Self-evident Economy

Posts tagged freedom

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How is Capitalism Totalitarian?

Nobody ever wins arguing in internet forums, but I couldn’t help myself. The following short conversation inspired a brief essay on my part.

User 1: I think it’s stupid to talk about communism when the topic is the unhealthy impacts of Capitalism.

There you see how you’re effed by both (totalitarian) systems.

User 2:  totalitarian? To quote a Spaniard, I do not think that words means what you think it means.

User 1: I know what it means and I know what I mean.
Of course not the totaltarism of a fascist regime as you may think. A little more abstract.

Me: Actual capitalism is equivalent to complete freedom of choice in what you do, what you buy, and how you use it (ie. FREE markets). How is that in any way totalitarian?

User 1: Think about.

Me: …

Here are my thoughts on how can capitalism be totalitarian.

I think it would have to be through the use of force. In most societies, especially democracies, the only sanctioned use of force is through the government. The reason the government is sanctioned to use force is so it can protect citizen A from citizen B if citizen B decides to use force to get what he wants. If I as citizen B did not want to use force in fear of government reprisal, the logical step would be to petition the government to use force for me. Since governments are run by people, and people desire power, corruption is possible. The more power a government has, the more incentive there is to be in government and thus to be susceptible to corruption (provide favors - you scratch my back, I scratch yours). But it has to be relatively covert, at least at first. Again, laws (which are enFORCEd) must be used to “protect” citizens or citizens become angry and a) vote elected officials out of office or b) overthrow their dictators through violence.

Here is a real world example. At one time, banks could only loan out the capital they had on deposit. To lend out more was actually illegal. Even so, some would loan out more money then they had (greedy bastards) and people would get wind of it and want their money back. This caused a run on the bank which, if the bank couldn’t pay them all back, would be forced close and liquidate. The owner of the bank would be broke and destitute (perhaps even go to jail) until he found another means of employment. Depositors also would be hurt, so would look for banks they could trust. This kept banks in check.

Enter the power of the government. Bankers wanted to be able to lend more money than they had so they could make more money. Since bankers were usually wealthy, and officials in government need money to stay in power, they petitioned the government to legalize reserve banking (more money in the economy encourages growth and helps everyone!). So now banks can legally lend more money then they have on deposit. Runs on the bank are still possible, but since reserve banking is legal, a bank can borrow money from another bank in times of need. Unfortunately, it was still very possible for a bank to fail. And if a bank failed, it might take the other banks that lent it money with it. This still limited the risks banks could take with their money.

Enter central banking. Instead of currency being created by the free market, governments force one sanctioned currency on citizens by creating a central bank. This of course is to make things better for the citizens - one currency to avoid confusion and make commerce easier. So now with a central bank and the power to print money, banks could borrow from the central bank instead of other banks. After all, it is risky to lend to a failing bank because if it fails, you don’t get your money back and may also fail. Unfortunately, pesky gold standards can make printing money difficult. So central banks can only do so much to protect a bank. There is still the possibility of a run, and thus failure. What to do!?

The answer is simple. Protect the depositor! Create fees that banks must pay (which, btw raises the barrier of entry for new banks and reduces competition) and create a department called the FDIC. When a bank fails, depositors no longer lose their money. This removes the incentive for fearful depositors to get their money out of a failing banks. No more banks runs. Banks then are free to take extraordinary risks with little consequence. They become too big to fail. They gain undue influence over all levels of government, and the government becomes bigger and more powerful in the process. They create laws, not to protect citizen A from citizen B, but to give Corporation/Bank A power over Corporation/Bank B, C, & D. Unfortunately markets (individual people making individual decisions) always win. Even with all these protections, banks fail because of the extraordinary risks they take. Except they don’t fail because the government protects them.

So I suppose this could make people think capitalism is totalitarian. However, at this point, what we have is no longer capitalism. It is crony capitalism, where gains are kept by those in power and loses are socialized by taxing society to pay for their mistakes.

Filed under capitalism economics federal reserve freedom politics central banks

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Too many laws, too many prisoners

Uhg. These kinds of stories make me sick. The story itself is a little old (from July 2010) but the message is very timely.


Mr Norris was 65 years old at the time, and a collector of orchids. He eventually discovered that he was suspected of smuggling the flowers into America, an offense under the Convention on International Trade in Endangered Species….

In March 2004, five months after the [initial] raid, Mr Norris was indicted, handcuffed and thrown into a cell with a suspected murderer and two suspected drug-dealers. When told why he was there, “they thought it hilarious.” One asked: “What do you do with these things? Smoke ’em?” …

[Later] an undercover federal agent had ordered some orchids from him, a few of which arrived without the correct papers. For this, he was charged with making a false statement to a government official, a federal crime punishable by up to five years in prison. Since he had communicated with his suppliers, he was charged with conspiracy, which also carries a potential five-year term.

As his legal bills exploded, Mr Norris reluctantly changed his plea to guilty, though he still protests his innocence. He was sentenced to 17 months in prison. After some time, he was released while his appeal was heard, but then put back inside. His health suffered: he has Parkinson’s disease, which was not helped by the strain of imprisonment. For bringing some prescription sleeping pills into prison, he was put in solitary confinement for 71 days. The prison was so crowded, however, that even in solitary he had two room-mates.

Filed under Freedom Free Markets Ron Paul

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On War and Ron Paul

Ron Paul seems to be the only GOP candidate to question our love of foreign wars (read Why Can’t We Talk About All Our Wars?). When he mentions that there may be reasons other than the 5th grade argument, “Muslims hate freedom and prosperity,” he gets booed and attacked by the other candidates.

This is from Nazi Germany’s Hermann Goering on how to take a country to war…

Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.”

It’s time people start thinking for themselves. Conservatives need to realize that constantly being at war contradicts so many of their supposed core values. War is extraordinarily expensive, increases debt and therefore taxes, is paid for in large part though the printing press which causes inflation, increases the size of government, is highly destructive, is certainly not Christian, and is the greatest danger to our freedom that we face.

Filed under Ron Paul WWII freedom inflation liberty taxes war politics