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Resources of Power: Fear, Love, and Dependency/ Machiavelli’s Prince and Modern Politics

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Throughout chapters XV and XVII of “The Prince” by Machiavelli, it becomes apparent that power is the goal, to include increasing and maintaining power, as opposed to a means to achieve other goals.  Also, it is necessary to view “the prince” as power incarnate, so that what ever benefits the prince benefits the pursuit of power and vice versa.  This helps to make sense of troubling “principles” advocated by Machiavelli, such as the prince “need not make himself uneasy at incurring reproach for those vices without which the state can only be saved with difficulty, for if everything is considered carefully, it will be found that something which looks like virtue, if followed, would be his ruin; whilst something else, which looks like vice, yet followed brings him security and prosperity.”  (Machiavelli, Chptr. 15)  If power is the only true goal for the prince then it would follow that anything that advanced that goal would be virtuous and that other moral guidelines or cultural views would be moot, and adhering to them would, according to this view, be considered a vice to the degree that they detracted from the goal of increasing or maintaining power.  In chapter XVII of “The Prince”, Machiavelli continues with another principle, that should be troubling for those not in power, that it “is much safer to be feared than loved” since “men loving according to their own will and fearing according to that of the prince” it would be wise for a prince to “establish himself on that which is in his own control” and not rely on that which is in the control of others.  The only limit Machiavelli puts on the prince in regard to using fear to establish his is power, is to “avoid hatred” as that may make “the prince” intolerable and lead to his ouster.

Piven and Cloward, in their essay “Rule Making, Rule Breaking, and Power”, tend to classify power as a means to achieving and individual’s or group’s goals through a series of “zero-sum” contests.  They cite Max Weber’s definition: “power is understood as ‘the chance of a man or a number of men to realize their own will in a social action even against the resistance of others who are participating in the action” (Janoski, 2005, 35) and that of R.H. Tawney: ( power may be defined as the capacity of an individual, or group of individual, to modify the conduct of other individuals or groups in the manner which he desires, and to prevent his own conduct being modified in the manner in which he does not.” (Janoski, 2005, 35)  Their view of power posits that most, if not all, human interaction involves one dominant party who exploits the dependency of another party, or uses force as their source of power, in order to gain at their expense.  The authors seem to conclude, as a result of this view, that seeking power to exercise over those who have much few resources to exert influence through “social interdependence” is a vice, or social harm and that power should be diffused so that the degree that one party gains at the expense of another party is minimized as much as possible.  However, this is not to say that individuals or groups who did not wish to act socially responsible could not use Machiavelli’s principles to gain power and increase their exploiter status, it just is not the position advocated by Piven and Cloward.

When Machiavelli wrote “The Prince,” it was with monarchy in mind.  The advent of the modern state, new tools and resources of power have been developed and some of the principles found in “The Prince” have become outdated.  However, several tactics advocated by Machiavelli have been modified and carried over to the modern state.  One of the primary differences, though, is that politicians are not power incarnate since they are mere “caretakers” of the state and the expanse of its sovereignty.  Whereas the King was the state, politicians are seen as representatives, sent to enact their constituent’s wills through the state, or as employees of the state.  This “caretaker” position drastically reduces the incentive to seek “absolute power” or power as a goal in and of itself.  Since politicians are only temporarily in power and can not, necessarily, pass power that they gain to their heirs, they are more focused on using resources of power, or “political capital” accumulated by their predecessors or during their temporary terms to achieve more immediate goals that can increase their actual wealth or that of their heirs.  This divergence from the goal of “the Prince” will definitely have an impact on the strategies they pursue, as they will be more short term and consist of utilizing, or spending power, as opposed to building and maintaining it.

The state, itself, is seen as a more ambiguous and anonymous phenomenon that is supposedly created by the “collective consciousness” or “general will” of the people.  However, as Austrian economist, Ludwig von Mises wrote in his book, “Socialism:”

“All rational action is in the first place individual action. Only the individual thinks. Only the individual reasons. Only the individual acts.”
The modern state has achieved the illusion of dichotomy, being divided into one part consisting of some metaphysical representation of the “general will,” the State, and the other of individuals in the employ of the State , and thus theoretically subordinated to the “general will,” politicians and the bureaucracy.  However, as with anything supernatural or based on superstition, closer examination reveals that there is no real evidence of its existence, no actions that can be directly attributed to it, without use of its supposed proxies, no boundaries the demarcate where its existence begins or ends, or any other measure of reality that can be applied to it.  Instead, objective observation, reveals that the masses are still subjected to the coercive power held by a few elite individuals, who when the curtains are pulled back, like in the Wizard of Oz, are normal men acting in their own self-interest.

This illusion of a dichotomous state allows politicians and the bureaucracy to more easily achieve the ideal means to power, according to Machiavelli, fear and love simultaneously.  The ruling elite, presenting themselves as representatives of the masses, can gain the love of the people by advocating for favors on their behalf, while their losses and necessary fear can be attributed to the State.  This phenomenon is apparent in most polls where the American Public, usually, approves of their own Congressman but holds Congress itself in the lowest regard.  They view the system as working against them, and every favor achieved by their representative as being wrestled from the tight jaws of the fearful State on their behalf.  If the public ever realized that the individuals and the State are one and the same the illusion would crumble.

The members of the State are also to achieve both love and fear through dependency, or the threat of withdrawing “love.”  Authoritarian parenting uses this technique to control children.  Children are made to believe that their parents’ love is conditional and can be lost if they do or do not act a certain way.  This method of control tends to be more effective at controlling behavior than fear of corporal punishment or overt reward/punishment schemes.  The State has realized the potential of utilizing this technique on its populations and so attempts to increase dependency and remove competitors of services it provides so that the threat of losing government services has that much more impact on controlling its citizens.  This also fits with Piven and Cloward’s theory of interdependence as a power resource, where the State attempts to raise the dependence of other parties while at the same time reducing its dependence on them so that it can more effectively exploit them with little resistance.

The reason for all the manipulation and illusion to maintain and increase power is because the ruling elite realize that their power truly comes from the people they rule and the legitimacy they grant them and that if the masses realized this, if they are not controlled by sufficient fear or love of the current power holders, they could take that power back at any time.  French philosopher, Etienne de la Boetie, in “The Politics of Obedience: The Discourse of Voluntary Servitude”, explained it best:

He who thus domineers over [you]…has indeed nothing more than the power that you confer upon him to destroy you. Where has he acquired enough eyes to spy upon you, if you do not provide them yourselves?  How can he have so many arms to beat you with, if he does not borrow them from you?  The feet that trample down your cities, where does he get them if they are not your own?  How does he have any power over you except through you? How would he dare assail you if had no cooperation from you?…..you weaken yourselves in order to make him the stronger and mightier to hold you in check. (1975, 52)

While Machiavelli’s principles may have been meant for monarchs, the techniques chosen by the modern holders of power should be no less unsettling and if Piven and Cloward are correct that the exercise of power leads to “zero-sum” contests with one party as the exploiter and the other the exploited, then we should recognize that the State is, or strives to be, always the exploiter and we should not give it a pass or make an exception for it in our agreed upon principles and ideas.

Works Cited:
Boetie, E. (1975). The Politics of Obedience: The Discourse of Voluntary Servitude. New York: Free Life Editions.
Machiavelli, N. (1916). The Prince. The Macmillan Company.
Mises, L. (1982). Socialism: An Economic and Sociological Analysis. Indianapolis, IN: Liberty Fund Inc.
Piven,F.F., & Cloward, R.A. (2005). Rule Making, Rule Breaking, and Power. In T.A. Janoski, A.M. Hicks, & M.A. Schwartz (Eds.), Handbook of Political Sociology: States, Civil Societies, and Globalization (33-53). Cambridge, UK: Cambridge University Press.

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Corporate Power and Democracy

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Since the American Revolution, Democracy has become the dominant political system in Western and large capitalist societies.  The driving factor is that democratic governments are thought to derive their legitimacy from popular sovereignty, as opposed to divine sovereignty.  However, the states and their people recognized the impracticality of actual direct democracy and opted instead for republicanism, or representative government.  Since this form of governance is still based in popular sovereignty and the theoretical rule “of,” “by,” and “for” the people, it is still often referred to as “democracy.”  As democracy has been observed over time, political scientists have redefined it”as a system whereby elites competed for the votes of a largely passive electorate.”  This position became known as “elite pluralism,” and its success rests on the idea that “as long as one group of elites was without power, its members could appeal to the public to replace the incumbents with those presumably more favorable to their interests.” (Mizruchi and Bey, 2005,311)  Since the success of this type of democracy requires competition, or division, of the elites, many detractors of democracy in capitalist states claim that the elites are, in fact, unified due to “common interests in maintaining their privileges” as well as “common socialization experiences (including attendance at elite prep schools and universities), common membership in social clubs and policy-making organizations, and social and kinship ties.” (Mizruchi and Bey, 2005,311)  Many also believe that these unifying traits are not only shared by the political elites, that are symptomatic of representative democracy, but also in the capitalist class.  If this were to be proved the case, then the elites meet the full requirements for a group to be powerful, “resources and unity,” and would threaten the effectiveness or success of democracy.  The extent that this threat, based on the possible causes and perceived “degree of business unity” the topic of four contemporary theories regarding corporate power and democracy, highlighted by Mark S. Mizruchi and Deborah M. Bey and discussed below. (Mizruchi and Bey, 2005,312)

The “Elite Theory,” by G. William Domhoff, posited “that a power elite, drawn from the social upper class, corporate leaders, and officials of policy-making organizations, collectively dominates American politics,” and that all of the unifying traits mentioned earlier are, in fact, present.  However, despite many revisions and the sophistication in Domhoff’s theories, he points to actions by the state that are opposed by business and those that they advocate as both being in the interest of business, and neither, according to Domhoff, detract from the “view that the elite perpetually dominates” and “thus raises questions about nonfalsifiability” and the overall legitimacy of this theory.(Mizruchi and Bey, 2005, 323)

The next two theories are best understood in the context of the “Berle and Means Thesis,” which basically states that “because of the large and increasing size of corporations, and because of the consequent difficulty of maintaining substantial family holdings in individual firms, stock holdings in large U.S. corporations gradually dispersed.  The consequence of this dispersal…was the usurpation..of power by the firm’s managers.  These managers…were viewed as a self-perpetuating oligarchy, unaccountable to the owners who had elected them.” (Mizruchi and Bey, 2005, 312)  With this in mind, Michael Useem, found that since the “largest single block of stockholders by the 1990s was not individuals,…but institutional investors,” they were the dominant power holders in business.(Mizruchi and Bey, 2005, 324)  Useem, however, made no claim to their unity and so his theory mostly contradicts that the managers are unaccountable, at least in recent decades, due to the influence of institutional investors.  The third theory, proposed by Gerald Davis, also attempts to negate the Berle and Means thesis by claiming that it makes no difference if a corporation is owner or manager run since they both must conform to “pressure from an amorphous, but no less real, source,” the “capital market.” (Mizruchi and Bey, 2005, 324-325)  The elites are “compelled to vow allegiance to ‘shareholder value'” and their “structures and policies are driven by anticipations of their economic consequences.” (Mizruchi and Bey, 2005, 325)  However, while Davis tries to use this observation to show a unity of purpose and political domination by the anonymous members of the “capital market,” but the very nature of this group, where no individuals, elite or otherwise, or their interests can be specified indicates that Davis’s theory simply creates a generalization so broad that almost anyone could be a part of it.  If that is the case, then the dispersal and division of interests that would exist in the “capital market” would actually be a boon to democracy if they were the truly the dominating force.

The fourth theory is conceptually different than the previous theories due to its international scale.  “Several scholars have suggested that with the increasing globalization of economic activity” and “the extent to which corporations have the ability to move capital outside their borders” giving “them leverage over their host states…national governments have lost the ability to regulate their own business communities.” (Mizruchi and Bey, 2005, 329)  This would certainly appear to diminish the power of national governments, but it does not necessarily mean an increase in corporate power, or the general business community, since that would still require unity in effort, which faces all of the difficulties present in the earlier theories.

I would like to close with my theory on corporate power and politics.  The first part explains why corporate interests seem to be advanced, overall, in spite of real conflicting interests within the corporate community. The state holds a monopoly over “legal” coercion and this is its only real service it has to offer on the marketplace.  The “passive electorate” is not as concerned, or as dependent a customer, of government coercion; whereas, corporations are interested in using state coercion to prevent or reduce competition and to advance its interests.  So overall, the government responds to the market for coercion, acting in the interests of various corporate entities who are most able to afford it, in means of resources and influence to protect the political elites’ privileges.  This does not require unity from the various corporate interests and the inconsistency of the policies enforced through state coercion seem to support that there is no need for unity from the corporate community in order for the state to act generally in their favor.  This on its own is destructive to society and damaging to the democratic ideal but does not cause a complete collapse of they system because of the lack of unity.  However, this trend may very likely lead to the second part of this theory which will lead to the collapse of democracy.  As the state continues to use coercion to choose the “winners” and “losers”, whether among the corporate community or between the corporate community and the rest of the electorate, there will be fewer and fewer parties competing or seeking the state’s coercive service.  Common sense dictates that it is easier for a few to coalesce, than the many, and so this increased centralization of both political and corporate elites will make it much more likely that complete unity, and the destruction of democracy will occur.

Mizruchi, M.S., & Bey, D.M. (2005). Rule Making, Rule Breaking, and Power. In T.A. Janoski, A.M. Hicks, & M.A. Schwartz (Eds.), Handbook of Political Sociology: States, Civil Societies, and Globalization (310-330). Cambridge, UK: Cambridge University Press.

Political Participation: Consent of the Governed

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Recent response in a class concerning political participation, centralization of government, and consent of the governed:

The “reversal” of the “amount of responsibilities held by each level government” is going to be very difficult to bring about under the current system and with the history of the United States. Since the Civil War the federal government no longer depends on consent of the governed. While everyone should agree that the Southern states were wrong to insist on continuing the institution of slavery, the implications of the Civil War are far more universal than a single issue. Since that war, states no longer have the illusion that they could withdrawal their consent from a contractual agreement their predecessors entered into and if you are not able to withdrawal consent then you are not able to truly give it. The consequences of this is that the states no longer act as a true check against the expansion of federal government since they are no longer competitive with it, but are in fact subordinated to it. As long as the states to do hold the power to check the federal government either through nullification, refusal to enforce federal laws, or through the possibility of peaceful secession, then there will be no way to reverse the roles as you advocate.

Mainstream political thinkers call nullification and secession extreme views but they were tools often utilized by the states prior to the civil war. While the attempted secession of the South may have been the first time a group of states went through with secession, there were several other incidents where groups of states threatened to secede in order to protest and influence the federal government. Also, just because one advocates the right to secede” does not mean that one advocates actual secession. The mere possibility or threat of secession would be enough to check the federal governments power in most cases. As for nullification, Thomas Jefferson and James Madison passed resolutions in Kentucky and Virginia stating the right of states to judge the constitutionality of laws passed by the federal government and to refuse to enforce those laws they viewed as unconstitutional.

These principles can be applied all the way down to the individual level. Many western philosophers have recognized a “consent” problem with any government body, since it holds a monopoly on coercive power in a geographic area and the residents in that location have no real option in giving or withdrawing their consent. However, they try and rationalize it through the idea of “implied consent.” In other words so long as the people are not in revolution it can be taken for granted that they continue to consent to being governed by the current political establishment. This is also how they bypass reaffirming consent from generation to generation, since even if we assume that the founding generation actually all consented to the establishment of a government it does not follow that their children and grandchildren also agreed to the formation so their consent was never provided. People confuse the act of voting or other forms of political participation as giving consent to be governed by the current system, but the boundaries of political participation is only to influence “how” you are governed not “if” or by “whom”, you are governed. While many people may not have explicitly realized this consent problem they still feel the restrictions of their choices to those provided by the current political paradigm and if their will lies outside of that paradigm they quickly lose incentive to participate in the political process.

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Political Participation: Reasons for its Decline

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Response in recent class on why political participation is in decline:

In a democracy, the government draw its sense of legitimacy from popular sovereignty, the idea of acting in accordance with the general will. However, if the citizens stop participating in the political system, for example not voting, then that system begins to lose legitimacy since it is hard for it to claim that it has a political mandate of the majority of the people. The United States is currently heading in this direction. A recent international survey cited in “Money, Participation, and Votes” by Jeff Manza et al, showed that “turnout in U.S. national elections ranks an extraordinary 138th among 170 countries that hold elections.” (2005, p. 208) National election results show that voting participation among the voting age population is slightly over half on Presidential election years and just slightly over one-third during mid term elections. This coupled with job approval ratings for the President below 50% and for Congress below 25% (www.realclearpolitics.com) and a grim picture for America’s political system starts to emerge. Also, there appears to be a trend in the increase of citizens who self-report being unaffiliated, independent, or supporting third-parties, none of which have noticeable, let alone proportional to their support, representation in the government. One of the questions Jeff Manza, Clem Brooks, and Michael Sauder try and answer is what is causing this decrease in political participation.

Manza et al, broke the sources of political participation, or lack there of, into two categories: individual sources based primarily on “social cleavage” and institutional sources, effects that are inherent to political system itself. “Social cleavages” are divisions in society “stemming from race/ethnicity, class, gender, religion, language, or national identity” that “give rise to groups of people with shared interests or statuses.” (Manza et al, 2005, p. 205-206) However, the studies in this area are full of statistical uncertainties and often contradict each other leading the authors to “conclude that there is at best only modest evidence for an increase in social cleavage impacts on turnout.” (p. 213) Instead it appears more likely that the American citizens’ “lack of interest in politics, low levels of political efficacy, or apparent apathy toward election outcomes may reflect substantive views of the party system or the character of elite political conflicts.” (p. 210)

What are the flaws inherent to the American political system that causes such political apathy. The likely culprits are increased centralization, single-member districts, two party system, amount of representation, and perceived illegitimacy of the current role of government. As government has become more centralized and most important decisions that impact citizens’ lives being made at higher levels, the individual’s influence drastically decreases. His voice is now 1/230 million as opposed to 1/10-100 thousand at the local level. This sense of having the impact of a grain of sand on a beach could lead to the economic calculation that political participation is not worth one’s time or effort. Another source of disillusionment with the political system is the single-member district, which inevitably leads to a two party system. The lack of variety in candidates or parties could lead many individuals to believe there is no one that represents their views even running for office. Also, since 1920 Congress has frozen the number of representatives at 435, in spite of the fact that the population has increased dramatically. As each member now represents hundreds of thousands people, their constituents feel as though they are lost at sea when it comes to influencing their representatives. Finally, many individuals believe that the government is not acting in a beneficial role in society and refuse to provide legitimacy for the very institution they oppose by participating in it.

Manza, J., Brooks, C.,& Sauder, M. (2005). Money, Participation, and Votes: Social Cleavages and Electoral Politics. In T.A. Janoski, A.M. Hicks, & M.A. Schwartz (Eds.), Handbook of Political Sociology: States, Civil Societies, and Globalization (33-53). Cambridge, UK: Cambridge University Press.
President Obama Job Approval. Retrieved March 23, 2011 from http://www.realclearpolitics.com/
Congressional Job Approval. Retrieved March 23, 2011 from http://www.realclearpolitics.com/

In a democracy, the government draw its sense of legitimacy from popular sovereignty, the idea of acting in accordance with the general will. However, if the citizens stop participating in the political system, for example not voting, then that system begins to lose legitimacy since it is hard for it to claim that it has a political mandate of the majority of the people. The United States is currently heading in this direction. A recent international survey cited in “Money, Participation, and Votes” by Jeff Manza et al, showed that “turnout in U.S. national elections ranks an extraordinary 138th among 170 countries that hold elections.” (2005, p. 208) National election results show that voting participation among the voting age population is slightly over half on Presidential election years and just slightly over one-third during mid term elections. This coupled with job approval ratings for the President below 50% and for Congress below 25% (www.realclearpolitics.com) and a grim picture for America’s political system starts to emerge. Also, there appears to be a trend in the increase of citizens who self-report being unaffiliated, independent, or supporting third-parties, none of which have noticeable, let alone proportional to their support, representation in the government. One of the questions Jeff Manza, Clem Brooks, and Michael Sauder try and answer is what is causing this decrease in political participation.

Manza et al, broke the sources of political participation, or lack there of, into two categories: individual sources based primarily on “social cleavage” and institutional sources, effects that are inherent to political system itself. “Social cleavages” are divisions in society “stemming from race/ethnicity, class, gender, religion, language, or national identity” that “give rise to groups of people with shared interests or statuses.” (Manza et al, 2005, p. 205-206# However, the studies in this area are full of statistical uncertainties and often contradict each other leading the authors to “conclude that there is at best only modest evidence for an increase in social cleavage impacts on turnout.” #p. 213# Instead it appears more likely that the American citizens’ “lack of interest in politics, low levels of political efficacy, or apparent apathy toward election outcomes may reflect substantive views of the party system or the character of elite political conflicts.” #p. 210#

What are the flaws inherent to the American political system that causes such political apathy. The likely culprits are increased centralization, single-member districts, two party system, amount of representation, and perceived illegitimacy of the current role of government. As government has become more centralized and most important decisions that impact citizens’ lives being made at higher levels, the individual’s influence drastically decreases. His voice is now 1/230 million as opposed to 1/10-100 thousand at the local level. This sense of having the impact of a grain of sand on a beach could lead to the economic calculation that political participation is not worth one’s time or effort. Another source of disillusionment with the political system is the single-member district, which inevitably leads to a two party system. The lack of variety in candidates or parties could lead many individuals to believe there is no one that represents their views even running for office. Also, since 1920 Congress has frozen the number of representatives at 435, in spite of the fact that the population has increased dramatically. As each member now represents hundreds of thousands people, their constituents feel as though they are lost at sea when it comes to influencing their representatives. Finally, many individuals believe that the government is not acting in a beneficial role in society and refuse to provide legitimacy for the very institution they oppose by participating in it.

Manza, J., Brooks, C.,& Sauder, M. #2005#. Money, Participation, and Votes: Social Cleavages and Electoral Politics. In T.A. Janoski, A.M. Hicks, & M.A. Schwartz #Eds.#, Handbook of Political Sociology: States, Civil Societies, and Globalization #33-53#. Cambridge, UK: Cambridge University Press.
President Obama Job Approval. Retrieved March 23, 2011 from http://www.realclearpolitics.com/
Congressional Job Approval. Retrieved March 23, 2011 from http://www.realclearpolitics.com/

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Nationalism and Democracy: The Unintended Consequence of Decivilizaiton

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Below is a response I posted in one of my classes:

The Treaty of Westphalia and the American Revolution marked another shift as well that is directly tied to the concept of Nationalism and can help explain the problems that the critics associate with it: “war, poverty, exploitation, colonialism, terrorism” and crime.  They marked the shift from monarchical government, where the legitimacy of power was gained through divine sovereignty, to democratic government, where the legitimacy comes from popular sovereignty.  Both forms require a monopoly on coercion over a geographic area, but the irony is that the form of government that appears more benevolent and fair-minded to its subjects, democracy, is actually equally or even more damaging to the societies who live under them.  The reason being that monarchs were seen as coercive and a burden on their subjects and thus much more susceptible to revolution; whereas, democracy takes “privileges, discrimination, and protectionism” that was once restricted to “princes and nobles” and opens them up to “be exercised and accorded to everyone.” (Hoppe, 2007, 83)  Nationalism is then the concept of identifying with the State, making one inseparable from it.  The groups in the text still apply here as each type: “individualistic and civic”, “collectivist and civic”, and collectivist and ethnic” (Greenfield & Eastwood, 2005, 256) describe who the privileges etc. can be accorded to and who will identify with the state, practice nationalism.  It follows then that any attack on the state will be viewed by each respective group as an attack on their perceived current or potential power and so resistance will be prevented or crushed in a decentralized manner through the nationalistic groups, protecting and adding legitimacy to the central government.

Nationalism and war: Total war,war on the entire population of a state vs war between just the militaries, is the result of all of the citizenry, or the various groups depending on the type of nationalism, identifying with the state.  In the age of monarchies, conflicts were “merely violent dynastic property disputes,” that could be “resolved through acts of territorial occupation;” however, modern wars have “become battles between different ways of life, which can only be resolved through cultural, linguistic, or religious domination and subjugation (or extermination).” (Hoppe, 2007, 37)  When there is no way to separate the populations from the state, due to nationalism, the wars have to be between the populations.

Nationalism and terrorism: Unlike the text, it does not appear to me that terrorism is the tactic used by people who subscribe to nationalism, but the tactic of those who do not identify with a state to use against those who subscribe to nationalism.  Those who use terrorist tactics see the citizenry as inseparable from the state and as the source of power and legitimacy for the state whose course they wish to change. This leads them to believe that tactical influence and victory can be gained by attacking this source of power, the citizenry, as opposed to attacking the State directly.

Nationalism and Exploitation/colonialism: Since the citizenry identify with the State and entry into positions of power are available to the citizenry, “everyone is permitted to openly express his desire for other men’s property.” (Hoppe, 2007, 87)  This can be through advocating redistributional policies within the population (exploitation) or through advocating territorial expansion in order to take property from outside the population (colonialism) and will be supported by the majority who see the gains of the State as their gains, or due to their hope to eventually enter into a position of power themselves and have the property available to achieve their own ends.

Nationalism and poverty/crime: The more general and damaging effect of nationalism is that it creates a higher time preference (in economics higher time preference refers wanting things sooner; a more short term outlook for both goals and consequences).  This is due to the uncertainty caused by mass amounts of legislation and regulation that results from the increased legitimacy granted to States of nationalistic populations and from the disincentive to accumulate capital due to increased exploitation/property redistribution that occurs for reasons mentioned above.  The resulting decivilization caused by higher time preference is a complex process to explain here but I will use the conclusion from the Chapter, “On Time Preference, Government, and the Process of Decivilization” from Hoppe’s “Democracy: The God that Failed” to sum up the effects:

“…as far as government is concerned, democratic republicanism [nationalism] produced communism (and with this public slavery and government sponsored mass murder even in peacetime), fascism, national socialism and, lastly and most enduringly, social democracy (‘liberalism’).  Compulsory military service has become almost universal, foreign and civil wars have increased in frequency and in brutality, and in the process of political centralization has advanced further than ever.  Internally, democratic republicanism [nationalism] has led to permanently rising taxes, debts, and public employment.  It has led to the destruction of the gold standard, unparalleled paper-money inflation, and increased protectionism and migration controls.  Even the most fundamental private law provision have been perverted by an unabating flood of legislation and regulation.    Simultaneously, as regards civil society, the institutions of marriage and family have been increasingly weakened, the number of children has declined, and the rates of divorce, illegitimacy, single parenthood, singledom, and abortion have increased.  Rather than rising with rising incomes, savings rates have been stagnating or even falling…And the rates of crime, structural unemployment, welfare dependency, parasitism, negligence, recklessness, incivility, psychopathy, and hedonism have increased.” (Hoppe, 2007, 42-43)

Greenfield, L. & Eastwood, J.(2005). Rule Making, Rule Breaking, and Power. In T.A. Janoski, A.M. Hicks, & M.A. Schwartz (Eds.), Handbook of Political Sociology: States, Civil Societies, and Globalization (33-53). Cambridge, UK: Cambridge University Press.

Hoppes, H.H. (2007) Democracy: The God that Failed.New Brunswick, New Jersey: Transaction Publishers.

Defining Power: Coercion vs Voluntary Cooperation

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Recent Essay for political sociology class defining power:

Power may be better understood as coercion, to differentiate from natural, electrical, or even Bertrand Russel’s definition (as cited in Janoski, 2005) as “simply the capicity to realize ends” by the individual. To treat power as a synonym for coercion would fit the definitions provided by Max Weber (as cited in Janoski,2005) as “the chance of a man or a number of men to realize their own will in a social action even against the resistance of others who are participating in the action.” The other similar definitions cited in the text (Janoski, 2005) correctly state this kind of power leads to “zero-sum” contests and is “thus inextricably linked with conflict in social life”; however, the application of the definition seems overly broad to include any type of influence, dependence, or interaction between individuals. This view presents a very cynical take on human nature that casts every relationship and every type of coordination or interaction between individuals with the roles of exploiter and exploited. Not only is this overly broad application cynical but it also diffuses any analysis and makes extracting any concrete principles regarding the concept of power nearly impossible since this application makes power “sociologically amorphous” since “all conceivable qualities of a person and all conceivable combinations of circumstances may put him in a position to impose his will in a given situation.” (Max Weber as cited in Janoski, 2005)

Coercion, the use of force explicitly or implicitly, is only one way individuals and groups interact with each other and will inevitably lead to “zero-sum” contests but individuals and groups can also interact through voluntary cooperation, in which case they will be mutual beneficiaries and cast off the doomed outlook that every relationship is that of “exploiter” and “exploited.” Even if a disinterested third party finds the interdependence of various relationships to be unbalanced, so long as it is voluntary each party involved in the interaction will be exchanging some good, service, etc that they value less for one that they value or more or else they would withdrawal their participation, absent coercion.

With this definition of power, it is clear that power is the very essence of politics. “The modern state is a compulsory association which organizes domination.” (Weber as cited in Janoski, 2005) The state is power, or coercion, incarnate. The difference between state power and individuals exercising power, though, is that state power has been legitimized by appealing to divine sovereignty, historically, or popular sovereignty, by wrapping itself in the enigmatic “general will.” In all the examples of exploiter/exploited relationships provided in the text one can easily find evidence of explicit coercion of one individual or group over another, which would be condemned by most any observer, or with a little more effort be traced to the implicit coercion of the laws, regulations, influence, and support of the state lingering in the shadows of the interaction, choosing the winners and losers in relationships that are no longer free.

 

Janoski, Thomas. (2005). Handbook of Political Sociology: States, Civil Societies, and Globalization. Cambridge University Press.

Filed under Philosophy, Politics

Monopoly and Competition: Government Intervention and its Effects on the Free Market

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One of the roles of government, debated even among those of a libertarian or small government perspective, is that of regulating monopolies and ensuring competition. On a larger political scale, the debate may focus on how free or how socialized should a market be, but among those that believe the markets should be as free as possible there is still concern over monopoly practices and how the government could be used as a tool to respond to them. The first step in understanding and forming conclusions in this debate is to determine a definition of monopoly. The three offered here are: One seller or producer of a good or service; the establishment of a monopoly price; and a firm or corporation that has been granted market power and special status by the government, either directly or indirectly. Also, the requirements for competition must be established, which economic textbooks may point to as: many small buyers and sellers; standardized product; and no barriers to entry or exit.1 After close inspection of the definitions of monopoly and the textbook requirements for competition, I hope to demonstrate that “barriers to entry or exit” are the only true requirement to competition and that all barriers are due to coercion, either from government or criminal activity among businesses and individuals.

The first definition of monopoly is that of one seller or producer of a good or service. This is the most literal definition (“monos” means “only and “polein” means “to sell”) and the most common understanding of the word monopoly. While this is a very clear cut and precise definition of monopoly its application is much less so and its use to justify government intervention is even more hazy. The application of this definition becomes difficult when one has to determine what constitutes a single product or service. Since there will be some sort of differentiation between every product offered by different people one could rationally claim that everyone is a monopolist. For example, while Hershey’s Chocolate company may not be a monopolist of chocolate they are monopolists of “Hershey’s Kisses” and John’s doctor is a monopolist of medical services to John. This is further complicated if we accept that fact that the point that the differentiation is substantial to lead to a product being categorized by a different product is solely in the mind of the consumer and can not be defined by any specific attributes or by committee. The second flaw with the use of this definition is when it is used to justify government intervention in the markets based on misconceptions of individual rights and freedom. While individuals do have the freedom to act on available choices they are not entitled to any certain number of choices. If there truly was only the choice of purchasing a product or service from one producer or not purchasing it at all then the individual is free to act on that choice, not require more choices be made available to him. Murray Rothbard uses the example of “Crusoe and Friday bargaining on a desert island” where they “have very little range or power of choice; their power of substitution is limited. Yet if neither man interferes with the other’s person or property, each one is absolutely free. To argue otherwise is to adopt the fallacy of confusing freedom with abundance or range of choice. No individual producer is or can be responsible for other people’s power to substitute.”2

The second definition, achieving monopoly price is explained best by Ludwig von Mises: “If conditions are such that the monopolist can secure higher net proceeds by selling a smaller quantity of his product at a higher price than by selling a greater quantity of his supply at a lower price, there emerges a monopoly price higher than the potential market price would have been in the absence of monopoly.”3 The concerns raised by the proponents of this defintion are that a single producer or a cartel made up of a few producers will restrict supply in order to gain increased profit margins at a higher price point on the supply-demand curve. However, this will only be profitable for products or services whose prices are inelastic above the “theoretical” competitive price. The flaw in this defintion is determining “competitive price” versus “monopoly price.” Since in the free, or unhampered, market every seller will “absolute control…over the price he will attempt to charge for any particular good…the question is whether he can find any buyer at that price. Similarly,…any buyer can set any price at which he will purchase a certain good; the question is whther he can find a seller at that price.”4 Naturally, sellers will seek the highest price and consumers will seek the lowest price and whatever price they agree on, absent coercion, is the competitive price. Along the same line, how would one determine if the producer was moving from a “sub competitive price” to the competitive price for their goods as opposed to moving from the competitive price to a monopoly price. The “demand curve is not simply ‘given’ to a producer, but must be estimated and discovered” and any restriction may simply be a correction of past supply to demand errors by the producer.5 These flaws lead to the conclusion that there can be no definable monopoly price on the free market since all prices are based on free-exchange between buyer and seller and whatever terms they come to are by definition the competitive price.

The third definition of monopoly is the original definition of government granted, direct or indirect, market power or protected status. Lord Coke, a definitive source of Common Law in 17th Century England, defined monopoly as “an institution or allowance by the king, by his grant, commission, or otherwise . . . to any person or persons, bodies politic or corporate, for the sole buying, selling, making, working, or using of anything, whereby any person or persons, bodies politic or corporate, are sought to be restrained of any freedom or liberty that they had before, or hindered in their lawful trade.”6 The formation of monopolies and the negative consequences of monopoly power is made possible only due to government intervention and it is therefore ironic that one of the few areas where limited government advocates tolerate government intervention is in the regulation of monopolies. Monopolies are created through barriers to entry into their market and government is the creator of these barriers, which include explicit grants of monopoly status, in industries deemed “public utilities” or “natural monopolies”, patents, license requirements, and economies of scale.7 Another barrier is the entire system of corporatism, the alliance between big business and government to create regulations and other burdens on new entrants into the market in order to hamper competition.

The most obvious, and accepted as necessary by some, way the government creates monopolies is by granting exclusive franchises to industries deemed “public utilities.” Some common examples have been energy providers (gas and electric), telephone service providers, and cable tv. The rationalization used is that certain industries, due to high fixed costs, economies of scale, and land usage limitations, are better served by having a single provider. The conclusion is that government should choose a single provider and protect them from competition while at the same time heavily regulating the selected monopoly to prevent monopoly pricing and pass the savings of the increased efficiency on to the customer. However, history does not seem to support this theory. Many industries that claim they are “public utilities” were competitive in the past or became competitive after time spent with protected monopoly status and the customer did not see great advantage in the monopoly years, especially when taxes used to subsidize the utilities are taken into account and other government intervention is not present in the competitive years. “In one of the first statistical studies of the effects of rate regulation in the electric utilities industry, published in 1962, George Stigler and Claire Friedland found no significant differences in prices and profits of utilities with and without regulatory commissions from 1917 to 1932.”8 Also, substitutes or alternative technology prevents the formation of “natural monopolies” on the free market. For example, when three competing gas companies tried to merge in 1888, an inventor named Thomas Edison “introduced the electric light which threatened the existence of all gas companies” and while all had “heavy fixed costs which led to economies of scale…no free-market or ‘natural’ monopoly ever materialized.”9 In 1940, economist Horace M. Gray noted that “public utility status was to be the haven of refuge for all aspiring monopolists,” to include, “radio, real estate, milk, air transport, coal, oil, and agricultural industries…who found it too difficult, too costly, or too precarious” otherwise. The label of “public utility” is arbitrary and history has shown that government designated monopolies to do serve the public well and stifle innovation and technological progress as well as violate the rights of entrepreneurs who wish to enter protected industries.

One of the first industries to be deemed a “natural monopoly” or “public utility” was the telecommunications industry, led by AT&T. Initially the monopoly was due to patents that Alexander Graham Bell held from 1876 to 1894. During this time period AT&T held between 85-100 percent of the market power for telephone systems and adoption was slow with average daily calls per 1,000 people increasing from 4.8 in 1880 to only 37 in 1895; the number of telephones per 1,000 people also increased slowly from 1.1 in 1880 to 4.8 in 1895. However, after the patents expired and competition was able to set in daily calls per 1,000 jumped from 37 in 1895 to 391.4 in 1910 and telephones per 1,000 people also increased much more rapidly, going from 4.8 in 1895 to 82 in 1910.10 The government, however, did not see this competition and rapid expansion of services and options as a good thing, instead they saw it as “duplicative,” “destructive,” and “wasteful” and during a Senate Commerce Committee hearing in 1921 it was stated that “telephoning is a natural monopoly.”11 This was in spite of the apparent boom in competitors and service. AT&T lobbied for this “natural” monopolization and put itself “squarely behind government regulation, as the quid pro quo for avoiding competition.”12

From the AT&T case we can see that it was able to form its original monopoly, before the government explicitly granted it monopoly status, through another government barrier to competition, patents. Patents are probably the most common and most accepted, among capitalists, form of government barriers to competition since they supposedly protect the innovations of individuals and allow them to reap the benefits of research, investment and ingenuity without someone else profiting from an idea they did not share the costs in discovering. However, there is strong evidence that patents are unnecessary and in fact stifle innovation instead of promoting it as intended. The telephone industry demonstrated this earlier but another example would be in the field of steam engines and steam power. In 1768, James Watts patented the steam engine and used his political clout to extend the patents until 1800. He aggressively pursued his competitors with patent violations and prevented many innovations from taking place in the area of steam power or improvements in the steam engine. As a result, “during the period of Watt’s patents, the United Kingdom added about 750 horsepower of steam engines per year. In the thirty years following Watt’s patents, additional horsepower was added at a rate of more than 4,000 per year. Moreover, the fuel efficiency of steam engines changed little during the period of Watt’s patent; however between 1810 and 1835 it is estimated to have increased by a factor of five.”13 The book, Against Intellectual Monopoly, documents many examples like this in almost all fields. Without patents, the original innovators will still find advantage since people are only likely to imitate successful innovations that would mean the original innovators would have time to establish themselves and gain market power and brand name recognition before competitors really started entering the market.

The requirement of Licenses to conduct a particular type of business or to work in a particular field are another widely accepted form of government intervention that creates a barrier to entry for potential competition. One of the reasons for this is that licenses are not sold to the public as protection for existing businesses from potential competitors or as a restriction on the supply of labor to artificially raise wages above market level for favored professions, but instead is billed as a means to protect the consumer by ensuring quality service. However, just like the other barriers to competition, licenses, when required by law, do more harm to the consumer by reducing available options when there is a strict quota on the number of licenses available or when smaller competitors can not afford licensing fees; monopoly pricing due to cartelization since “the governmental administration of licensing is almost invariably in the hands of members of the trade”14 who have an obvious interest in limiting entry into their field to individuals who are of similar mind to keep prices higher.

All of the barriers mentioned so far and others have become part of the system of corporatism that is actually the dominant force in US and western markets, not capitalism. The high fixed price that leads to economies of scale and prevents smaller businesses from competing is government. “It is no surprise, then, that throughout U.S. history corporations have been overwhelmingly hostile to the free market. Indeed, most of the existing regulatory apparatus–including those regulations widely misperceived as restraints on corporate power–were vigorously supported, lobbied for, and in some cases even drafted by the corporate elite.”15 In this essay we have mostly focused on the direct barriers to competition placed by the government but there are also many less obvious ways that government intervention helps favored corporations such as inflationary credit expansion, where the first to receive the new dollars will get to use them before the inflationary effects kick in and corporate law itself that allows the individuals who act, or make decisions, in a business to separate themselves from the liabilities involved with those decisions causing a serious accountability issue in our markets today. A “corporation is an artificial being, invisible, intangible, and existing only in contemplation of the law.”16 This arbitrary grant of artificial personhood status to businesses is yet another barrier to free competition and a fraud is committed when corporate law is presented as part of capitalism and the free market or as advantageous to consumers.

In conclusion, monopolies, oligopolies, unnaturally high market concentrations all stem from government intervention into the free market placing various barriers to the entry and exit of competing businesses. This is done in the guise of regulating or promoting capitalism but is actually within a system of corporatism, the alliance of big business and big government. Big business works with big government to “socialize costs in exchange for a share of profits.”17 Big business also likes big government because “it has a competitive advantage over small business in doing business with it and negotiating favors. Big government, in turn, likes big business because it is manageable; it does what it is told.”18 This alliance has distorted our markets and increased the power of both partners at the expense of competition, consumers, and citizens.

1Jacqueline Brux, Economics Issues and Policy Fourth Edition, (Ohio: Cengage Learning, 2008), 246.

2Murray Rothbard, Man, Economy, and State: A Treatise on Economic Principles (Alabama: Ludwing von Mises Institute, 2004), 653.

3Ludwig von Mises, Human Action: A Treatise on Economics (Alabama: Ludwig von Mises Institute, 2008), 278

4Murray Rothbard, Man, Economy, and State: A Treatise on Economic Principles (Alabama: Ludwing von Mises Institute, 2004), 662.

5Ibid., 690

6 Quoted in Richard T. Ely and others, Outlines of Economics (3rd ed.; New York: Macmillan & Co., 1917), pp. 190–91.

7Jacqueline Brux, Economics Issues and Policy Fourth Edition, (Ohio: Cengage Learning, 2008), 251-253.

8Thomas DiLorenzo, “The Myth of Natural Monopoly”, The Review of Austrian Economics Vol.9, No.2 (1996), 49-50.

9Ibid., 48

10Adam Thierer, “Unnatural Monopoly: Critical Moments in the Development of the Bell System Monopoly”, The Cato Journal Vol. 14 No. 2 (Fall, 1994)

11Ibid.

12Ibid.

13Michele Boldrin, David Levine, Against Intellectual Monopoly (New York: Cambridge University Press, 2008), 1.

14Murray Rothbard, Man, Economy, and State: A Treatise on Economic Principles (Alabama: Ludwing von Mises Institute, 2004), 1095.

15Roderick Long, “Corporations Versus the Market; Or, Whip Conflation Now”, Cato Unbound, 10 November 2008.

16Frank van Dun, “Is the Corporation a Free-Market Institution?,” Ideas on Liberty, March 2003.

17Robert Locke, “What is American Corporatism?,”, Front Page Magazine, 13 September 2002.

18Ibid.

Flaws of Equal Employment Opportunity

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The Civil Rights Act of 1964 and the many following bills that modified and added to it has been a great affront to property rights and by extension individual sovereignty. Whether we examine the impacts of “equality of outcome” the Civil Rights Act strives to implement or we examine how the act contradicts core principles, such as an individual’s right to their own person and the fruits of their labor, we will find that the government intervention required by the Civil Rights Act faces serious challenges on both sides of the equation, principles and practical effects.

The Civil Rights Act of 1964, specifically Title VII, prohibited discrimination by employers, with over 15 employees, on the basis of race, color, religion, sex, national origin, or by association with an individual of those factors. In 1967, persons over the age became a protected group; in 1990, persons with disabilities gained protected status; the Genetic Information Nondiscrimination Act of 2008 prohibited discrimination based on genetic information; and all of these bills protect individuals from retaliatory discrimination. (1)

If one accepts that an individual has the right to his own person and the fruits of his labor then one can not be in agreement with this legislation and remain consistent in their principles. The concept of this right is a “negative” one or a right to be free from coercion in regards to your person and the fruits of your labor which creates a situation where no one has the “right” to “compel someone to do a positive act, for in that case the compulsion violates the right of person or property of the individual being coerced.” (2) Many recognize the impracticality of violating this principle when it is not applied to employers. For example, while many find racism to be abhorrent they would not necessarily advocate that individuals be forced to patronize minority owned businesses equally and an ardent feminist would find it difficult that men looking for jobs should be forced by threat of law to submit their resumes to equally qualified female employers. In the first case, many recognize that the consumer has the right to spend his money where he pleases regardless of motivations or character flaws and in the second instance most would see the flaw in coercing a person to apply or accept a job against their will. However, segments of our population choose to ignore these principles when it comes to employers. Is an employer’s person any less their own or is their money, representative of their property and the fruits of their labor, different than the property of the individuals seeking employment. I do not see how one can claim one and not the other without being disingenuous.

Milton Friedman argues that anti-discrimination laws are not necessary to achieve the goal. He states that, “a businessman or an entrepreneur who expresses preferences in his business activities that are not related to productive efficiency is at a disadvantage compared to other individuals who do not. Such an individual is an effect imposing higher costs on himself than are other individuals who do not have such preferences. Hence, in a free market they will tend to drive him out.”(3) Another practical issue with this legislation is that it uses often arbitrary standards in order to designate certain groups “oppressed” or of “minority” status. Our text points out that numbers are of little significance when designating a group a minority but instead their level of “access to positions of power, prestige, and status in society” should be the deciding factor. (4) What this will lead to is endless lobbying from all groups in an attempt to shred the label of “oppressor” in exchange for the benefits of being labeled “oppressed.” Rothbard points out that the different ways to categorize or class people is infinite and research can be done to demonstrate how they all face various barriers to the “access” mentioned above. He also note the impossible task of parodying this movement as a friend of his tried to do by arguing that short people, suffering from “heightism”, should be designated a minority or “oppressed class.” Unfortunately, he was beat by a serious undertaking to do just that by “a sociologist at Case-Western Reserve,” Professor Saul D. Feldman, who provided plenty of convincing research and evidence to back up his case. (5)

The principles of Title VII of the Civil Rights Act are perfectly acceptable from a moral standpoint. Employers are unwise to discriminate based on race, color, sex, religion, or national origin, but that does not give anyone the right to coerce them to act against their will or to release their property to individual’s not of their choosing. Consumers, employees, peers, etc. are free to boycott, ostracize, or shame employers who act reprehensibly but not coerce with threat of law/violence to act morally.

  1. Equal Employment Opportunity Commission,”Equal Employment Opportunity is The Law”; available from http://www.eeoc.gov/employers/upload/eeoc_self_print_poster.pdf; Internet; accessed 23 March 2010.
  2. Murray Rothbard, The Ethics of Liberty (New Jersey: New York University Press, 1998), 100.
  3. Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 2002), 109-110.
  4. Jacqueline M. Brux, Economic Issues & Policy (Ohio: Thomson Higher Education, 2008), 114
  5. Murray Rothbard, “Freedom, Inequality, primitivism and the Division of Labor”, available from http://mises.org/fipandol.asp; Internet; accessed 23 March 2010.

Retributive Punishment: Proportionality and Justice

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The way we punish criminals and restore justice is very important to our overall crime prevention strategy. It is important to establish a punitive system that will exact the right amount of punishment while also bringing about justice and restitution to the victim of the crime. A retributive punishment system, where the maximum punishment is proportional to the crime and the victim decides the final sentence for the aggressor would bring the goal of criminal punishment back to its rightful focus… justice for the victims of crime.

The “primacy of restitution to the victim” is an “ancient principle of law”, but “as the State monopolized the institution of punishment, so the rights of the injured were slowly separated from penal law.” (1)(2) This has led to the focus of “punishment” shifting from justice for the victims to the utilitarian purpose of deterrence or the “humanitarian” goal of “rehabilitation.” Both of these alternatives to justice are philosophically flawed if carried to their logical conclusions. The utilitarian goal of deterrence would justify “cruel and unusual” punishments, since it would be the most effective at deterring future criminals, as well as severely harsh punishments for minor crimes since justice or proportionality is not the goal. The humanitarian goal of rehabilitation, on the other hand, condemns the criminal to an “indeterminate” sentence– “to be determined at the Psychologist’s pleasure”– regardless of the crime and all at the expense of the victim, who pays taxes to support these rehabilitation efforts, with no restitution repaid to the victim or justice achieved on their behalf. Also, if rehabilitation is the sole goal of criminal punishment than a petty thief could theoretically be held much longer than a murderer if the thief is less willing to reform or not as capable of feigning rehabilitation compared to the murderer.

The way to truly pursue justice against the aggressor and on behalf of the victim would be to allow the victim to sentence the aggressor, up to a maximum punishment, once they have been found guilty. The punishment should be both proportionally retributive towards the criminal as well as include restitution for the victim, “two teeth for a tooth” concept of punishment. This is demonstrated most easily in the example of theft used by Murray Rothbard in his essay Punishment and Proportionality. Suppose a thief is found guilty of stealing $15,000 from Bob. We would hold that he must pay back the $15,000 he stole (restitution), but that is not punishment but simply restitution for the thief is no worse off than he was prior to the theft, so he should be forced to pay an additional $15,000 (plus police and court costs) to Bob so that he is deprived of the same liberty that he deprived Bob of (retribution). This is the concept that sets the proportional maximum that a victim may sentence a guilty criminal. However, the victim, since justice is theirs, should also be able to forgive the criminal in entirety or exercise partial forgiveness for whatever reason, philosophy, sympathy, monetary compensation, etc.

This legitimate sense of justice and retributive system of punishment will distribute punishment appropriately according to the level of harm done to the victims of the crime and the “two teeth for a tooth” concept upheld up to the desire of the victim should also act as a deterrent to criminals, even though that is not the primary goal.

(1) Rothbard, Murray. The Ethics of Liberty. New Jersy: New York University, 1998. (“Punishment and Proportionality“)

(2) William, Tallack. Reparation to the Injured and the Rights of the Victims of Crime to Compensation. London, 1900.

Filed under Crime, Law, Philosophy

Flaws of Social Security

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Here is an essay I recently wrote for one of my classes regarding Social Security.  The majority of my research and sources was through the book “The Roots of the Social Security Myth” which can be found here.

Social Securirity will likely be insolvent in the next couple of decades if it remains as is and some have suggested allowing individuals to invest some or all of their payroll taxes into private investment accounts or put another way, to stop coercing individuals to pay into a government run programs that uses the revenues collected from “new investors” to pay the benefits of “old investors”, a ponzi scheme of sorts. Social Security is an example of one of the many ways the government expanded its powers and intrusive nature after the great depression. It is also an example of government “double-speak” as it was sold to the public as one thing and actually legislated as another. The two contradicting narratives still continue today as most of the public tend to view social security the way its proponents want them to, as an inherent right earned through investment of their money that individuals can lay claim to in their retirement years. The reality of social security is starkly different and as long as we are operating under that fallacy no reform will be effective. The real answer is to give responsibility and their own money back to the individual and let them do as they wish.

The common view of social security is that is a type of insurance, where people pay in a certain amount and then receive their investment returned with interest when they retire. This is how it was sold to the public and we bought it. However, Roosevelt himself said the following about the payroll taxes and the motivations behind this public marketing scheme:

…those taxes were never a problem of economics.
They were politics all the way through.
We put those payroll contributions there so
as to give the contributors a legal, moral, and
political right to collect their pensions and
their unemployment benefits. With those taxes
in there, no damn politician can ever scrap my
Social Security program. (1)

However, the “legal, moral, and political right” were only marketing and not fact. This was made clear by Assistant Attorney General Robert Jackson arguing before the court in 1937:

…these benefits are in the nature of pensions or
gratuities. There is no contract created by
which any person becomes entitled as a matter
of right to sue the United States or to maintain
a claim for any particular sum of money. Not
only is there no contract implied but it is
expressly negated, because it is provided in
the Act, Section 1104, that it may be repealed,
altered, or amended in any of its provisions at
any time. This Court has held that a pension
granted by the Government is a matter of
bounty, that the pensioner has no legal right to
his pension, and that they may be given, withheld,
distributed, or recalled at the discretion
of Congress. (2)

The practical implications were also expressed in this letter from an individual who lost his social security when Congress changed the law to deny benefits to those who were self-employed making over a certain amoung:

My position is that Congress has violated the
sanctity of a contract, to which I am a party, . .
. and it is a well-established principle of law
that no valid contract can be altered or
amended without the consent of both contracting
parties. . . .
Since the inception of the plan I have paid
my premiums by payroll deductions until
April 1947, when it became necessary for me
to retire . . . from that time until January 1951 I
received the benefits to which I was entitled. I
engaged in business promptly thereafter as a
self-employed person . . . as self-employed
persons were not covered by the then existing
statute. I continued to receive my social-security
benefits until the new act.
The people who get social security paid for
it. It is their money, they invested it during all
the years to the social-security fund. The social
security is not a charity. It is a form of insurance.
How has the Government the right to
take the money away or to say how much
these people can or cannot earn? (3)

Social Security is a welfare program paid for in current taxes and a redistribution of wealth. The idea that it is a retirement insurance or account in any way owned or controlled or inherently due to the financiers, taxpayers, is a facade that makes it politically untouchable. This lie is compounded by the claim that payroll taxes are kept in a trust fund earning interest to pay beneficiaries. The books are cooked. The funds are used as general funds and replaced with government bonds. In other words, the government borrows money from itself promising to pay itself back with interest. How does the government pay interest…well since all of its money comes from taxpayers, the taxpayers pay the interest and pay back the government bonds or IOUs. All smoke and mirrors in order to protect this coercive and government expanding program.

The answer is not reform but to scrap Social Security altogether. It is not the federal governments place to ensure retirement for all. The private accounts would give the government a huge stake in the markets, where there political capital as well as individuals payroll taxes will be at risk. This will encourage further regulation and manipulation of industry to produce positive results for government retirement accounts. Also, the government will have $1 trillion plus dollars to influence the markets and the people involved in the markets. People should be responsible for themselves or suffer the consequences. Charities, friends and families can help pick up the slack.

1. Arthur M. Schlesinger, Jr., The Age of Roosevelt, vol. 2,
The Coming of the New Deal (Boston: Houghton Mifflin,
1958), p. 308.

2. 73U.S., Congress, Senate, Oral Arguments in Helvering et
al. v. Davis involving the Old-Age Benefit Provisions of the Social
Security Act Before the Supreme Court of the United States, May
5, 1937, S. Doc. 71, 75th Cong., 1st sess., 1937 qtd in “The Roots of the Social Security Myth” by John Attarian

3. Analysis of the Social Security System: Hearings
before a Subcommittee of the House Committee on Ways and
Means, 83rd Cong., 1st sess., 1953 qtd in “The Roots of the Social Security Myth.”

Filed under Economics, Politics

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