21st Century Schizoid Boy

While West Germany (more capitalistic) had a pretty constant rate of growth in life expectancy, after about 25 years, East Germany (more communistic) took a dive and didn’t recover until unification in 1990 (at which point it recovered dramatically):

Mortality Tempo Adjustment: Theoretical and Empirical Considerations, Marc Luy, Institute for Sociology and Demography, University of Rostock, Germany, October 13th, 2006, http://www.oeaw.ac.at/vid/download/col061013ml.pdf.

Dr. Andrei Shleifer is an economist at Harvard:

The single most pervasive phenomenon in socialist countries is shortage of goods. Consumer goods ranging from necessities, such as food, to luxuries, such as cars and gold, as well as many intermediate inputs, are typically in short supply.

Standard explanations of shortages of goods under socialism are not completely persuasive… In the former Soviet Union, shortages of some goods, such as cars, have lasted for decades, without any price increases… The government has long been trying to extract the excess savings from the rich, and raising prices of luxuries would have been a natural way of doing this. It does not appear, then, that fairness is the real issue.

We argue that an important reason for pervasive shortages is self-interested behavior by the ministry bureaucrats who set the planned prices and output. These bureaucrats intentionally plan shortages in order to invite bribes from rationed consumers. If markets cleared, firms in an industry could earn profits, but most of these profits would accrue to the state treasury, not to the managers or the ministries. The key feature of socialism is that the decision makers who determine the prices and output of firms do not, to a first approximation, keep any of these profits. In contrast, when there is a shortage of a good, potential customers try to obtain it by offering bribes and favors to the bureaucrats in the ministry (and to the managers of the firms). These bribes tend to be much larger than the share of official profits that the bureaucrats and the managers are allowed to keep. And because the bribes are not official transactions, none of them goes to the treasury. As a result, the industry is better off creating a shortage of the goods and collecting the bribes than making official profits it cannot keep. To collect bribes, socialist industries will always try to produce a level of output entailing a shortage at official prices.

Pervasive Shortages under Socialism, Andrei Shleifer and Robert Vishny, The Rand Journal of Economics, Summer 1992, http://www.economics.harvard.edu/faculty/shleifer/files/pervasive_shortages.pdf.

The United States’ secret and illegal bombing of Cambodia during the Vietnam War killed approximately 150,000 Cambodians, started not under Nixon but under Lyndon Johnson (Laos was also secretly bombed). This led to a coup d’etat by the Khmer Rouge, led by Pol Pot, an agrarian communist movement that tried to realize socialism in its most extreme – no property, no money, schools closed, religion banned and forcefully moving many from cities to farms. The Khmer Rouge ruled from 1975-1979, and in just four years brutally murdered an estimated 2 million Cambodians or 25% of the country’s population.

An amazing documentary was made called S21: The Khmer Rouge Death Machine which even brings together former prison guards and former prisoners face-to-face:

Stats from the Mayo Clinic:

• 1 Pound of Fat ~= 3,500 calories

Milan

This “apéritif” concept (happy hour, but with a lot of all-you-can-eat finger foods for free) needs to be brought over to the U.S….

Doors for monsters!

The Duomo:

Venice

The West during [the period 1830 to 1900] is perceived as a place of great chaos, with little respect for property or life. Histories describe the era and area as characterized by gunfights, horse-thievery, and general disrespect for basic human rights. The taste for the dramatic in literature and other entertainment forms has led to concentration on the seeming disparity between the westerners’ desire for order and the prevailing disorder.

Our research indicates that this was not the case; property rights were protected and civil order prevailed. Private agencies provided the necessary basis for an orderly society in which property was protected and conflicts were resolved. These agencies often did not qualify as governments because they did not have a legal monopoly on “keeping order.” They soon discovered that “warfare” was a costly way of resolving disputes and lower cost methods of settlement (arbitration, courts, etc.) resulted. In summary, this paper argues that a characterization of the American West as chaotic would appear to be incorrect.

In his book, Frontier Violence: Another Look, W. Eugene Hollon stated that the he believed “that the Western frontier was a far more civilized, more peaceful, and safer place than American society is today.” The legend of the “wild, wild West” lives on despite Robert Dykstra’s finding that in five of the major cattle towns (Abilene, Ellsworth, Wichita, Dodge City, and Caldwell) for the years from 1870 to 1885, only 45 homicides were reported-an average of 1.5 per cattle-trading season. In Abilene, supposedly one of the wildest of the cow towns, “nobody was killed in 1869 or 1870. In fact, nobody was killed until the advent of officers of the law, employed to prevent killings.” Only two towns, Ellsworth in 1873 and Dodge City in 1876, ever had five killings in any one year. Frank Prassel states in his book subtitled “A Legacy of Law and Order,” that “if any conclusion can be drawn from recent crime statistics, it must be that this last frontier left no significant heritage of offenses against the person, relative to other sections of the country.”

To understand how law and order were provided in the American West, we now turn to four examples of institutions which approximated anarcho-capitalism. These case studies of land claims clubs, cattlemens’ associations, mining camps, and wagon trains provide support for the hypotheses presented above and suggest that private rights were enforced and that chaos did not reign.

…

From the above descriptions of the experience of the American West, several conclusions… appear:

1. The West, although often dependent upon market peace keeping agencies, was, for the most part, orderly.
2. Different standards of justice did prevail and various preferences for rules were expressed through the market place.
3. Competition in defending and adjudicating rights does have beneficial effects. Market agencies provided useful ways of measuring the efficiency of government alternatives. The fact that government’s monopoly on coercion was not taken as seriously as at present meant that when that monopoly was poorly used market alternatives arose. Even when these market alternatives did become “governments” in the sense of having a virtual monopoly on coercion, the fact that such firms were usually quite small provided significant checks on their behavior. Clients could leave or originate protective agencies on their own. Without formal legal sanctions, the private agencies did face a “market test” and the rate of survival of such agencies was much less than under government.

In conclusion, it appears in the absence of formal government, that the western frontier was not as wild as legend would have us believe. The market did provide protection and arbitration agencies that functioned very effectively, either as a complete replacement for formal government or as a supplement to that government. However, the same desire for power that creates problems in government also seemed to create difficulties at times in the West. All was not peaceful. Especially when Schelling points were lacking, disorder and chaos resulted, lending support to Buchanan’s contention that agreement on initial rights is important to anarcho-capitalism. When this agreement existed, however, we have presented evidence that anarcho-capitalism was viable on the frontier.

An American Experiment in Anarcho-Capitalism: The Not So Wild, Wild West, Terry L. Anderson and P. J. Hill, Department of Economics, Montana State University, The Journal of Libertarian Studies, 1977, http://mises.org/journals/jls/3_1/3_1_2.pdf.

http://www.independent.org/pdf/tir/tir_15_02_4_dilorenzo.pdf

I propose first a revision of the prevailing view of traditional hereditary monarchies and provide instead an uncharacteristically favorable interpretation of monarchy and the monarchical experience. In short, monarchical government is reconstructed theoretically as privately-owned government, which in turn is explained as promoting future-orientedness and a concern for capital values and economic calculation by the government ruler. Second, equally unorthodox but by the same theoretical token, democracy and the democratic experience are cast in an untypically unfavorable light. Democratic government is reconstructed as publicly-owned government, which is explained as leading to present-orientedness and a disregard or neglect of capital values in government rulers, and the transition from monarchy to democracy is interpreted accordingly as a civilizational decline.

Despite the comparatively favorable portrait presented of monarchy, I am not a monarchist and the following is not a defense of monarchy. Instead, the position taken toward monarchy is this: If one must have a state, defined as an agency that exercises a compulsory territorial monopoly of ultimate decision-making (jurisdiction) and of taxation, then it is economically and ethically advantageous to choose monarchy over democracy. But this leaves the question open whether or not a state is necessary, i.e., if there exists an alternative to both, monarchy and democracy.

In complete contrast to the orthodox opinion on the matter, then, elementary social theory shows, and will be explained as showing, that no state can be justified, be it economically or ethically. Rather, every state, regardless of its constitution, is economically and ethically deficient. Thus, the choice between monarchy and democracy concerns a choice between two defective social orders. In fact, modern history provides ample illustration of the economic and ethical shortcomings of all states, whether monarchic or democratic.

Moreover, the same social theory demonstrates positively the possibility of an alternative social order free of the economic and ethical shortcomings of monarchy and democracy (as well as any other form of state). The term adopted here for a social system free of monopoly of taxation is “natural order.” Other names used elsewhere or by others to refer to the same thing include “ordered anarchy,” “private property anarchism,” “anarcho-capitalism,” “autogovernment,” “private law society,” and “pure capitalism”… where every scarce resource is owned privately, where every enterprise is funded by voluntarily paying customers or private donors, and where entry into every line of production, including that of justice, police, and defense services, is free (xix-xxi).

Throughout most of its history, mankind, insofar as it was subject to any government control at all, was under monarchical rule. There were exceptions: Athenian democracy, Rome during its republican era until 31 B.C., the republics of Venice, Florence, and Genoa during the Renaissance period, the Swiss cantons since 1291, the United Provinces from 1648 until 1673, and England under Cromwell from 1649 until 1660. Yet these were rare occurrences in a world dominated by monarchies. With the exception of Switzerland, they were short-lived phenomena… With the end of World War I, mankind truly left the monarchical age. In the course of one and a half centuries since the French Revolution, Europe, and in its wake the entire world, have undergone a fundamental transformation. Everywhere, monarchical rule and sovereign kings were replaced by democratic-republican rule and sovereign peoples.

During the monarchical age… the share of government revenue remained remarkably stable and low. Economic historian Carlo M. Cipolla concludes, “from the eleventh century onward all over Europe, it is difficult to imagine that, apart from particular times and places, the public power ever managed to draw more than 5 to 8 percent of national income.” And he then goes on to note that this portion was not systematically exceeded until the second half of the twentieth century.

Until the very end of the nineteenth century, government employment rarely exceeded 3 percent of the total labor force. Royal ministers and parliamentarians typically did not receive publicly funded salaries but were expected to support themselves out of their private incomes.

A similar pattern emerges from an inspection of inflation and data on the money supply. As hard as they tried, monarchical rulers did not succeed in establishing monopolies of pure fiat currencies… It was only under the conditions of democratic republicanism… that this feat was accomplished. From the beginning of the democratic-republican age–initially under a pseudo gold standard and at an accelerated pace since 1971 under a government paper money standard– a seemingly permanent secular tendency toward inflation and currency depreciation has existed. During the monarchical age with commodity money largely outside government control, the “level” of prices had generally fallen and the purchasing power of money increased, except during times of war or new gold discoveries.

In addition to taxation and inflation… monarchs also showed considerably more moderation and farsightedness than democratic-republican caretakers [in regards to debt]. Throughout the monarchical age, government debts were essentially war debts. While the total debt thereby tended to increase over time, during peacetime at least monarchs characteristically reduced their debts… In striking contrast, since the onset of the democratic-republican age British debt has only increased, in war and in peace. Likewise, U.S. government debt has increased through war and peace.

Finally, the same tendency toward increased exploitation and present-orientation emerges upon examination of government legislation and regulation. During the monarchical age… the king and his parliament were held to be under the law. They applied preexisting law as judge or jury. They did not make law… Under democracy, with the exercise of power shrouded in anonymity, presidents and parliaments quickly came to rise above the law. They became not only judge but legislator, the creators of “new” law.

The phenomenon of social time preference is somewhere more elusive than that of expropriation and exploitation, and it is more complicated to identify suitable indicators of present-orientation. But all of them point in the same direction… The most direct indicator of social time preference is the rate of interest… A tendency toward falling interest rates characterizes mankind’s suprasecular trend of development. Minimum interest rates on ‘normal safe loans’ were around 16 percent at the beginning of Greek financial history in the sixth century B.C., and fell to 6 percent during the Hellenistic period. In Rome, minimum interest rates fell from more than 8 percent during the earliest period of the Republic to 4 percent during the first century of the Empire… This trend was by no means smooth… With this historical backdrop… it should be expected that twentieth-century interest rates would be still lower than nineteenth-century rates… this is not so… If real incomes are higher but interest rates are not lower, then the ceteris paribus clause can no longer be assumed true. Rather, the social time preference schedule must have shifted upward. That is, the character of the population must have changed. People on the average must have lost in moral and intellectual strength and become more present-oriented.

The degree of urbanization began to increase dramatically from about 1800 onward. A period of rising crime rates during the early nineteenth century can be attributed to this initial spurt of urbanization. Yet after a period of adjustment to the new phenomenon of urbanization, from the mid-nineteenth century onward, the countervailing tendency toward falling crime rates took hold again, despite the fact that the process of rapid urbanization continued for about another hundred years. And when crime rates began to move systematically upward, from the mid-twentieth century onward, the process of increasing urbanization had actually come to a halt. It thus appears that the phenomenon of rising crime rates cannot be explained other than… by a rising degree of social time preference, an increasing loss of individual responsibility, intellectually and morally, and a diminished respect for all law– moral relativism– stimulated by an unabated flood of legislation.

For decades… real incomes have stagnated or even fallen (50-70).

In the U.S. between 1960 and 1990 the murder rate doubled, rape rates quadrupled, the robbery rate increased five-fold, and the likelihood of becoming the victim of an aggravated assault increased by 700 percent (102).

Until the end of World War I, the overwhelming majority of the public in Europe accepted monarchical rule as legitimate (Etienne de la Boetie, The Politics of Obedience; David Hume, Essays: Moral, Political, and Literary) (70).

Democracy: The God that Failed: The Economics and Politics of Monarchy, Democracy, and Natural Order, Hans-Hermann Hoppe, July 30, 2001, http://www.amazon.com/Democracy-Economics-Politics-Monarchy-Natural/dp/0765808684.

A fundamental change in the relationship between the state, natural elites, and intellectuals only occurred with the transition from monarchical to democratic rule. It was the inflated price of justice and the perversions of ancient law by kings as monopolistic judges and peacekeepers that motivated the historical opposition against monarchy. But confusion as to the causes of this phenomenon prevailed. There were those who recognized correctly that the problem was with monopoly, not with elites or nobility. However, they were far outnumbered by those who erroneously blamed the elitist character of the ruler for the problem, and who advocated maintaining the monopoly of law and law enforcement and merely replacing the king and the highly visible royal pomp with the “people” and the presumed decency of the “common man.” Hence the historic success of democracy.

How ironic that monarchism was destroyed by the same social forces that kings had first stimulated and enlisted when they began to exclude competing natural authorities from acting as judges: the envy of the common men against their betters, and the desire of the intellectuals for their allegedly deserved place in society. When the king’s promises of better and cheaper justice turned out to be empty, intellectuals turned the egalitarian sentiments the kings had previously courted against the monarchical rulers themselves. Accordingly, it appeared logical that kings, too, should be brought down and that the egalitarian policies, which monarchs had initiated, should be carried through to their ultimate conclusion: the monopolistic control of the judiciary by the common man. To the intellectuals, this meant by them, as the people’s spokesmen.

http://mises.org/etexts/intellectuals.pdf

I do not say that democracy has been more pernicious on the whole, and in the long run, than monarchy or aristocracy. Democracy has never been and never can be so durable as aristocracy or monarchy; but while it lasts, it is more bloody than either. … Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide. It is in vain to say that democracy is less vain, less proud, less selfish, less ambitious, or less avaricious than aristocracy or monarchy. It is not true, in fact, and nowhere appears in history. Those passions are the same in all men, under all forms of simple government, and when unchecked, produce the same effects of fraud, violence, and cruelty. When clear prospects are opened before vanity, pride, avarice, or ambition, for their easy gratification, it is hard for the most considerate philosophers and the most conscientious moralists to resist the temptation. Individuals have conquered themselves. Nations and large bodies of men, never.

John Adams, letter to John Taylor (15 April 1814), http://en.wikiquote.org/wiki/Democracy

It has been known for decades that the Nazis used Hollerith equipment and that IBM’s German subsidiary during the 1930s — Deutsche Hollerith Maschinen GmbH (Dehomag) — supplied Hollerith equipment. As with hundreds of foreign-owned companies that did business in Germany at that time, Dehomag came under the control of Nazi authorities prior to and during World War II. It is also widely known that Thomas J. Watson, Sr., received and subsequently repudiated and returned a medal presented to him by the German government for his role in global economic relations. These well-known facts appear to be the primary underpinning for these recent allegations.

IBM does not have much information about this period or the operations of Dehomag. Most documents were destroyed or lost during the war. The documents that did exist were placed in the public domain some time ago to assist research and historical scholarship. The records were transferred from the company’s New York and German operations to New York University and Hohenheim University in Stuttgart, Germany — two highly respected institutions with the appropriate credentials to be custodians of these records. Independent academic experts at these universities now supervise access to the documents by researchers and historians.

The lawsuit appears largely to be based on the claims contained in the book. Based on everything the company has seen to date, there appear to be no new facts or findings that bear on this important issue and period… The lawsuit has been dismissed.

IBM Statement on Nazi-era Book and Lawsuit, February 14, 2001, http://www-03.ibm.com/press/us/en/pressrelease/1388.wss.

In his much anticipated new book, “I.B.M. and the Holocaust,” Edwin Black makes a copiously documented case for the utter amorality of the profit motive and its indifference to consequences.

“Jews could not hide from millions of punch cards thudding through Hollerith machines, comparing names across generations, address changes across regions, family trees and personal data across unending registries,” Mr. Black writes. Even as war approached, Watson, in Mr. Black’s account, fought to keep I.B.M. in the Reich. “As a result, millions of cards, millions of lives and millions of dollars would now intersect at the whirring stations of Hitler’s Holleriths.”

But such vaunted language — cards, lives and dollars fatally intersecting — threatens to obliterate the moral distinction between the sellers of rope and those who use rope to hang people. In the generalized outbreak of evil from 1933 to 1945, it is the Nazis, of course, who belong at the top of the heap of evildoers. Below them were the fascist collaborators, the militias, and the camp guards who did their bidding; and then there were the companies, like I. G. Farben and Daimler-Benz, who used slave labor made available by the concentration camps. I.B.M. and Watson were far from heroic, but they do not seem to have been so unusually unheroic as to justify making them a special case.

Mr. Black, in his fervor to find I.B.M. culpable, weighs only punch cards in this particular balance. Of course, he is right that it would have been better had I.B.M. not sold them to Hitler. It would have been better had many things been done differently by many people. Mr. Black’s case is long and heavily documented, and yet he does not demonstrate that I.B.M. bears some unique or decisive responsibility for the evil that was done.

‘I.B.M. and the Holocaust’: Assessing the Culpability, Richard Bernstein, The New York Times, March 7, 2001, http://www.nytimes.com/2001/03/07/arts/07BERN.html.

When World War II began, all IBM facilities were placed at the disposal of the U.S. government. IBM’s product line expanded to include bombsights, rifles and engine parts – in all, more than three dozen major ordnance items. Thomas Watson, Sr., set a nominal one percent profit on those products and used the money to establish a fund for widows and orphans of IBM war casualties.

The war years also marked IBM’s first steps toward computing. The Automatic Sequence Controlled Calculator, also called the Mark I, was completed in 1944 after six years of development with Harvard University. It was the first machine that could execute long computations automatically.

IBM Archives: 1940s, http://www-03.ibm.com/ibm/history/history/decade_1940.html.

The intersection of governments and corporations has and always will create murkiness for culpability. The modern day equivalent is Cisco purportedly “marketing its routers to China specifically as a tool of repression” for China’s “Great Firewall” (wired.com). But is this a problem of greed or are the evil governments the problem? Does gravity cause plane crashes?

Statistics from the U.S. Small Business Administration [sba.gov]:

A small business [is] an independent business having fewer than 500 employees.

Small businesses employ just over half of U.S. workers. Of 119.9 million nonfarm private sector workers in 2006, small firms with fewer than 500 workers employed 60.2 million and large firms employed 59.7 million. Firms with fewer than 20 employees employed 21.6 million. Small firms’ share of part-time workers (21 percent) is similar to large firms’ share (18 percent).

Pay 44 percent of total U.S. private payroll.

Create more than half of the nonfarm private gross domestic product (GDP).

Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).

Very small firms with fewer than 20 employees annually spend 45 percent more per employee than larger firms to comply with federal regulations. These very small firms spend four and a half times as much per employee to comply with environmental regulations and 67 percent more per employee on tax compliance than their larger counterparts.

Firms with fewer than 500 employees accounted for 64 percent (or 14.5 million) of the 22.5 million net new jobs (gains minus losses) between 1993 and the third quarter of 2008.

In 2008, there were 29.6 million businesses in the United States, according to Office of Advocacy estimates. Census data show that there were 6.0 million firms with employees in 2006 and 21.7 million without employees in 2007 (the latest available data). Small firms with fewer than 500 employees represent 99.9 percent of the 29.6 million businesses (including both employers and nonemployers), as the most recent data show there were about 18,000 large businesses in 2006.

In 2007, the overall rate of self-employment (unincorporated and incorporated) was 10 percent.

Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.