Escalating Political Violence in Sweden

A chilling wave of political violence is sweeping across Sweden. None of this makes it in to European or American mainstream media. This is a shame because the situation in Sweden is destabilizing rapidly. Here are some examples of what is going on right now.

On March 29 Dispatch International reported (with the website’s own rugged translation from Swedish):

It is 1 PM on Saturday 23 March, still a full hour yet until the Swedish Defence League (SDL) is to hold its support rally for a democratic and secular society with free expression. The leftist political partyVänsterpartiet stands perched at the statue of Swedish king Karl X, encouraging those assembled to give the demonstrators from nearby Möllevångstorget a warm welcome. They have barely unfolded their banner with the slogan ”No Breivik soldiers in our streets” before all hell breaks loose in Stortorget. As if on cue, one firecracker after another goes off, and the city squared is drowned in red/green Bengal flames, while the counter-demonstrators attack the riot fence, and with a deafening sound carry it 20-30 meters backwards. It is like being in a war zone, where one becomes worried about surviving it. Although hundreds of police officers are in the streets in order to ensure safety during the SDL rally, they seem taken by surprise. They have permitted the counter-demonstrators to walk up to the outer riot fence, and seem not to have imagined that the counter-demonstrators would  turn violent a full hour before the object of their hate, the SDL, was to appear.

The SDL members allegedly had to be transported out of the area under heavy police protection. It was only a matter of good luck that the rioters did not use anything more powerful than large, noisy and smoke-generating fireworks. That said, such devices can be dangerous as they are, and it is impossible to understand that the Swedish police tolerate their use in public, especially in situations like this one.

Barely a month later, Dispatch International reporter Ingrid Carlqvist – one of Sweden’s most experienced investigative journalists and co-founder of Dispatch International – had a terrifying experience while trying to cover a political event in the southern university city of Lund:

For more than 30 years, I have been a tough reporter who never hesitated to go on an assignment, no matter what was. I take journalism very seriously and know that when the media no longer write about what goes on in society, no longer scrutinize those in power, then  democracy is on the skids. This past Monday I encountered the end of my courage. Right in front of several police officers and ordinary citizens, I was hounded away from the gravel area in front of AF-Borgen in the Swedish city of Lund. Furious, masked and hateful “anti-racists” threatened me, pushed me around and forced me to leave the place. As photographer Roger Sahlström saw what was happening and caught one of the craziest attackers by his neck, two police officers finally reacted and came to our corner of the gravel area. But as soon as Roger let go of the demonstrator, they left again – leaving us to our fate. With a whole gang of spitting and extremely hateful gangsters in front of us, we were forced to give up. For the first time in my life, I left an assignment before it was complete. … The hatred, in particular the white hot unreasonable hatred, is what scares me. What kind of people are these? Where do they come from? What has happened to these young people who claim to be good ”anti-racists”, but behave as at any time they would throw themselves at me and tear me to shreds? Without hesitating. In spite of the presence of the police 20-30 meters away. But they do not see me. Or do they not care?

On May 1 the nationalist Party of the Swedes, with roots in Nazi movements, marched through the city of Jönköping. They were confronted by very aggressive activists, who made several serious attempts at penetrating police lines. Just like at the event in Malmö in March the activists threw fireworks and other objects at the participants in the march. The activists also set to cars on fire, one of which belonged to a high-ranking official of the Party of the Swedes. The following video gives a glimpse of what went on (go here for the original news report in Swedish). At about 0:35-0:40 two minor fireworks explosions can be heard, and at 0:52 a larger piece of fireworks can be seen burning on a side street. None of the fireworks reached the march, thanks only to aggressive barricading by riot police. However, in other news reports the police admit that their abilities to keep the activists from attaching the marchers were stretched to the limit:

Scenes like the ones in this video are now so common in Sweden that they don’t make national headlines unless a number of people are hospitalized as a result of the violence.

The violent events in the streets only scratch the surface of the political violence currently plaguing Swedish politics. Recently a former member of parliament for the Swedish Democrats, Mr. Erik Almqvist, decided to leave Sweden for fear of his own safety. Reports the Swedish website Avpixlat:

Former member of parliament for the Swedish Democrats, Erik Almqvist, announces that he is moving to Hungary. A main reason is that Almqvist is the subject of serious threats from hateful, violent leftist movements but is no longer eligible for personal protection from the parliamentary security service that he had while he was a member of parliament.

Mr. Almqvist’s party, the Swedish Democrats, is a patriotic party of the same brand as UKIP in Britain or FPÖ in Austria. It has nothing in common with the Nazi-rooted Party of the Swedes, except a skepticism toward immigration. However, while the Party of the Swedes are calling for ethnic cleansing in Sweden, the Swedish Democrats want to preserve Swedish culture and have a sensible level of immigration, tuned to what the country’s cultural, social and economic stability can absorb.

Ever since the Swedish Democrats made national headlines in 2006 by capturing many seats on city and county councils, their leading officials have been targeted by serious, politically driven and often very violent attacks. Officials of the Swedish Democrats have been assaulted in the public and at events organized by the party. National chairman Jimmie Åkesson admits to sleeping with a baseball bat next to his bed – despite the fact that he and many other party officials have bodyguards provided for them by the parliamentary security detail.

Many Swedish Democrat officials have also been attacked in their homes, including window smashing and arson attacks. One example is Mr. Ulf Prytz, precinct captain of the Swedish Democrats in the city of Ängelholm. On March 1 he was attacked in his own home. He was badly beaten, but recovers from the incident without permanent physical harm. However, in the weeks both before and after the assault Mr. Prytz has been the subject of various forms of threats and harassment. On May 1, two months after the assault in his home, Mr. Prytz once again finds himself on the receiving end of vicious violence, clearly related to his political activities:

A cabin belonging to Swedish Democrat official Ulf Prytz burned to the ground on Wednesday – one in a series of incidents directed against the Ängelholm politician this year. ‘It is terrifying and I am considering quitting politics altogether’ Ulf Prytz said the day after the fire. … There have been a lot of incidents, worse than what happened [on May 1]. Twelve difference incidents.

Due to the ongoing police investigation Mr. Prytz does not want to elaborate. We will, however, return to his case and other examples of political violence in Sweden. The situation is spinning out of control and it is no longer entirely certain that the country will be able to hold an entirely impartial national election in September next year. For the first time since parliamentary democracy came to Sweden there is a distinct possibility that political violence will compromise the integrity of the election.

Only Keynes Can Save Europe

Recently I have reported on the changing tone among Europe’s political leaders when it comes to austerity. The change came after the French government basically declared that it would not be able to unite around the same kind of job-destroying policies that the EU so viciously had forced upon France’s southern neighbors. But rather than admitting that their austerity policies have been a disaster for Europe, the Eurocrats simply shifted foot, declaring plainly that austerity had done its job.

Given the death of jobs and destruction of prosperity from the Aegean Sea to the Iberian peninsula, this is more than a little arrogant. It is political elitism coupled with a disdain for the lives of regular citizens.

It is, in one word, Eurotarianism.

If the EU Commission really cared about the citizens whose taxes are paying for their lavish lifestyle, they would pay a lot more attention to mundane things like, oh, the GDP growth rate of the euro zone. As technical and yawn-inspiring as that figure might be, it is still one of the best indicators of whether or not austerity is working. (Let’s not forget that Greece, Italy, Spain and Portugal are still enforcing austerity policies, despite the new words hot-airing out of the mouth of some Eurocrats.)

A good place for them to start learning about reality would be a recent article in Euractiv about the sluggish – to say the least – European economy:

The eurozone economy shows little sign of recovering before the year-end despite an easing of financial market conditions, European Central Bank Mario Draghi said … after interest rates were left at a record low. The ECB held its main rate at 0.75%, deferring any cut in borrowing costs … .

The common belief among parishioners of the Austrian school of economics is that so long as a government balances its budget a so called natural interest rate will emerge that will encourage entrepreneurs to invest and expand their production capacity. Regardless of the budgets of EU’s member states, if it was true that a low interest rate encourages investments, then a rate of 0.75 percent should have entrepreneurs all over Europe flocking to the banks.

Do you see that happening?

Neither does Euractiv, which reports that the ECB is also ready to keep interest rates down through its bond buying program:

The central bank has said it is ready to buy bonds of debt-strained governments such as Spain and Italy once they sign up to a European bailout programme with strict conditions, under a programme dubbed Outright Monetary Transactions (OMTs). So far no request has been made, but the announcement alone has calmed markets.

And is thereby keeping interest rates down. How surprising. The ECB has explicitly said that “we will use our money printers to churn out whatever trillions of euros it takes to buy every single treasury bond from Spain, Italy, Greece and Whateveristan, from now until Sweden freezes over”. When owners of even the junkiest of euro-denominated treasury bonds know that they can always get their money back, no matter how bad things get, then of course they will rest easier.

The problem is of course that at some point they will have had to print so much euros that owners of bonds outside the euro zone will want to secure the exchange rate of the currency. That becomes increasingly difficult if the ECB is going to flood the world with euros just to save its member states from the financial junk yard.

No one can say for sure when that point will come. Doomsday preachers have cast a spell on the U.S. dollar for years, yet it still stands relatively strong. That does not mean the doomsdayers are wrong – all it means is that we simply do not have enough examples of collapsing currencies to predict where either the Federal Reserve or the ECB will have printed too much money for their own good.

But long before we find that out, we will find out that the low interest rates the come with excessive money supply are not going to get the wheels turning in the economy. There is a very simple reason for that, which we will get to in a second. First, back to Euractiv:

Gloomy data this week indicated the eurozone economy will shrink in the fourth quarter, which the ECB could eventually respond to by cutting rates. Recent survey evidence gave no sign of improvement towards the end of the year and the risks surrounding the euro area remain on the downside, Draghi said. He signalled the ECB would downgrade its GDP forecasts next month, describing “a picture of weaker economies”, and said inflation would remain above the ECB’s target for the rest of the year, before falling below two percent during in 2013.

It is interesting that inflation is above two percent in an economy – the euro zone – that is at a complete standstill when it comes to GDP. While we will have to wait for the micro data behind the inflation number to know exactly where it comes from, my bet is that it is caused by tax increases and terminated government subsidies in austerity-ridden countries. The private sector is always quick to pass on such explicit and implicit tax hikes, even in tough economic times.

Pricing in modern economies is typically done on a mark-up basis where producers and seller review prices about two times per year. (If your microeconomics professor told you anything else, then I’m sorry for the rude awakening…) This means that if we have austerity measures being put into place this spring with a direct effect on consumer prices, we will see repercussions in inflation data for the rest of the year.

That said, inflation above two percent and interest rates at rock-bottom levels is actually – according to standard economic theory – a good recipe for investments. You see consumer prices on a slow upbound trajectory, which tells you that if you lock in your costs today you have good reasons to expect profit margins in the future. At the same time, with very low interest rates you have good reasons to believe that you will lock in those low costs.

So why aren’t they investing?? Patience, my young padawan. Uncle Keynes will give you the answer in just a moment.

Euractiv again:

Before making any decision to cut rates further, the ECB will focus on making sure that its looser policy reaches companies and households across the eurozone, a mechanism that has been broken by the bloc’s debt crisis. The new bond purchase plan is the ECB’s designated tool but it can only be activated once a eurozone government requests help from the bloc’s rescue fund and accepts policy conditions and strict international supervision.

Which is technospeak for “more austerity”. Despite the hot air from Barroso, nothing has changed in the conditions that the ECB attaches to its bail-out program for debt-mired member states. Governments in already-suffering countries know that if they try to push more tax hikes and spending cuts on their citizens they will have an armed revolution on their hands – or be booted out of office in the next election and replaced by Nazis or “Bolivarian” communists. They obviously don’t want this to happen.

The problem for the ECB is that their bond-buying pledge has now calmed the markets, but the member states have not accepted the terms of the program. This means that in effect, the program is worthless. In order to avoid losing credibility the ECB is going to have to relax the conditions attached to the program, not now but in a year or two. The reason is that the countries in Europe’s dungeon of debt will not recover from their current crisis.

Why won’t they recover? Because their fiscal policies are still geared entirely toward balancing the budget in the midst of zero or negative growth and very high unemployment. With too few taxpayers and too many entitlement consumers indebted governments continue to run deficits – and therefore continue to try to close those gaps with the same policies that brought about the depression in the first place.

In order for those economies to start growing again the hopelessly indebted governments must give the private sector room to spend money. So long as consumers are pushed to the end of their finances by high taxes and unemployment they won’t spend. If they don’t spend there won’t be any demand for consumer products, services, houses, cars, food, clothes, haircuts, vacation travel services, books, plumbers, painters, carpenters, restaurants, recreational services like spas and gyms…

Which brings us back to why entrepreneurs are not taking advantage of virtually free money. They have no reason to believe that they will get their money back in the form of sales revenue.

People have cut their spending today, which according to the pastors of the Church of Mises and Menger means that they will increase spending by the exact same amount at 1:20PM on Monday. Keynes, however, had a more sober analysis. Here is how he opened Chapter 16 of his General Theory of Employment, Interest and Money:

An act of individual saving means — so to speak — a decision not to have dinner to-day. But it does not necessitate a decision to have dinner or to buy a pair of boots a week hence or a year hence or to consume any specified thing at any specified date. Thus it depresses the business of preparing to-day’s dinner without stimulating the business of making ready for some future act of consumption. It is not a substitution of future consumption-demand for present consumption-demand,— it is a net diminution of such demand. Moreover, the expectation of future consumption is so largely based on current experience of present consumption that a reduction in the latter is likely to depress the former, with the result that the act of saving will not merely depress the price of consumption-goods and leave the marginal efficiency of existing capital unaffected, but may actually tend to depress the latter also. In this event it may reduce present investment-demand as well as present consumption-demand.

Only Keynes can save Europe. It would take an enormous load of work, though, to allow his theory of effective demand to actually go to work in the European economy. While economically possible, I seriously doubt that there is enough political will power to allow that to happen. It would mean that those who have gained enormous political power both in the Eurocracy in general and among the austerity merchants, will have to take more than a few steps back.

I frankly don’t think this is politically possible. I am fairly certain that Europe has gone so far down the path of austerity and big government that it won’t ever come back again. But this message from Uncle Keynes could serve as an excellent reminder for American lawmakers to get their own house in order – the right way.

The Keynesian way.

Thank You, All Readers!

Dear readers,

Once again, this blog has had a very strong month. The number of readers in March was at an all-time-high and April was almost exactly at the same level! I am thrilled to now have thousands of readers from all parts of the world. I am also very happy to see the active use of the archives.

As always, I welcome comments, suggestions and questions. Again, thank you and God bless you! You inspire me to work even harder with this blog.

Latest EU Fad: Raise Minimum Wage

After years of fiscal torture of country after country along the southern rim of Europe, the EU recently turned its attention to France. It was time for Paris to be subjugated. But unlike their southern neighbors, the French government got scared of the well-documented consequences of austerity and wanted no part of it. Since France is not as easy a pushover as Greece or Portugal, the Eurocrats in Brussels  found themselves trying to bite off more than they could swallow.

In order not to look like losers, the EU Commission quickly decided to refurbish its agenda. All of a sudden the chair of the Commission, a Eurotarian by the name Jose Manuel Barroso, declared that…

the EU’s budget-slashing response to the economic crisis has run its course. Speaking in Brussels at a meeting of European think tanks, Barroso commented that “while I think this policy [austerity] is fundamentally right, I think it has reached its limits.”

In other words, Barroso and his cohorts of fiscal dictators now think they have destroyed enough jobs, raised enough taxes, starved the health care systems to a sufficient level of fiscal anorexia, and killed the future prospects for a satisfactory number of young people. Now they can leave the economic wasteland behind them as if nothing really happened.

Well, if things were at least that good. Even if the EU Commission would escape any accountability for what it has done to the livelihood of a hundred million Europeans – if all  it would do from now on were leave the European economy alone, it might be possible to move the years of austerity into the annals of history. But that is not what is going to happen. As Barroso hinted, his commissioners have tasted blood and will not let go of their new-found instruments of power. They have become far too fond of their self-appointed role as supreme fiscal policy experts.

If they indeed stop shoving austerity down the throats of EU members, it will not be because they have become born-again libertarians who will leave the economy alone. Far from it. The alternative emerging from the hallways of the Eurocracy is almost as ridiculous as a continuation of austerity. From the EU Observer:

EU social commissioner Laszlo Andor has asked Germany to raise its wages in order to boost consumption and help other countries in the eurozone to export more. A shift from budget cuts and austerity towards economic stimulus is needed to help the southern euro-countries overcome the crisis, Andor told Sueddeutsche Zeitung in an interview published on Monday (29 April).

So now it is time to shift from one form of destructive incursions into the free-market economy, to another. Instead of raising taxes and cutting government spending to balance the budget of a member state, Mr. Andor and his fellow EU Commissioners now want to force private employers to pay their employees more.

The minimum wage is an attempt at making private businesses part of a government welfare program.  It is a major issue here in the United States, but its effect on the labor market is even more intrusive in high-unemployment Europe. It has one of two effects:

  • Some employers are discouraged from hiring more people, as the expected revenue increase from the work of that extra employee falls short of what the person would be compensated;
  • Other employees will try to stay in business by raising their prices, thus passing the cost of the minimum wage on to their customers.

Either way, the end result is higher cost of living for consumers and fewer entry-level jobs for new job seekers, especially the young. For a good, in-depth study, see Mark Wilson’s recent Cato Institute Policy Analysis. Or continue to read and we will do a little experiment to show how ridiculous the minimum-wage regulation really is.

First, though, let’s hear more from Commissioner Andor:

“Saving alone does not create growth. That requires additional investment and demand,” he said. Andor, a left-wing economist from Hungary, also pleaded for countries like Spain, Italy and France to be given more time to bring their deficit in line with EU rules. If not, he warned, all these countries will just pile on more debt.

The only right thing to do is to eliminate the Stability and Growth Pact altogether, and thereby do away with the legal mandate that EU member states must balance their government budgets. But relaxing its enforcement is a step in the right direction. Mr. Andor is also correct in that the European economy needs more demand. But after having made that observation, Mr. Andor resorts to traditional statist thinking, namely that government can somehow dictate the course of the economy. He should have learned from the EU Commission’s attempts at dictating a balanced budget in, e.g., Greece. But no:

He advocated a minimum wage in Germany – a demand also being made by the Socialist-Green opposition – explaining that it would help raise overall wages and boost consumption in the EU’s largest economy. ”Belgium and France have been complaining about German wage dumping,” Andor added. If Germany continues to keep the wages low and have high export surpluses, the commissioner warned, “the currency union will drift apart. Cohesion is already half lost.”

The currency union was a mistake in the first place. The euro zone is not an optimal currency area as defined by widely accepted economic theory. But more importantly, it was constructed in such a way that the currency union was isolated from fiscal policy and any other policy area with implications for the performance of the economy.

This macroeconomic artifact assumes that the real and monetary sectors of the economy never interact, that money somehow plays an isolated role in the economy. But modern economies are far too complex for any such isolation to take place. Even such simple things as credit cards break down the barriers between real and monetary economic sectors. People’s demand for money is closely tied to their consumption – a part of the real sector – and thanks to the existence of credit the banking system is actually part of creating money supply. Their part of the money supply is entirely driven by demand and credit ratings, which mandates a monetary policy that goes in lockstep with fiscal policy.

Under the currency union such coordination has been impossible. But as soon as things went rough in Greece, Spain, Portugal and Italy the European Central Bank quickly abandoned its independence decree and began interacting very closely with the fiscal-policy authority, the EU Commission. This is strong evidence of the construction flaw that was built in to the currency union. If it had been designed properly from the get-go, the current crisis would not have been nearly as bad.

That was a tangent, albeit an important one. It hints at a systemic error in the entire European construct that has made life worse for almost half-a-billion people. More on that in a later article, though; time now to return to Commissioner Andor’s demand for higher minimum wages in Germany:

Germany’s central bank, the Bundesbank, warned in February against raising wages too quickly, as companies would fire people and invest less. Dramatically increasing wages would only temporarily boost consumer demand, it argued, and in the long run, real incomes and consumer spending would actually decrease.

Correct. Consider the following experiment as an illustration of why a minimum wage is a bad idea in the first place, and raising it is about as bad as introducing it in the first place.

Suppose you have just opened a coffee shop and you have hired six people. Your business is making just enough money to pay the bills, so you are not paying yourself anything. You can only afford to pay your employees minimum wage. They all work 40 hours per week at $7.25 per hour, which puts your weekly employee cost (excluding payroll taxes) at $1,740.

One day EU Commissioner Laszlo Andor and his minimum-wage posse ride through town. When the dust settles you are left with a wage bill of $8.50 per hour, per employee. Suddenly, your costs went up by $300 per week.

How do you come up with that money? You could raise your prices, but the neighborhood is fairly competitive. Besides, you know your patrons are pretty price sensitive, and as a new business you want to encourage them to come back. You do not want to alienate them by suddenly raising prices.

You have two alternatives. You can reduce everyone’s work week from 40 to 33 hours and bring your wage costs down to $1,700, about where they were before the minimum-wage increase. You can also fire one employee and achieve almost the exact same cost cut.

Either way, the harsh reality of doing business will force you to contribute to the job destruction that always follows in the footsteps of a rising minimum wage. As bleak an outlook as this might be, at least it is based on sound economic analysis. It provides, in a very simple setting, the microeconomic foundation for the Bundesbank’s concerns regarding demands for a higher minimum wage in Germany.

There is only one way out of Europe’s crisis, and that is to get government out of taxing and regulating the private sector – and to structurally reform away the welfare state. Mr. Andor’s alternative to austerity may look good at first glance, but its consequences down the road are going to be solidly negative. Unfortunately, it also illustrates the statist mindset that has the EU Commission in a tight grip.

Austrian Theory vs. Economic Freedom

My apologies for a long article, but this is a very important topic.

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When someone titles his article “The Bankruptcy of Governments” it attracts interest from every friend of economic freedom. If the piece is well-written, it makes a valuable contribution to the intellectual battle over the future of Western Civilization. We need more of intellectually sharp contributions and less of ill-founded demagoguery. Our followers on the political side of the arena are inspired by us, bring our arguments and our analysis to the legislative hallways and try to get laws and budgets passed that will change economic policy and the role of government in the better direction.

If we get it right, all the way from good analysis to good policy decisions, we win – and more importantly: everyone else wins when we all benefit from more economic freedom. The wealthy can invest and improve businesses under more liberty; the poor and needy get more opportunities to improve their lives; creative, entrepreneurial people get more opportunities to build new businesses.

However, if we get our analysis wrong our cause is badly hurt. In theory, it does not matter where the mistake is made in the chain from analysis to legislation, but the closer the error is to the analytical starting point, the more serious the mistake is. Policies that are built on flawed legislative work will have repercussions that are limited to the legislative process; analysts and policy advocates can still do their work without having put their future credibility in jeopardy.

When the error is in the analytical foundation, the entire chain unravels. Bad analysis contaminates analysts, policy advocates, grassroots and activists, as well as elected officials. We who create the analytical foundation therefore have to hold ourselves to the standard that we can’t miss once.

In fact, as I explain in my book Ending the Welfare State, with the big welfare state we have today we will in reality only get one chance to restore economic freedom. If we stumble on the reforms or execute them in such a way that it causes a lot of hardship for many people, we will lose the battle for at least a generation. By that time there won’t be much of a prosperous, industrialized world to save.

For precisely this reason it is crucial that we freedom scholars and analysts do not waste our time – and other people’s time – on analytical constructs that lead to pain, suffering and a certain death for the cause of freedom. This is also why I engage other scholars and analysis whose ambition it is to promote economic freedom, but whose analysis I disagree with.

In the field of economics there is one school that meets all the criteria of purportedly supporting freedom but in reality doing a lot of harm to the cause. That school is, hardly surprisingly, Carl Menger’s Austrian tradition of economics. I have already on a few occasions written about the flaws in Austrian economics and I will continue to do so until its role in the freedom movement has been marginalized to the point of no influence.

This side of Marxism, Austrian economics is the most ill-conceived theory currently at use in the public policy arena. When it was put to work in Russia after the collapse of the Soviet Union, the result was a decade of economic waste, deprivation, abject poverty and collapse of almost every social institution except the Orthodox Church. The demise of a bankrupt government did not automatically, through some spontaneous order, give rise to a well-ordered society with a minimal government. When big government disappeared chaos, anarchy and mob rule took over.

With this experience in mind we have to know exactly what we are doing when we lay out a path to limited government. The article mentioned earlier, ”The Bankruptcy of Governments”, has a promising title but unfortunately turns out to be yet another example of flawed Austrian thinking. It is an important example to discuss, though, precisely because it so well illustrates the fine line between good and bad analysis.

The author, Alasdair Macleod with the British think tank The Cobden Centre, starts off well:

For a long time governments have been redistributing peoples’ income and wealth in the name of fairness. They provide for the unemployed, the sick, and the elderly. The state provides. You can depend on the state. The result is nearly everyone in all advanced countries now depends on the state. Unfortunately citizens are running out of accessible wealth. Having run out of our money, Governments are now themselves insolvent. They started printing money in a misguided attempt to manage our affairs for us and now have to print it just to survive.

That is not entirely true. The excessive money printing did not start until the Great Recession broke out in 2009. Up until that point EU governments in particular were very good at maxing out taxes on their citizens. But Mr. Macleod’s point about governments printing money just to survive financially is a good one, and falls well in line with my analysis.

However, this statement…

The final and inevitable outcome will be all major paper currencies will become worthless.

…is a bit on the excessive side, to say the least. Austrians have been crying about American monetary inflation for years, yet it has not happened. The reason is that their analysis does not recognize the existence of transmission mechanisms between the monetary and the real sectors of the economy. In order for newly printed money to drive up prices in the real sector there has to be some movement of activity in the real sector to motivate price setters to mark up their prices at hyper-inflation rates. In a recession like the current one those transmission mechanisms are weak – consumer credit demand is weak and it is tough for small businesses to get bank loans for investments. As a result, the newly printed money stays in the monetary sector of the economy, where it has no contact with prices.

This does not mean that a modern economy in a recession cannot succumb to high inflation pressure. We know numerous examples from Latin America where government has used its own spending to push newly printed money out in the economy. This is in part how Venezuela under Hugo Chavez got stuck with 30 percent inflation. So far this has not happened in the United States, but that is no guarantee it won’t happen. While the simplistic Austrian prediction is wrong, the facts on the ground are not sufficient to completely dismiss their argument. More evidence is needed, especially on the nature of the transmission mechanisms.

Alasdair Macleod disagrees. True to the Austrian school he dismisses the use of empirical evidence and quantitative reasoning in economics:

Modern economists retreat into two comfort zones: empirical evidence and mathematics. They claim that because something has happened before, it will happen again. The weakness in this approach is to substitute precedence for the vagaries of human nature. We can never be sure of cause and effect. Human action is after all subjective and therefore inherently unpredictable.

Does this mean that Macleod never drives? After all, he apparently cannot be sure that his fellow Brits will drive on the left side of the street tomorrow just as they did today.

Macleod’s statement about the “inherently unpredictable” nature of human action is of course rather silly. It is, however, typical for the Austrian school. One of its key tenets is the denial of empirical analysis, which of course begs the question why they even bother with economics. But by taking the attitude that human action is inherently unpredictable they also suggest that we as humans are not rational. Rationality means, among other things, repeating successful behavior in order to assure your own survival. In terms of economics this means repeating successful trade and other exchange relations with other rational individuals.

I should not have to explain this to someone who is in the game to change public policy. But Alasdair Macleod appears to be one of those activists/analysts who have been seduced by the supposedly refined nature of Austrian theory without seeing its public-policy consequences. If he did he would realize that a theory that starts out with suggesting that human action is inherently unpredictable will have a hard time convincing legislators that they can trust people to make the right decisions on their own. Quite the contrary, in fact: if we all behave unpredictably there is no chance for a society with a minimal government to survive, let alone thrive; the only way to create a stable, predictable society would be to have government organize and regulate it.

Macleod is of course wrong on the fundamental nature of human action. So is the Austrian theory. May I recommend some reading on the role of uncertainty in economic analysis. Austrian theorists might also want to disseminate Armen Alchian’s classic but very dense essay on uncertainty, evolution and economic theory.

Because of their disdain for empirical evidence and quantitative reasoning, Austrians have a hard time constructing workable analytical arguments on their own. Instead they often spend their time producing pure rhetoric, often directed at competing theories. Mcleod is no exception, going after the man Austrian theorists dislike almost as much as Karl Marx:

Keynes was strongly socialistic. In the concluding remarks to his General Theory, Keynes looks forward to the euthanasia of the rentier (or saver) and that the State will eventually supply the resources for capital investment.

This statement is not only false, but also very telling of the difference between Austrian theory and Keynesianism. Austrians prefer the armchair as the foundation of their analysis, while Keynesians work inductively to constantly evolve and enhance the proficiency of their theory and their ability to interact with the public policy arena. The statements by Keynes that Macleod has cherry-picked are from chapter 24 of the General Theory, where Keynes has left his theoretical work and is speculating about what role economic policy could play, and how government would fit in to that role.

It is important to note that in the preceding 23 chapters of his General Theory Keynes barely even touches upon government, even as a subject of conversation. Already for this reason, Macleod’s statement about Keynes being a socialist is false. But there is also a deeper and from a policy viewpoint more important reason. When Keynes got to the end of his book he had examined the “mechanics” of a modern industrialized economy – he had in effect laid the groundwork for what we now know as macroeconomics. With this pioneer work Keynes challenged a great many prejudices held by Classical economists, but he also opened for the potential of an entirely new era of economic policy.

First and foremost, Keynes’s work allowed for a new understanding of what brings about recessions – and, even more importantly, depressions. Never before had anyone systematically proven that when you try to starve an economy out of a recession, you make matters worse. But to produce and explain this proof, Keynes had to spend almost the entire volume we know as his General Theory; as he was finishing it, he only had time for brief, speculative thoughts about what role government could play in defending or restoring full employment.

This is what Austrians do not get. Keynes’s analysis was systematic. He built a macroeconomic theory, induced from evidence, that allowed him and anyone else who takes it seriously to do an open-ended analysis of what role government might play. Unlike closed systems like Marxism or Austrian theory, the Keynesian analysis is open in that its conclusions are not deductively produced – or, to be blunt, dictated – by the theory.

Herein lies the problem with Austrian theory. Because it refuses to recognize the role of evidence, it refuses to open itself to the probable – as opposed to uncertain – nature of human action. Because there is no room for probability, there is no open end to the analysis an Austrian produces. His conclusions are dictated beforehand.

This leads to major problems when theory is brought in to the public policy arena. More on that in a moment. First, let me wrap up Macleod’s point about Keynes being a “socialist”. In chapter 24 of the General Theory Keynes suggests a death tax as one possible policy measure to help build economic policy in favor of full employment. The tax would be used to fund investment activity when private-sector activity is unable to reach full employment. Keynes speculates on the possibility of having government be a permanent agent in this way, which he suggests would mean that the economy would be operating at or very close to the point of full employment.

Keynes’s theory of investment equates full employment to a point where the so called marginal efficiency of capital is virtually zero. The practical meaning of this is that there is no more profit opportunity left in expanding the economy’s capital stock – it is operating at its economically viable maximum. This is accomplished, Keynes suggests (but does not firmly conclude), when private-sector investment is supplemented by government investment, funded by a death tax

Obviously, a death tax, even at 100 percent, would never lead to government replacing private investment funding. Yet Macleod makes the critical mistake of thinking that the point where the marginal efficiency of capital is zero is also the point where private credit is eliminated. He misreads Keynes’s idea about “euthanising the rentier” as the elimination of privately funded investment. In reality, this statement means that funding for investment is so abundantly available that it ceases to be scarce. Thereby no one can make money on credit in response to systemic uncertainty. Individual risk factors still remain, though, as Keynes makes clear in his elaboration of his theory of investment and the concept of the marginal efficiency of capital.

In short: government eliminates systemic uncertainty while the private sector handles uncertainty and risk at the market level.

I disagree with Keynes’s speculation about the death tax. But I do agree with him that the free market is unable to incorporate and manage systemic uncertainty. How that is best done is a matter for further scholarly work; my own doctoral dissertation was devoted entirely to finding the demarcation line between the roles of government and the private sector in managing uncertainty. What I learned from Keynes is that there is indeed a role for government to play there; the exact nature of that role is still an open question, especially because the attempts made thus far at organizing government to eliminate systemic uncertainty have had a lot of side effects.

I apologize for the wordiness of this article, but it is important to understand the depth of the problem with Austrian theory. One good way to do that is to contrast it toward its arch enemy, Keynesianism.

Speaking of which, it is almost amusing to witness the obsession that many Austrian theorists have with Keynes. As Alasdair Macleod demonstrates, this obsession sometimes gets so bad that they throw out the only analytical tool they themselves cherish, namely logic, just to get another chance to go after Keynes:

The misconceptions of Keynesianism are so many that the great Austrian economist von Mises said that the only true statement to come out of the neo-British Cambridge school was “in the long run we are all dead”.

Let’s put this in its proper Austrian context. In December last year one of the Cobden Centre’s academic advisors, Phillip Bagus, applauded the shrinking GDP that some European countries were experiencing. Bagus was jumping up and down with joy over the fact that Greece had lost a quarter of its GDP and suggested merrily that this elimination of economic activity would free up resources that would create new investments and new jobs. He suggested that it was a home run for the economy that people were laid off from jobs right and left and forced to scavenge for food because an austere government was not providing the poverty relief people had been promised.

Bagus is a prime example of what Austrians do when they enter the public policy arena. They are completely locked in to their theory, without a single open window to the outside world and its empirical evidence that when they are confronted with the worst economic crisis since the Great Depression they suggest that the world needs more of the same. To them there is no such thing as hesitation and caution among private entrepreneurs and consumers. Their static and rigid theory says that consumers and entrepreneurs fail to produce full employment for the economy because government takes away resources from them. There is a great deal of truth in this part, but what the Austrians forget is that there is a second leg to this analysis: they conclude that all you need to do is fire government bureaucrats and  they will all get jobs in the private sector. All you need to do is shut down a government agency and someone else will take over their office.

The problem is, as we witnessed in Russia during the 1990s, the private sector may hesitate to step in and absorb idle resources formerly employed by government. The one tiny detail that Austrians forget is that an entrepreneur will not make an investment unless he has reasons to believe that he will be able to pay off the loan he funded the investment with. Furthermore, the banks won’t lend him money toward the investment unless he can make a good case for the profitability of that investment.

Keynes knew of this problem very well. That is why he speculated that government should supplement private investment in times of uncertainty, in order to eliminate systemic risk factors. While I disagree with Keynes’s particular suggestion, I am wholeheartedly with him on the nature of the problem. Individuals can be held back by uncertainty and thereby, in the aggregate, hold back the entire economy.

Austrians do not believe in uncertainty. They recognize its existence but they do not incorporate it into their analysis. Instead, they assume that all that needs to happen for the economy to be perpetually in full employment is that the so called “natural” rate of interest can prevail. They assume the existence of this “natural” interest rate without ever providing proof of its existence. This assumption, again entirely theoretical, allows them to create a perfect intertemporal allocation of resources – in other words, to eliminate uncertainty.

When you ask an Austrian theorist when this natural interest rate will come about, he will give you an answer that resembles something like “in the long run”. In other words, in the long run the economy will always be in a perfect state of equilibrium and full employment.

Keynes always criticized Classical economists for relying on the long run to fix all sorts of problems. When Austrian theorists take the same view on the long run as Keynes did, they jeopardize the very foundation – flawed as it is – of their own theory. Either they have to resort to illogical reasoning or they have to make up their mind: do they agree or disagree with Keynes on the role of uncertainty in the economy?

Alasdair Macleod, needless to say, does not see this lack of logic in Austrian theory. He marches on like nothing happened. The rest of his analysis is unfortunately as simplistic as the Austrian theory he relies on. He echoes a commonly held belief among Austrians that there have never been economic crises before big government:

The misallocation of economic resources which is the result of decades of increasing government intervention cannot go on indefinitely. Businesses have stopped investing, which is why big business’s cash reserves are so high. Money is no longer being invested in production; it is going into asset bubbles. Dot-coms, residential property, and now on the back of zero interest rates government bonds and equities. These booms have hidden the underlying malaise.

Although I disagree with John Kenneth Galbraith on virtually everything under the sun, I have to give Galbraith credit for his book A Short History of Financial Euphoria. There, Galbraith takes the reader on a journey through speculative bubbles that have occurred throughout history – the ones we know of – and done so at times when there was no big government.

I have discussed the nature of today’s crisis at length in other articles. Very briefly, I do agree with Macleod that government has played a bad role in exacerbating this crisis – my conclusion is that our banking system would have absorbed the shock from the real estate crisis were it not for the fact that those same banks had also invested heavily in government bonds. During 2011 and 2012 more and more of those bonds turned into bad assets, effectively destroying an otherwise sound balance on banks’ balance sheets.

The implication of a sound analysis of today’s crisis is that we need to get government out of the economy, but that we need to do it in a structurally sound way and by showing great respect for two groups of citizens:

  • Those who already live on the dole because they have lost their jobs and been let down by government;
  • Those who still work but have become dependent on government to make ends meet.

The true challenge for freedom-minded public policy scholars is to design a path for our economy out of the welfare state without causing undue hardship for either of these two groups. It can be done. The problem is that we are not getting much help from Austrian theorists here: all they suggest is the destruction of the welfare state so that Phoenix may rise from the ruins.

Macleod is no exception. He makes a good observation about the role of government…

Take France. Government is 57% of GDP. The population is 66m, of which the employed working population is about 25m, 17m in the productive private sector. The taxes collected on 17m pay for the welfare of 66m. The taxes on 17m pay all government’s finances. The private sector is simply over-burdened and is being strangled.

But then, instead of helping pull the economy out of this entitlement quagmire, Macleod resorts to the favorite Austrian pastime, namely to bash the printing of money:

The progressive replacement of sound money by fiat currency has destroyed economic calculation, and has destroyed private sector wealth. These policies were deliberate. We have now run out of accessible wealth to transfer from private individuals to governments. That is our true condition. Governments will still seek to save themselves at the continuing expense of their citizens, and in the process destroy what wealth is left.

He never gets to the usual advocacy for a gold standard, but he comes pretty darn close. However, as a brief look at Galbraith’s book will show, we have had crises even during the heydays of the gold standard.

The problem is not big money. The problem is big entitlement. It would be nice if Austrians could put down their Scriptures and help us get rid of the welfare state in a sound, stable way that encourages people to be optimistic about the future. If they are not interested in that, may I suggest they withdraw to their academic chat rooms and stop pretending to be concerned.

Another Socialist Hate Rant

Amazingly, despite a century of evidence to its disastrous consequences, socialism still sticks its ugly face out in the public arena from time to time. Before the Berlin Wall fell its demagogues were trying to pick what they thought were the cherries out of the Soviet pie and present them as a palatable, even tasty option to Capitalism. Then the Soviet empire crumbled, and after a decade in the wilderness the socialist ranters came back with a vengeance.

They had found “global warming”.

We who went to school in the ’70s and early ’80s were told by our science teachers that the world was steadfastly heading for a new ice age. Science books came with frightening images of cities, far down in southern Europe, buried in ice and snow. On the horizon, a mile-thick glacier that slowly pushed south.

Some time during the ’80s the preachers of climate change stopped talking about the pending ice age. Perhaps they could not get enough research grants to continue to stay away from teaching at their colleges, so they invented a new climate change story: global warming.

A couple of years ago the climategate scandal put a big, fat nail in the coffin of the global-warming fairy tale. In January of this year  news broke that there has been no global warming for 16 years now. By now, even moderately intelligent liberals should start wondering what their climate preachers have been up to, and why they can’t deliver the climate disaster they have promised for so long.

While the world is slowly beginning to see the light with sober eyes, many leftists have invested far too much of their careers in the global-warming fairy tale to let go of it. One of them is a South African socialist by the name of Jay Naidoo. Like so many other socialists of late, he is trying to use “global warming” as a moral carte blanche to impose his collectivist nonsense on his fellow man.

Naidoo is former minister of reconstruction and development in the South African government and currently chairs an organization called Global Alliance for Improved Nutrition. He gets plenty of space on the Euractiv website to rant about everything between “climate change” and poverty, except what really matters:

“The drought is brutal in the north of Kenya around Lake Turkana. The rains seldom come and the lake is drying up. So is the hope of the Turkana, a proud people. They are mainly pastoralists. But the grazing lands are fast disappearing as are the fish in the rapidly receding lake.

Right here, Naidoo has put the blame on the hardship of the Turkana on non-existent global warming. Without offering the slightest evidence to the claims he makes about their environmental situation, he takes it as the starting point of a long rant on poverty and the evil West.

Even more amazingly, in the next paragraph he tells us that the Turkana are the victims of lawlessness and anarchy – yet somehow the poverty of the Turkana is still caused by evil Capitalism:

Heavily armed marauding bands of bandits from the Horn of Africa regularly raid lands and seize the cattle of the Turkana. As one herder said, “They take our wealth and our food. Our cows are our bank. We are alone. There is no government here to protect us. It is the rule of the gun. Our homes are torched, our innocent are murdered. They want to drive us from our land. Our children are not safe. They must go to the city.”

Any common-sense minded person would immediately ask why the Kenyan government, who claims jurisdiction over the territory where the Turkana live, is not interested in enforcing the rule of law. Another question is why property rights are so weak in this part of the world. Could it be because socialists look down their nose at private property?

In the next sentence Naidoo takes all the blame for the poverty of the Turkana away from the thugs who assault them, as well as from the Kenyan government:

Here poverty is driven by climate change, a precursor to the new resource wars to be fought over water, land, food and competition over scarce resources.

Like mankind has never lived under resource scarcity before. Mother of all ignorance…

Any time the price of an item is higher than zero, it is because that resource is scarce. Scarcity, in fact, is one of the driving forces that makes a society evolve – it does not motivate societal evolution on its own, but it is one of the key ingredients. But scarcity is universal and affects all mankind one way or the other. We all have to adjust our lives to the fact that we cannot get everything we want, in an instant, for free.

The question is why some societies evolve under scarcity, while others don’t. The best and most obvious answer to that question is found on the Korean peninsula. South Korea, with a population twice the size of North Korea’s and on a smaller piece of land, is able to feed itself, clothe its population, cure the vast majority of their diseases, educate them and keep them safe. The North on the other hand cannot even feed its own children.

Most people would dismiss the comparison between South and North Korea with something to the effect that “well, everybody knows that Communism isn’t working”. But the point is that despite this knowledge – despite the glaringly obvious, ocean-wide difference between Capitalist South Korea and socialist North Korea – socialism is still given a valid presence in the global public policy debate. For some reason there are people who still believe that you can blend South and North Korea, yet what they find out too late when they try is that the ingredients from “North” that go into the blend are venomous to vital organs of “South”.

The very essence of socialism is the transferal of property rights from the individual to the “collective”, almost always represented by a government. The “collective” is given the right to seize parts or all of what the individual acquires through work, trade and investment. Yet when the “collective” is given this right there is a proportionate loss of rights for the individual, and with the loss of right to the proceeds of his work, trade and investment, the individual also loses the incentive to pursue those proceeds.

This is the first and most important reason why societies with socialist economies are poorer than societies that rely on Capitalism.

As for the Turkana in Naidoo’s story, their reason to evolve and become more prosperous is robbed from them by the thugs who can come and seize their cattle with impunity. The thugs have de facto become their socialist government that imposes a heavy tax on them.

Naidoo, of course, is blind to this fact. On the contrary, he continues to cast the blame for the Turkana’s poverty on everyone else except the thugs who steal their cattle. Euractiv again:

The poverty is chronic, systemic and leaves many in despair, abandoned by the political and economic elites of the world.

Then he globalizes his warped views:

That story is repeated in the many villages I have been to in the India subcontinent, in the slums of Africa and Asia where families live in a space that is barely bigger than the bathroom of middle class families. In these communities people feel that God has forsaken them. While we have undoubtedly made progress, when I see the official reports suggesting “Enormous progress has been made towards achieving the Millennium Development Goals (MDGs). Global poverty continues to decline, more children than ever are attending primary school, child deaths have dropped dramatically; access to safe drinking water has been greatly expanded…” I wonder when these gains will trickle down to the billion people I encounter at the edges of our humanity.

My native country, Sweden, was one of the poorest nations in the northern hemisphere back in the mid-19th century. It went from being an agricultural backwater on the northern edge of Europe to a dynamic economy with rapidly growing prosperity in the 1930s. What happened? Did the world suddenly give Swedes foreign aid? Did the rest of the world suddenly impose a hate-the-rich tax in order to give handouts to Swedish farmers?

No. The reason was the same that allowed industry and entrepreneurship to thrive and prosperity to grow all over Europe: limited government and respect for property rights. (That Sweden later abandoned those principles is another story.) The smaller a government is, the more concentrated it becomes on its only real function in society, namely to protect life, liberty and property. By contrast, the bigger government gets the farther away it will drift from that function. That is why socialist governments – which includes the Kenyan government – lose track of things like people’s right to the proceeds of their own hard work.

Hence the disaster in Turkana.

Back to Euractiv, where Naidoo starts pushing for a global welfare state:

What the bottom half of humanity sees is a new apartheid that divides a global rich and predatory minority from the overwhelming majority’s growing poverty, joblessness and social inequality.

And here we go. A man who purports to be some kind of compassionate caretaker over the poor in the world finally comes out as what he truly is: a socialist hate merchant.

People who live in free countries with democratic governments, who have the right to own the proceeds of their work, who get up in the morning, provide for their loved ones, obey the law and donate to charity – they are characterized as a “predatory minority” by Naidoo. People who live honest, decent, productive lives and do their best to be contributing members of society – they are castigated as “predatory” by Naidoo, simply because they happen to live in a rich, industrialized, free country.

Even worse, Naidoo’s rhetoric is aimed at those who create jobs for hundreds and hundreds of millions of people. Entrepreneurial visionaries like IKEA’s Ingvar Kamprad or Microsoft founder Bill Gates; industrialists like the Toyoda family; around-the-clock working corporate executives who make sure their businesses continue to provide the world with clothes, food, cell phones, medicines, light bulbs, tools, appliances, water purifiers and other essential consumer goods. All these men and women are a “predatory minority” in the eyes of Jay Naidoo.

This is the level that all socialists eventually sink to. Their world view is one of relentless, ongoing conflict. To them, people do not cooperate voluntarily. People do not by their free will take a job with a large corporation – they are forced into that job by the “system”. To socialists like Naidoo there is no other cooperation than that which is enforced by government.

Even more pathetic is the fact that socialists like Naidoo are so totally and utterly blind to the free will of individual human beings. Ask any young engineer who works long, hard hours for the car manufacturer Hyundai in South Korea if he has been forced into that job by an evil Capitalist. Ask him if he would rather live and work in North Korea instead.

When Naidoo resorts to referring to the high-productive people who take advantage of economic freedom as a “predatory minority”, he gives away his true identity. His rhetoric is nothing more than the same old, dingy class warfare rhetoric that socialists have been using for a century and a half by now – and what has that rhetoric given us?

It has given us the Gulag Archipelago; the Berlin Wall; the Killing Fields in Cambodia, Cuban prison camps and children starving to death in the streets of North Korea. And don’t forget the Third Reich brand of socialism, according to which the “predatory minority” should bear a yellow six-point star and be exterminated in death camps.

Wherever socialists have gotten the chance to identify a “predatory minority” they have brought about war, chaos, starvation, depravity and death.

Naidoo’s rhetoric is the same kind of divisive, aggressive, conflict-driving language that has caused so many wars, civil and other, around the world over the past century. Naidoo’s class warfare rhetoric fueled the Leninist revolution which ended up costing 25 million Russians their lives. Naidoo’s class warfare rhetoric falls in the same line as that which Josef Göbbels used to fire up the masses against a small, innocent group of fellow citizens. Naidoo’s class warfare rhetoric built an Iron Curtain across Europe and is still today being used to defend the North Korean tyranny.

It does not help Naidoo’s case that when he gets to the practical side of his rant, he focuses entirely on “equality” and totally ignores the variables that really matter:

We need to go beyond measuring progress as a set of narrow input and output indicators. We need to address the underlying drivers of poverty and that the data has hidden a growing social and economic inequality which has risen dramatically in the world.

Suppose Jack and Joe earn $1 per day on Monday. On Tuesday Joe starts manufacturing gobbletigooks in his basement. He sells them with great success and rapidly increases his daily income. On Wednesday he earns $2 per day, while Jack still earns $1.

Where there was income equality on Monday there is now income inequality. How is Jack worse off under income inequality than he was under income equality?

On Friday, Joe needs to hire help. He now earns $4.50 per day and hires Jack to do the simple manufacturing work at $1.50 per day. The income inequality is now bigger than ever, but comparatively low-earning Jack has increased his income by 50 percent thanks to Joe’s entrepreneurship.

How is Friday’s income inequality worse for him than income equality was on Monday?

Of course, socialist Naidoo does not answer this question. Instead he dismisses China’s enormous strides toward prosperity in the past two decades:

Poverty has been defined as an income of less than $1.25 a day. Because figures are not disaggregated what is ignored is the fact that China accounts for the bulk of this success. Sub-Saharan Africa, on the other hand, is not on track on its poverty reduction

Of course not. That region is still ruled by dictators and war lords, and its largest country, Nigeria, is being torn apart by radical, Medieval islamists whose respect for individual and economic freedom we know from the Taliban era in Afghanistan. Once again, Naidoo proves the point about the correlation between on the one hand the lack of respect for life, liberty and property and on the other hand prosperity and opportunity for all.

In his position as chair of a large lobbying organization, Jay Naidoo has considerable influence on the global public policy arena. His divisive, hate-mongering socialist rhetoric is wrapped in dangerously seductive, superficial compassion for the poor, yet when push comes to shove all he wants is more government, more bureaucracies and more redistribution from the rich to the poor. He totally ignores the economic mechanisms that bring about prosperity. He turns a blind eye to the forces that have successfully lifted more than a billion people out of abject poverty in the past two decades.

Jay Naidoo is the kind of person who would rather see everyone equally poor than everyone wealthy, if that meant some got wealthier than others.

At the end of the day, that is precisely what socialism is all about. It turns people into instruments for an idea, an ideology, reducing them to bricks in a game of political power.

Socialists have had a century to prove that their ideology can work. On every occasion where they have gotten the chance, they have failed. And they have failed on every account imaginable.

Socialism is nothing more than a highway to poverty, tyranny and serfdom – for all.

Another EU Lie: “End to Austerity”

First you send your tanks in and pound away at schools, hospitals and private businesses. When people are laid off and flock to unemployment offices you direct your bombardment at those instead. When the unemployed and homeless former middle-class citizens go scavenging for food in dumpsters behind McDonald’s, you hammer away at them with yet another round of big-caliber fiscal ammunition. Then you tell everyone that this invasion may be a bit hard on them right now, but at some point, somewhere in the long run, their lives will get better.

When people still defy your fiscal army you keep fighting them until they have lost a quarter of their income and their jobs and their entire country has been transformed from a relatively prosperous European nation to an economic wasteland.

You keep going until your austerity storm troopers have wreaked havoc and destruction on country after country and reached the outskirts of Paris. Then, but only then, do you pause and try to brush off the image of a fiscal imperialist. From the EU Observer:

European Commission chief Jose Manuel Barroso on Monday (22 April) indicated that the EU’s budget-slashing response to the economic crisis has run its course. Speaking in Brussels at a meeting of European think tanks, Barroso commented that “while I think this policy [austerity] is fundamentally right, I think it has reached its limits.”

Of course. When austerity robbed the Greeks of 25 percent of their GDP, they got what they deserved. When Spain is risking  regional secession and political and economic disintegration, and when Portugal is simmering at the point of civil unrest, that is all right and good in Barroso’s playbook.

In reality, what really concerns Barroso is the presence of public opinion in the way of his fiscal tanks. The EU Observer again:

In a reference to rising public discontent at the severity of spending cuts and tax rises, he noted that “a policy to be successful not only has to be properly designed, it has to have a minimum of political and social support.” ”We have to have tailor-made solutions for each country, we cannot apply a one size fits all programme to the European countries,” he added.

What exactly does this mean? Different combinations of tax hikes and spending cuts depending on what country you are in? More tax hikes in Portugal and more spending cuts in France? Do note that Barroso still believes in austerity – his only reason for not charging ahead to conquer France is that the French prime minister’s cabinet is not united in the desire to greet the invading austerity army at the border.

In the words of the EU Observer:

Barroso’s remarks are a further sign that Brussels is ready to give the likes of France, Spain and Italy more time to force through unpopular economic reforms to reduce their budget deficits. For his part, speaking at the same event, EU Council President Herman Van Rompuy conceded the economic crisis is “lasting too long. He added that “patience is understandably wearing thin and a renewed sense of urgency is setting in.” He underlined the need to “move faster on the reforms with the biggest immediate growth impact.”

The problem with Barroso and van Rompuy is that they have absolutely no idea of what really gets an economy going, nor do they have an interest in learning about it. Their only goal is in expanding their own power, and they have discovered that austerity is a formidable tool that can conveniently be applied to further that goal. Right now they are hesitant because France is a big chunk of real estate to bite off, and French politicians are a bit less inclined to bow their heads to the new fiscal masters than they were in Athens, Rome, Madrid and Lisbon.

As the EU Observer notes, the critics of the EU’s fiscal invaders have just been given more ammunition to use in the defense of their national fiscal sovereignty, as the EU Commission’s own economic forecasts…

make grim reading, especially for countries on the Mediterranean rim, which have been among the worst hit by the eurozone’s economic crisis. … Portugal and Spain saw their deficits swell to 6.4 percent and 10.6 percent of GDP, respectively, while Greece’ deficit rose to 10 percent. The ongoing recession also forced up average EU government debt levels to 90.6 percent, well above the 60 percent threshold set out in the EU’s Stability and Growth Pact.

In other words, the countries that have been subjected to austerity the longest, are the ones with the biggest deficit and GDP growth problems. Austerity is sold as a recipe for smaller deficits and stronger economic growth, yet the outcome is the exact opposite.

I have only one thing to say to my many European readers: don’t let yourselves be fooled by what Barroso says about austerity reaching its limits. He has stopped his barrage for now because you are paying attention. Once you let your guard down and look the other way, his fiscal stukas will be taking aim at your country again before you know what hit you.