Archive for June, 2009
War Is the Health of the State, Redux
Randolph Bourne warned us nearly a century ago that “war is the health of the state.” There may be no better present evidence of the danger of promiscuous war-making comes than a new article by columnist Ralph Peters. Faced with the inevitable horror of war, he says embrace the horror rather than forgo the war.
While the essence of warfare never changes—it will always be about killing the enemy until he acquiesces in our desires or is exterminated—its topical manifestations evolve and its dimensions expand. Today, the United States and its allies will never face a lone enemy on the battlefield. There will always be a hostile third party in the fight, but one which we not only refrain from attacking but are hesitant to annoy: the media.
While this brief essay cannot undertake to analyze the psychological dysfunctions that lead many among the most privileged Westerners to attack their own civilization and those who defend it, we can acknowledge the overwhelming evidence that, to most media practitioners, our troops are always guilty (even if proven innocent), while our barbaric enemies are innocent (even if proven guilty). The phenomenon of Western and world journalists championing the “rights” and causes of blood-drenched butchers who, given the opportunity, would torture and slaughter them, disproves the notion—were any additional proof required—that human beings are rational creatures. Indeed, the passionate belief of so much of the intelligentsia that our civilization is evil and only the savage is noble looks rather like an anemic version of the self-delusions of the terrorists themselves. And, of course, there is a penalty for the intellectual’s dismissal of religion: humans need to believe in something greater than themselves, even if they have a degree from Harvard. Rejecting the god of their fathers, the neo-pagans who dominate the media serve as lackeys at the terrorists’ bloody altar.
Of course, the media have shaped the outcome of conflicts for centuries, from the European wars of religion through Vietnam. More recently, though, the media have determined the outcomes of conflicts. While journalists and editors ultimately failed to defeat the U.S. government in Iraq, video cameras and biased reporting guaranteed that Hezbollah would survive the 2006 war with Israel and, as of this writing, they appear to have saved Hamas from destruction in Gaza.
Pretending to be impartial, the self-segregating personalities drawn to media careers overwhelmingly take a side, and that side is rarely ours. Although it seems unthinkable now, future wars may require censorship, news blackouts and, ultimately, military attacks on the partisan media. Perceiving themselves as superior beings, journalists have positioned themselves as protected-species combatants. But freedom of the press stops when its abuse kills our soldiers and strengthens our enemies. Such a view arouses disdain today, but a media establishment that has forgotten any sense of sober patriotism may find that it has become tomorrow’s conventional wisdom.
Sometimes war will be inevitable, but America’s many economic, geographic, and political advantages allow us to more easily avoid it. The cost to our people, foreign peoples, and our domestic freedoms are all good reasons to treat war as the last resort rather than the first tool of choice by Washington policymakers.
“There Is No Gain to Keep Them”
Thus explained Khmer Rouge apparatchiks on why children of perceived regime enemies were killed.
In the midst of America’s political and economic mess, it is worth remembering how blessed we are and how deep humanity can fall. Cambodia is in the process of trying the former commandant of Tuol Sleng, a prison that specialized in torture and murder, and from which only a handful of prisoners emerged alive.
The Khmer Rouge regime of the 1970s killed babies and toddlers — sometimes by holding their legs and smashing their heads against trees — so they would not seek revenge later in life, the group’s former chief jailer said Monday.
Kaing Guek Eav, alias Duch, commanded the Khmer Rouge’s notorious S-21 prison, where as many as 16,000 men, women and children are believed to have been tortured before being sent to their deaths.
Duch, 66, is being tried by a U.N.-assisted genocide tribunal for crimes against humanity, war crimes, murder and torture. An estimated 1.7 million Cambodians died under the 1975-79 communist Khmer Rouge regime from forced labor, starvation, medical neglect and executions.
…
Duch recounted a Khmer Rouge policy on detained children: “There is no gain to keep them, and they might take revenge on you,” which he said was told to him by the regime’s former defense minister, Son Sen.
Today Tuol Sleng is a museum. I visited it several years ago, along with the “killing fields,” in which thousands of the Khmer Rouge’s victims were buried. Seeing the former prison is an experience simultaneously moving, sobering, chilling, and depressing. It offers a tragic reminder of the horrors that result when sinful human beings take control of powerful state institutions and seek to remake society. No wonder liberty is so precious.
Social Control as a Profit Center
Here’s an idea that should be killed in the crib: scanning automobiles for up-to-date insurance.
Says Gizmodo (via ars technica and the Chicago Sun-Times):
The system is anticipated to raise yearly earnings “well in excess” of $100 million (possibly even double that figure or more), with InsureNet taking a modest 30% for their services. Of course, all of this cash would be contingent on uninsured drivers actually paying their fines.
There will be thousands more reasons like this put forward for mass public surveillance. The answer should almost always be no because of the accumulations of data about law-abiding citizens such programs would collect in government (and government-contractor) databases.
Week in Review: Health Care Battles, Pay Caps and North Korean Prisoners
Will Obama Raise Middle-Class Taxes to Fund Health Care?
President Obama is promoting an expansion in federal health care spending, and Democratic leaders are scrambling to find ways to pay for it. The plan is expected to cost about $1.5 trillion over the next decade, but the administration has promised that health care legislation won’t add to already huge federal budget deficits. In a new paper, Cato scholars Michael D. Tanner and Chris Edwards argue that expanding government health care will likely involve huge tax increases on the middle class.
Tanner warns of “Obamacare” to come, saying that Obama’s new health care plan will give “government control over one-sixth of the U.S. economy, and over some of the most important, personal, and private decisions in Americans’ lives.” Don’t miss Tanner’s in-depth analysis of the new health care plan that is making its way through Congress, which “would dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and — most importantly — the quality and range of care given to patients.”
A part of the plan would include “public option” (read: government-run) health care, which would allow the government to compete against private health care providers. Tanner says it would be the first step toward wiping out the private insurance market as we know it:
Regardless of how it is structured or administered, such a plan would have an inherent advantage in the marketplace because it would ultimately be subsidized by taxpayers. It could, for instance, keep its premiums artificially low or offer extra benefits, then turn to the U.S. Treasury to cover any shortfalls. Consumers would naturally be attracted to the lower-cost, higher-benefit government program.
…It is unlikely that any significant private insurance market could continue to exist under such circumstances. America would be firmly on the road to a single-payer health care system with all the dangers that presents. That would be a disaster for American taxpayers, physicians, and—most importantly—patients.
Treasury Seeks to Control Executive Pay Across the Private Sector
Fox Business reports, “The Treasury Department on Wednesday took new steps to rein in executive compensation, saying the Obama Administration would introduce legislation that could create stricter limits on pay; it also appointed an official to head up efforts on the issue.”
In a 2008 Policy Analysis Ira T. Kay and Steven Van Putten explain the misconceptions many people have about executive pay, and why the market is a better arbiter than any bureaucrat in Washington:
Such populist sentiments are often based on misunderstandings about the role of corporate executives in the economy and the vigorous competition that exists for these highly skilled leaders. In the past, federal regulatory efforts based on such misunderstandings have generated unintended consequences, which have damaged the economy and hurt the ability of the market for executives to self-regulate over time.
The labor market for executives and the associated pay levels are already subject to high levels of regulation. Indeed, U.S. corporations are subject to more stringent executive pay disclosure requirements than corporations anywhere else in the world. Before additional regulatory and legislative efforts are unleashed, policymakers should examine the rationale for current pay structures and the strong links between executive pay and corporate performance.
In a Washington Times op-ed, Alan Reynolds says efforts to cap executive pay are wholly misguided:
Congressional hearings to barbecue Wall Street executives are as fun as a circus, but with more clowns. Presidential politics is now taking such political distractions to a lower level.
…Most top executives who were actually in charge during the craze of overinvestment in mortgage-backed securities have been fired. Executives who are fired are not in a position to be “giving themselves” anything.
In reality, top executives are mainly paid by accumulating a big stockpile of company stock and stock options. Estimates of annual CEO pay that Congress and the press have been focusing on look as high as they do only because of the high value of restricted stock or stock options at the time.
Writing in 2007 (before the first round of major bailouts), Cato scholars Jerry Taylor and Jagadeesh Gokhale took it a step further: “Pay Bosses More!”:
Excessive executive compensation harms no one but perhaps the stockholders who put up with it. And stockholders put up with it because there’s good reason to believe that sizable CEO compensation packages help — not harm — corporate performance, which redounds to their benefit, and that of the firms’ workers.
Companies pay workers what they must to deliver their products and services to the market, and supply and demand establishes executive compensation packages the same way it establishes consumer prices. Any overcompensation comes out of the firm’s bottom line — at a loss to the shareholders, not the workers.
North Korea Sentences Two U.S. Journalists to 12 Years Hard Labor
Two American journalists were convicted of entering North Korea illegally while on assignment, and exhibiting “hostility toward the Korean people.” This week, a North Korean court sentenced them to 12 years in a labor prison.
Cato scholar Doug Bandow comments:
Washington should publicly downplay the controversy and present the issue to the Kim regime as a humanitarian matter. The Obama administration should indicate its willingness to open a broader dialogue with North Korea, but indicate that positive results will be possible only if Pyongyang responds with cooperation instead of confrontation. Releasing the two journalists obviously would provide evidence of the former.
Regrettably, Laura Ling and Euna Lee are political pawns. As such, Washington’s best strategy to achieve their release is to simultaneously reduce their perceived value to Pyongyang and ease tensions between the U.S. and North Korea. Patience may be the Obama administration’s highest virtue and Ling’s and Lee’s greatest hope.
In a Cato Daily Podcast, Bandow discusses what can be done for the American prisoners, and how the U.S. government should react.
Money in Politics, Virigina Edition
Bruce Bartlett has a good opinion piece on money in politics in Forbes. He mostly focuses on self-funding candidates who rarely win even when they contribute large sums to their own campaigns. The recent Democratic gubernatorial primary in Virginia, which Bartlett mentions, saw Terry McAuliffe spend over $7 million and lose badly. McAuliffe financed his bid in the usual way by attracting contributions. His success at fundraising may have cost him votes in the end.
Despite the McAuliffe example and others mentioned by Bartlett, people still believe “only money matters in politics” or “money buys elections.” The truth is, money matters but not all that much. Other factors, like circumstances, partisanship and the quality of the candidate, have more effect on the outcome of any election. It is true that incumbent members of Congress generally raise more than their challengers and almost always defeat them. But if you take into account the quality of a challenger, money has little effect on the outcome of a race.
We hear little these days about money buying elections. The people who complain about the power of money to subvert democracy are almost always on the left. If money buys elections, is Obama’s presidency a subversion of democracy? After all, the current president is the most successful fundraiser in American history, and not all of his money came from small contributors. But Obama didn’t buy the election of 2008. He was running against an unpopular administration with the economy mired in a deep recession. Obama was a skillful candidate who ran an effective campaign. John McCain could have matched Obama’s fundraising and the Republican still would have lost.
Money is overrated in politics. Just ask Terry McAuliffe.
Campaign Finance Reform, European Style
Europe just held elections for the European parliament. The British National Party — an essentially fascist, all-white grouping — won two seats. And access to potentially a lot of money.
It isn’t literally public campaign financing, but once elected, parties in the European parliament often can get their hands on a lot of public funding. Reports the Independent:
Both men will be entitled to about £310,000 in annual funding, including an £80,443 salary, a staff budget of up to £182,000 and £40,000 for office expenses. But the British National Party (BNP) could also unlock a share of the £22.8m allowance that is given to parliamentary groups if it can find at least 25 fellow MEPs from seven member states willing to form a bloc within the European Parliament.
Being part of a group is crucial in terms of power as it entitles members to EU funding, a party office, administrative staff and, crucially, the right to vote in committees which are the nerve centre of the Parliament.
A parliamentary group is also entitled to up to £5m of extra funding over the next five-year term.
A number of far-right groups have secured seats in the European Parliament, many of whom hold outwardly racist or neo-fascist policies. Prior to the European elections, high-ranking members of the BNP had attended rallies held by neo-Nazis in both Italy and Hungary.
It’s bad enough for Europeans to have to tolerate such folks in the European Parliament. But subsidizing their activities seems ridiculous. So it is with the public funding of elections and government restrictions on private fundraising and advertising in elections in the U.S. The thought of jackboots at the trough, as some in Britain put it, is as good an argument as I can imagine against the public financing of elections here.
Ecuador’s Continuing Attack on the Free Press
Last year the Ecuadorian government seized two TV channels broadcasting on public airwaves and one cable channel along with hundreds of other businesses supposedly owned by the Isaías family, an unpopular Ecuadorian business group that the government bailed out in the late nineties. In seizing those assets, the current government claimed to be cashing in on a long overdue debt owed to it by the Isaías family. Leaving the violations of due process aside, this was a significant attack on freedom of the press in Ecuador given that the two public access channels garnered almost half the country’s TV audience. Back then the government said it was going to sell off the seized channels but it has not done so yet.
The last elections in my country, held on April 26, showed how government ends up manipulating state media: 79% of the political ads aired on these channels went for the official candidates despite the fact that the new electoral rules require every candidate to have equal air time.
Since those elections, Carlos Vera, the most popular morning news anchor in the country, quit his channel Ecuavisa because he claims to have been subject to the self-censorship imposed by Ecuavisa’s owner. According to Vera, the owner wanted to dictate whom he should interview on his show and chose not to air one of his interviews which, coincidentally, was with the President’s main political opponent. Vera issued a public statement explaining that he would not censor his show nor would he let anybody else do so. Since then, Ecuavisa’s independence has been severely questioned.
This leaves us with one important public airwaves channel that is still independent: Teleamazonas.
For the past couple of weeks there have been growing rumors that the government might shut down Teleamazonas applying the laws of Conartel, the regulator of TV and radio stations. According to Ecuadorian regulations, which have their origins in the military dictatorship of General Rodríguez Lara of the early 1970s, a TV channel or radio station can be sanctioned symbolically for $20 the first time it commits a violation; suspended for up to 90 days the second time; and lose its concession to operate for good the third time. Conartel has already imposed two sanctions on Teleamazonas.
In the first case Teleamazonas was sanctioned for showing bull fighting images, which Conartel has considered to be “conducive to violence” and thus, in violation of its regulations. This is a questionable rule, especially in a country in which bull-fighting takes center stage every December in Quito. In the case of the second sanction Conartel is applying a clause that forbids the live reporting of unconfirmed events. Such a law would make illegal most of the news reported in CNN or other news networks that report in real time. In this particular case, Teleamazonas aired images of what appeared to be a clandestine vote-counting center.
For now, we are waiting to hear from Conartel about the third sanction and what it is going to do about the second sanction, which would, if enforced, mean the suspension of Teleamazonas for up to 90 days. I wonder what freedom of expression Ecuadorians would be left with if the government decided to apply Conartel’s rules consistently to every TV and radio station.
Meanwhile the former Minister of the Interior, Gustavo Larrea, called attention to “journalists whose salary comes from foreign powers” including the CIA, though he did not specify what individuals he was referring to.
When asked about details he merely replied that it was the duty of a legislative commission to find out. I guess he is suggesting that individuals like myself, who write for an Ecuadorian newspaper but are not employed by an Ecuadorian company, should be investigated…
What is happening in Ecuador, and what has been happening in Venezuela over the last few years — the shutdown of RCTV, and the ongoing persecution of Globovisión — shows that in countries with a weak rule of law and public ownership of the airwaves, regulations can easily serve those in power who want to silence independent voices. Nobel Laureate Ronald Coase warned Americans about this potential abuse of power in 1959 in his classic “The Federal Communications Commission.” Back then he wondered, “In other fields it is almost always agreed that the use of property rights and of the price system serves the public good, why not in the case of radios [and TV]?”
‘Motorhome Diaries’ Crew Makes a Stop at Cato
Two freedom lovers who bought an old RV to travel across the country and film an online documentary called The Motorhome Diaries stopped by Cato this week to interview Cato Executive Vice President David Boaz.
Boaz chatted with Diaries rider Pete Eyre about libertarianism, Cato’s role in Washington and why he’s optimistic about the future of liberty.
You can follow them on their trek at MotorhomeDiaries.com or on Twitter at @MHDiaries.
Save Free Enterprise–Starting Now
As Dan Mitchell noted below, the U.S. Chamber of Commerce has launched a “Campaign for Free Enterprise” to stop the “rapidly growing influence of government over private-sector activity.” Chamber president Thomas Donohue told the Wall Street Journal that an “avalanche of new rules, restrictions, mandates and taxes” could “seriously undermine the wealth- and job-creating capacity of the nation.”
Indeed. Given the scope and extent of the Obama administration’s assaults on private enterprise — national health insurance, energy central planning, pay czars, abrogation of contracts, skyrocketing spending, and so on — free enterprise can use all the help it can get. I welcome the Chamber to the fight.
But it would be nice if the Chamber had joined the fight for economic freedom a bit earlier, say back in February when many of us were trying to stop the administration’s massive “stimulus” spending bill. That bill’s official cost is $787 billion; with interest, it would be about $1.3 trillion; and if you assume that its temporary spending increases will be extended, it will cost taxpayers about $3.27 trillion over 10 years.
Back then, Donohue had a few criticisms of the bill, but
The bottom line is that at the end of the day, we’re going to support the legislation. Why? Because with the markets functioning so poorly, the government is the only game in town capable of jump-starting the economy.
Or they might even have started defending free enterprise last fall, instead of going all-out to push the TARP bailout through Congress.
Converts to the cause of limited government are always welcome. But we might not need a $100 million Campaign for Free Enterprise if American business had opposed big government when the votes were going down in Congress. Still, better late than never.
A Libertarian Dilemma
What is to be done with the nation’s largest financial institutions, 19 of which have been officially designated as “too big to fail?” When thus guaranteed government protection, such institutions can be expected to take excessive risk and generally operate recklessly. Profits on risky ventures remain privatized, while losses become socialized. That is what happens when you bet with other people’s (that is, taxpayers’) money. I have called the system “casino capitalism.”
The solution, of course, is to end the policy of “too big to fail.” That will not happen soon, however, and we will likely see the government’s safety net extended to more institutions before there is any prospect for its withdrawal. In the interim, the risk-taking appetite of the large banks must be constrained, that is, regulated. What should the classical liberal response be?
MIT’s Simon Johnson has argued, “Anything that is too big to fail is too big to exist.” He favors breaking these institutions up. Chicago’s Gary Becker has suggested imposing progressive capital requirements as a disincentive for financial services firms to grow large enough to become too big to fail. The larger the institution, the higher the required capital ratio.
What cannot in conscience be done is to apply presumptive free-market arguments to such entities. They are not being constrained by market forces. The market’s invisible hand has been replaced by the state’s protective embrace.
Ponnuru: Stop Socialized Medicine, in All Its Forms
As usual, National Review‘s Ramesh Ponnuru offers sound advice on how Republicans, etc., should approach the Democrats’ health care reforms:
Karl Rove’s WSJ op-ed on health care reflects the thinking of a lot of Republicans. He concludes, “Defeating the public option should be a top priority for the GOP this year. Otherwise, our nation will be changed in damaging ways almost impossible to reverse.” In my view, Rove is defining Republican goals too narrowly.
Congress and the president can expand federal control of the health-care system a great deal without a “public option” (that is, a new government program to provide health insurance to people who choose it). They could set mandatory minimum standards for health insurance, impose price controls, mandate that individuals or employers buy insurance, and so forth. If Republicans say that the public option is the chief defect of liberals’ approach to health care, they may be leaving themselves with no rationale for opposing these steps if the Democrats drop it—which they might just do. (Or they might cosmetically weaken the public option in various ways. They could, for example, set up a “trigger” that brings the option into being only if certain conditions in the health market are met, and then design those conditions so that they will be met.)
The public option appears to be one of the biggest political vulnerabilities of the Democrats’ emerging health-care plan, but it isn’t the only one, and it shouldn’t be targeted to the exclusion of the plan’s other features—or of its general government-first orientation. Republicans ought to be making the case against individual mandates and employer mandates as well, both of which are disguised tax increases.
It isn’t incumbent on Republicans to see that a health-care bill passes Congress. To warrant conservative support, a bill should have no public option—but also no mandates and no price controls. Which is to say: No government-directed health-care system.
Fed to BoA: ‘We Will Not Leave You in the Lurch’
Thursday, the House Committee on Oversight and Government Reform questioned Ken Lewis about Bank of America’s purchase of Merrill Lynch and the subsequent injection of tens of billions of taxpayer funds into Bank of America.
While much of the hearing focused on Lewis’ leadership of Bank of America, the hearing also touched upon the more important questions of government regulators pressuring BoA to purchase Merrill even after BoA realized that Merrill’s losses were greater than expected.
One of the basic tenets of sound regulation, exercised in the public interest, is that regulators remain at “arm’s length” from the entities they regulate. As defined by Black’s Law Dictionary, “arm’s length” relates to “dealings between two parties who are not related or not on close terms and who are presumed to have roughly equal bargaining power; not involving a confidential relationship.”
If anything, it appears that BoA and the federal government were in a bear hug, rather than at arm’s length. As described in Lewis’ notes on one of his many conversations about the Merrill deal with Fed Chairman Ben Bernanke, Bernanke told Lewis, “We will not leave you in the lurch.” Given the funds subsequently injected into BoA, one can say that Chairman Bernanke is at least a man of his word.
One of the significant problems arising from extensive government ownership of private entities is that in regulating those entities, the government no longer has the ability to be a neutral, objective arbitrator. Whether it is BoA or GM, government officials will come under increasing pressure to see a positive return on the taxpayer’s investment. One should not be surprised if that pressure manifests itself by government officials favoring the very companies they have invested in.
While BoA has been saved, it appears that the rule of law has been “left in the lurch.”
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