Africa.

Environmentalism in practice is a return to pre-industrial society. Its enemy is man and its goal is to restrict the progess of man at every turn. Their method is to increase economic regulations in order to lower the standard of living, restrict technological advancement and deny to men at every turn anything that means a better life. Environmentalism is economic decline on principle. That we see high oil prices today is a telltale result of environmentalism.

The problem for environmentalists is that they start with a foundation that evaluates man as evil and as a scourge. This mistake leads them to policies that seek to restrict man in developing an advanced civilization. Civilization is the process of securing freedom for the individual while environmentalism is the philosophy that wants to tear man down and eliminate him from the planet. The wider principle on the issue of man’s progress is that if you have a view that incorrectly evaluates man you necessarily develop actions toward man that put you at odds with his life and progress.

When you start with a view of man that holds he is essentially worthless and incapable of making rational decisions, what kind of government would you foster but one that regulates life and insists that every man march to the tune of collective goals rather than his individual self-interest? What is to stop the government from imposing collective goals if there is no concept of rights or even of human value?

The basic political system the environmentalists would establish would be fascist. To see this more clearly, let’s define what a fascist system is and see how it would coincide with environmentalism. Fascism is a system where the citizens own property but the government has the right to determine the use of that property. Needless to say this definition is far from the image of Nazi stormtroopers harassing minority groups and smashing shop windows but these extreme examples were, in fact, each a form of fascism and their view of property was essentially the same as in my definition.

Today, fascism is visible when you see the spectacle of an extensive network of government regulations that affect virtually every sphere of human activity. Financial services, banking, oil production, automotive manufacturing, communications, immigration, entertainment and a whole host of other industries are so regulated today that the argument is not about whether they should be regulated, but about which regulations work, which do we like and how they should be changed. In fact, today we have a Presidential candidate who advocates change – which means, not fundamental change in how our government works, but which kinds of change, regulations and government programs, will improve, in his opinion the ability of government to provide services.

I like to describe facism as the “tweaking” political system. In a fascist system of today, politicians spend their time analyzing the economy and deciding which changes to make that would enable the economy to work more efficiently. What they don’t understand is that the economy does not work efficiently because of some inherent weakness but because of the various “tweaks” they have made in the past.

Today few stop to question whether the state should even have the right to interfere in the lives of people to make their own economic decisions. The trick today, politically, is to create enough consensus, or at least the appearance of consensus, to make major “tweaks.” Needless to say, in such an environment, the state always gets bigger and more intrusive…and the skill today is who is going to decide which piece of a very big money pie will be sliced out of the production of hard working citizens. Facism makes the criticism of capitalism into a truism: eat or be eaten.

Classical economists like Ludwig von Mises and others have done an excellent job of illustrating the fallacies of central government planning. In essence, they point out that the free market is a self-correcting process. Because it leaves people free to make economic decisions based upon their individual needs, all transactions are mutually beneficial and this ensures consistent progress throughout the economy. In addition, competitive markets contribute to constant improvement in products and services. When a company offers inferior products or services, or when it refuses to innovate, consumers will go to the companies that offer better services at better prices. Supply and demand works to ensure that prices go up with scarcity and down with abundance. This creates a process where the market is constantly correcting itself. When government proclaims that the free market is not working, which is always a lie (most dislocations in a specific market are the result of previous government interventions not due to the free market), they invariably introduce regulations that interfere with the self-correcting process of the free market.

I think it is important to point out that Mises, writing in the 40s while war was being wages said:

“[t]he characteristic mark of this age of dictators, wars and revolutions is its anticapitalistic bias. Most governments and political parties are eager to restrict the sphere of private initiateve and free enterprise. It is an almost unchallenged dogma that capitalism is done for and that the coming of all-round regimentation of economic activities is both inescapable and highly desirable.”[1]

Mises is saying that what characterized the period in which he lived, a period replete with wars, death and plunder, was that it was justified by an anticapitalist bias. Anticapitalism was the singular characteristic of dictatorship in the 20^th century. Today, in the new century, we should ponder this remark because it is not only an indication of the causes of many of the upheavals that took place during the time leading up to the dropping of the first atomic bomb (that put a sudden end to those dicatorships) but it is also an indication of where we are headed since today the anticapitalist bias is just as strong as during the ‘40s.

What does our anticapitalist behavior have to say about our time and the kinds of upheavals that might come about because of it?

“History will call our age the age of the dictators and tyrants. We have witnessed in the last years the fall of two of these inflated supermen. But the spirit which raised these knaves to autocratic power survives. It permeates textbooks and periodicals, it spreaks through the mouths of teachers and politicians, it manifests itself in party programs and in plays and novels. As long as this spirit previals there cannot be any hope of durable peace, of democray, the preservation of freedom or of a steady improvement in the nations’ economic well being.”[2]

The spirit to which Mises refers is the spirit of dictatorship and central planning. Needless to say, this situation still exists today and the arguments in favor of government intervention in the economy have become a foregone conclusion. The difference between the interventions of yesterday and those of today is that during the war period those of Hitler, Mussolini, Stalin and Roosevelt were much more autocratic. Today, we have merely absorbed interventionism into our democratic processes. We have accepted the idea that it is ok for the government to regulate different transactions and industries, presumably for the sake of the general well being. But what held true in the time of tyranny holds true today; every action taken by the government creates a consequence that influences the decisions of otherwise free people.

The basic idea of Free Market economists is that when government intervenes, the consequences are worst than the original problem and that the arguments of those who favor intervention are ignorant of free market principles and require lies and distortions in order to justify intervention. Another key point is that most of the tweaks made to the system are made in order to mitigate the consequences of previous tweaks while they blame the need for the tweak on a failing of the free market.

To a large extent, we are a “fix it” type of society. We like to fix things that are wrong and that is one of our strongest characteristics. But the idea of fixing economic “problems” is anathema to the idea that people should be free to fix their own problems every day by means of the choices they make in the marketplace. For instance, if the price of a particular product is too high, most people will buy a different, less expensive alternative or they will not buy at all. If the wages for a particular job are too low, most people will find a better job. There is no need to fix these problems by means of government intervention because we already fix them through countless decisions every day. Advocates for government intervention exploit this “fix it” attitude by promising to fix economic distortions that they invent.

A good example today is found in the present situation with high gasoline prices. Politicians are telling us that the problem is not government restrictions on fossil fuel exploration and refining but with speculators. The solution is to regulate the speculators, they tell us, because they are causing distortions in the marketplace and forcing prices higher in order to make more money in the speculation business.

But is speculation the problem? What is oil futures speculation? Who does it and what is its role in the marketplace? A speculator performs the role of taking on risk on behalf of hedgers. Where hedgers are not willing to speculate when they buy a commodity, they sell that risk to speculators who are trying to make money if the price of the commodity goes up. If the price goes down, then the speculators have lost.

If we did away with speculation in a particular commodity what would that mean? First of all, you can’t stop speculation because it is a global phenomenon. People in other parts of the world would still be able to speculate. Secondly, the decision about which commodities to speculate in would still be market-based. You could outlaw speculation in the United States but oil would still be a great commodity for speculation because of the intense need for the fuel and the frequent price movements. This means that outlawing U.S. speculation in oil products will have no effect on prices because prices are determined by supply and demand globally. If the price of oil goes up, it is because of other factors, supply and demand primarily and speculation about what governments are doing regarding the commodity (as well as whether a war is looming, etc.).

Given that we will not impact the price of oil by outlawing speculators, what would happen if we outlawed speculation in the U.S.? First of all, asset management companies that use oil speculation to enhance their portfolios will have to find other ways to invest and these other commodities may not be as lucrative as oil. If they are smart, and they can get away with it, they will use foreign companies to engage in oil speculation on their behalf so they don’t violate American laws. In fact, outlawing speculation would mean that there would only be an impact on the lives and businesses of people in the U.S., their investment portfolios, their reporting requirements (to the government) – and there would be no impact whatsoever on oil prices.

But there is another cost to outlawing speculation on oil and that is the cost to the government, and eventually the taxpayer, to monitor, administer and punish lawbreakers. In order to enforce anti-speculation laws, you must add administrative employees, computers, managers, lawyers and federal agents in order to ensure that the law is enforced and that violaters are punished; with the net result that it has absolutely no impact on the price of oil.

In fact, the speculators are right in assuming the price of oil is going up...they are being rational. They know the government will do nothing and they think we may soon be at war with Iran and that we might let them block the Straight of Hormuz. They also know that if Obama wins the Presidency, we will never have new oil production in the U.S. In fact, the speculators are probably wrong only because they are underestimating the price of oil in the future. The speculators are our saviors because they are giving us a warning.

Secondly, notice that no one is talking about a free market...they are only talking about removing some restrictions. Without a free market, we will never be able to plan effectively for the future so everything will be half-effective. Only a fully free market for energy production will make a difference in the long-run. Even if the Democrats agree reluctantly to remove some restrictions, that won't be enough. They can count on law suits brought by the environmentalists against the energy companies to restrict production far into the future.

There are a host of other government interventions that have significant costs and the classical economists have been excellent at exposing them, in spite of the fact that few of today’s economists seem to understand that intervention does not work. As it was during Mises’ time that many economists learned about the detrimental effects of central planning. Today, capitalism is still blamed for most of the problems of our society by virtually everyone across the spectrum from liberals to conservatives. Mises’ words then are equally true today:

“Nothing is more unpopular today than the free market economy, i.e., capitalism. Everything that is considered undastisfactory in present-day conditions is charged to capitalism. The atheists make capitalism responsible for the survival of Christianity. Buth the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in the indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its “bourgeouis” pracificm, contrary to human naturer and to the inescaptable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the “progressives” blame capitalism for the preservation of allegedly outdated rules of sexual restraint. Almost all men agree that poverty is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promostes crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism altogether.”[3]

After nearly 60 years, since the time of Mises, of living in a mostly mixed economy, an economy that combines capitalism and government regulation, it might be surprizing that we have any form capitalism at all. In fact, interventionism, of the type described by Mises is replete. We have a mere remnant of the Constitution left to guide us with a number of basic contradictions that violate that Constitution. Every politician takes government intervention as the stock in trade, the only way to make things better; completely oblivious to the fact that the interventions have not solved any problems.

“Although capitalism is the economic system of modern Western civilization, the policies of all Western nations are guided by utterly anticapitalistic ideas. The aim of these interventionist policies is not to preserve capitalism, but to substitute a mixed economy for it. It is assumed that this mixed economy is neither capitalism nor socialism. It is described as a third system, as far from capitalism as it is from socialism. It is alledged that it stands midway between socialism and capitalism, retaining the advantages of both and avoiding the disadvantages inherent in each.”[4]

I submit that this is not the case. The system we have today is fascism and the longer it is allowed to function, the closer we get to jackboots, billy clubs and broken legs.

[1] Planned Chaos by Ludwig von Mises, Introductory Remarks, P15 The Foundation for Economic Education

[2] Ibid

[3] Ibid

[4] Ibid

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