Siachen Glacier is a glacier in the Himalayas averaging about 17,000 feet in elevation. The highest war in the world has taken place there between India and Pakistan since 1984. “In spite of the severe climate, the word ‘Siachen’ ironically means ‘the place of wild roses’.”
Relatedly, India has about half a million troops committed to the Kashmir war.
India has about 500,000 soldiers and paramilitary troops in Kashmir, which is claimed in its entirety by India and Pakistan and has caused two of the three wars between them since they won independence from Britain in 1947. [The Times, June 13, 2009, http://www.timesonline.co.uk/tol/news/world/asia/article6485349.ece]
For almost all the young protesters, that struggle is for total independence, rather than accession to Pakistan which, like India, claims all of divided Kashmir. Still, India has deployed an estimated 600,000 troops in Kashmir. [The Economist, 9 October 2008]
Questioner: I actually lifted a speech that you made in the Banking Committee on September 10, 2003. I remember that day, because your words are so dramatic. Ron, you said, while everybody else was saying, “Oh, if we don’t help people out through these loans with Fannie and Freddie, then we’re just horrible people; we hate poor people.” You said, and you predicted, you said, “If we continue to inflate the bubble this way, the housing crisis is going to cause an explosion and there’s going to be damage worldwide.” What did you know, Ron Paul, in 2003 that nobody else on the banking committee or in the United States Congress or in the media knew? What did you know?
Ron Paul: Well, I think it reflects an understanding of economics. I didn’t know anything special, other than the fact that I have studied Austrian economics. Their understanding of the business cycle comes from the Federal Reserve – the creation of credit. We’ve been working with Keynesian economics since the Depression. We’ve had perpetual bubbles and recessions and ups and downs and inflation. Nixon really sealed it over when he said, “We’re all Keynesians now.” And we still are in Washington. They still use Keynesian economics to try to solve these problems. It isn’t all that complex. Interest rates are very, very important. Prices are very, very important in a free market. And when you distort prices like in wage and price controls, everything seizes up. Nothing can happen. But when the Federal Reserve comes in and fixes the prices of interest rates, you deceive the savers and the spenders and the investors. People believe that there’s been a lot of savings, and interest rates were very low and that wasn’t the case. We weren’t saving a penny. We were giving low interest rates because we were creating money out of thin air. And that’s why I keep coming back to the Federal Reserve. It was the policies of the Federal Reserve that created this. We shouldn’t have been as surprised at all that we eventually had this tremendous financial crisis.
Questioner: So Congressman, is your solution then to get rid of the Federal Reserve then, or what else are you proposing we do here to make sure this kind of stuff doesn’t happen again?
Ron Paul: First off, we have to obey the Constitution, live within our means, balance the budget, quit war-mongering, and quit the Welfare state – those minor things like that. Eventually, you don’t need the Federal Reserve. No, it’s caused too much trouble. Central banking has always been harmful. It’s a seductive way of financing big government. Conservatives love it, because you can pay the military bills. Liberals love it, because you can pay the Welfare State bill. But it’s all deception and it’s all a tax. It eventually destroys and hurts the very people you’re trying to help. You try to help poor people by giving them stuff for free, but you end up giving them inflation. They’re the first ones to lose their jobs. They’re the ones who suffer the most from inflation. We have inflation today much more so than anybody admits, because that’s why the cost of medicine is so high and the cost of education is so high. It’s the devaluation of the Dollar. So with all the good intentions of helping poor people, the very people who are doing this are actually making it much more harmful, and hurting those they want to help.
Nixon’s quote was an adaptation of a mis-quote of Milton Friedman:
Sir: You quote me [Dec. 31] as saying: “We are all Keynesians now.” The quotation is correct, but taken out of context. As best I can recall it, the context was: “In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian.” The second half is at least as important as the first.
Milton Friedman demonstrated theoretical problems with Keynesianism first in 1967:
In 1967 Friedman made another seminal contribution to Keynesian-monetarist debates in his presidential address before the American Economic Association. In it he questioned the validity of another key Keynesian construct, the Phillips curve, which asserted that a stable trade-off exists between the rate of inflation and the unemployment rate. Friedman argued that the trade-off was temporary and depended on workers being “fooled” by unanticipated inflation into thinking that a rise in their nominal wage was a rise in their real wage, thus inducing them to produce more output. According to Friedman, the only way to reduce unemployment below what he dubbed the “natural rate” required not a one-time increase but accelerating inflation. The “stagflation” of the 1970s (literally, a combination of economic stagnation and inflation), impossible in a simplified Keynesian framework, was seen by many as confirmation of Friedman’s hypothesis. It was in any event the death knell for the dominance of the Keynesian model in macroeconomics.
Stagflation occurred in the 1970s due to Keynesian policies:
Keynes died in 1946. In addition to “The General Theory”, he was part of a panel that worked on the Bretton Woods Agreement and the International Monetary Fund (IMF). His theory continued to grow in popularity and caught on with the public. After his death, however, critics began attacking both the macroeconomic view and the short-term aims of Keynesian thinking. Forcing spending, they argued, might keep a worker employed for another week, but what happens after that? Eventually the money runs out and the government must print more, leading to inflation.
This is exactly what happened in the stagflation of the 1970s. Stagflation was impossible within Keynes’ theory, but it happened nonetheless. With government spending crowding out private investment and inflation reducing real wages, Keynes’ critics gained more ears. It ultimately fell upon Milton Friedman to reverse the Keynesian formulation of capitalism and reestablish free market principles in the U.S. (Find out what factors contribute to a slowing economy, in Examining Stagflation and Stagflation, 1970s Style.)
This was not what Nixon was promising when he created Bretton Woods II:
Your dollar will be worth just as much tomorrow as it is today.
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Accordingly, I have directed the Secretary of the Treasury to take the action necessary to defend the Dollar against the speculators. I have directed Secretary Connolly to suspend temporarily the convertibility of the Dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interests of monetary stability and in the best interests of the United States.
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In full cooperation with the International Monetary Fund, and those who trade with us, we will press for the necessary reforms to set up an urgently needed, new, international monetary system.
Good evening. Seven weeks ago, I announced a new economic policy to stop the rise in prices, to create new jobs, and protect the American dollar.
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On the inflation front, I can report to you tonight that the wage/price freeze has been remarkably successful.
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Now, let’s look at the future. Because of our strong beginning, because of the determination Americans have shown to pull together during the freeze, I am confident that our further action in stopping inflation will succeed as well.
I come before this special joint session to ask the cooperation of the Congress in achieving a great goal: a new prosperty without war and without inflation.
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When this temporary and necessarily drastic action [price and wage controls] is over, we shall take all the steps needed to see that America is not again inflicted by the virus of runaway inflation.
According to the U.S. Energy Information Administration, more than half of all energy produced or imported in the United States is lost either in transmission or in conversion. Cars (internal combustion engines) are the worst offenders, with only 20% of the energy (e.g. gasoline) reaching the drive train.
1 Btu is the amount of heat necessary to raise one pound of water by 1 degree Fahrenheit (F), or approximately the amount of heat created by a single match.
For electricity generation, the electrical system energy losses are assumed by the EIA to be about two-thirds of the energy consumed. In the residential/commercial and industrial sectors, the division between “useful” and “rejected” or “lost” energy depends on assumed efficiencies of conversion processes, based on engineer’s estimates for the conversion efficiency of devices such as process heaters and boilers. In the residential/commercial sector, a 75% efficiency is assumed, which is a weighted average between space heating at approximately 60% and electrical motors and other electrical uses at about 90%. For the industrial sector, 80% efficiency is assumed. For transportation, a generous 20% efficiency is assumed, which corresponds to the approximate average efficiency of internal combustion engines as measured on Federal Driving Schedules (i.e., the amount of energy that actually reaches the drive train of a vehicle, compared to the amount of energy consumed.)
The energy content of fuels varies depending on source, fuel type, year of production, and the sector using the fuel. Some conversion factors, useful for estimation, are given below.
Short ton of coal: 21,400,000 Btu
Barrel (42 gallons) of crude oil: 5,800,000 Btu
Cubic foot of natural gas (at standard conditions): 1,027 Btu
Kilowatt-hour of electricity: 3,412 Btu
Colonel Mathieu: Let’s try to be precise. The word “torture” isn’t used in our orders… No, gentlemen, believe me, it’s a vicious circle. We could talk for hours to no avail, because that isn’t the problem. The problem is this: The FLN wants to throw us out of Algeria, and we want to stay. Even with slight shades of opinion, you all agree that we must stay. When the FLN rebellion began, there were no shades at all. Every paper, the communist press included, wanted it crushed. We’re here for that reason alone. We’re neither madmen nor sadists… We are soldiers. Our duty is to win. Therefore, to be precise, it’s my turn to ask a question. Should France stay in Algeria? If your answer is still yes, then you must accept all the consequences.
[In the 3rd century, Roman] merchants and the artisans were traditionally organized into guilds and chambers of commerce and that sort of thing. They now, too, came under government pressure because the government could not obtain enough material for the war machine through regular channels — people didn’t want all that token coinage. So merchants and artisans were now compelled to make deliveries of goods.
So that if you had a factory for making garments, you now had to deliver so many garments to the government requisitions. If you had ships, you had to carry government goods in your ships. In other words, what we have here is a kind of nationalization of private enterprises, and this nationalization means that the people who use their money and their talent are now compelled to serve the state whether they like it or not.
When people tried to get out of this they were then, by law, compelled to remain in the occupation that they were in. In other words, you couldn’t change your job or your business.
This was not sufficient because, after all, death is a relief from taxes. So the occupations were now made hereditary. When you died, your son had to take up your profession. If your father was a shoemaker, you had to be a shoemaker. These laws started by being restricted to the defense-oriented industries but, of course, gradually it was realized that everything is defense-oriented.
The peasantry, known as the coloni, were leaseholders on both imperial and private estates. They too were formerly a free class. Now under the same kinds of pressures that all smallholders were in in this situation, they began to drift away, trying to find better opportunities, better leases, or better occupations. So under Diocletian the coloni were now bound to the soil.
Anyone who had a lease on a particular piece of land could not give that lease up. More than that, they had to stay on the land and work it. In effect, this is the beginning of what in the Middle Ages is called serfdom, but it actually has its origins here in late Roman society.
James Madison is known as the Father of the Constitution because of his pivotal role in the document’s drafting as well as its ratification. Madison also drafted the first 10 amendments — the Bill of Rights (http://www.loc.gov/wiseguide/may05/constitution.html).
Wherever the real power in a Government lies, there is the danger of oppression. In our Governments the real power lies in the majority of the Community, and the invasion of private rights is chiefly to be apprehended, not from acts of Government contrary to the sense of its constituents, but from acts in which the Government is the mere instrument of the major number of the Constituents. This is a truth of great importance, but not yet sufficiently attended to; and is probably more strongly impressed on my mind by facts, and reflections suggested by them, than on yours which has contemplated abuses of power issuing from a very different quarter. Whereever there is an interest and power to do wrong, wrong will generally be done, and not less readily by a powerful & interested party than by a powerful and interested prince. The difference so far as it relates to the superiority of republics over monarchies, lies in the less degree of probability that interest may prompt more abuses of power in the former than in the latter; and in the security in the former agst an oppression of more than the smaller part of the Society, whereas in the former [latter] it may be extended in a manner to the whole, The difference so far as it relates to the point in question–the efficacy of a bill of rights in controuling abuses of power–lies in this: that in a monarchy the latent force of the nation is superior to that of the Sovereign, and a solemn charter of popular fights must have a great effect, as a standard for trying the validity of public acts, and a signal for rousing & uniting the superior force of the community; whereas in a popular Government, the political and physical power may be considered as vested in the same hands, that is in a majority of the people, and, consequently the tyrannical will of the Sovereign is not [to] be controuled by the dread of an appeal to any other force within the community. What use then it may be asked can a bill of rights serve in popular Governments? I answer the two following which, though less essential than in other Governments, sufficiently recommend the precaution: 1. The political truths declared in that solemn manner acquire by degrees the character of fundamental maxims of free Government, and as they become incorporated with the national sentiment, counteract the impulses of interest and passion. 2. Altho. it be generally true as above stated that the danger of oppression lies in the interested majorities of the people rather than in usurped. acts of the Government, yet there may be occasions on which the evil may spring from the latter source; and on such, a bill of rights will be a good ground for an appeal to the sense of the community. Perhaps too there may be a certain degree of danger, that a successionof artful and ambitious rulers may by gradual & well timed advances, finally erect an independent Government on the subversion of liberty. Should this danger exist at all, it is prudent to guard agst it, especially when the precaution can do no injury. At the same time I must own that I see no tendency in our Governments to danger on that side. It has been remarked that there is a tendency in all Governments to an augmentation of power at the expence of liberty. But the remark as usually understood does not appear to me well founded. Power when it has attained a certain degree of energy and independence goes on generally to further degrees. But when below that degree, the direct tendency is to further degrees of relaxation, until the abuses of liberty beget a sudden transition to an undue degree of power. With this explanation the remark may be true; and in the latter sense only is it, in my opinion applicable to the Governments in America. It is a melancholy reflection that liberty should be equally exposed to danger whether the Government have too much or too little power, and that the line which divides these extremes should be so inaccurately defined by experience.
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My own opinion has always been in favor of a bill of rights; provided it be so framed as not to imply powers not meant to be included in the enumeration.
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Repeated violations of these parchment barriers have been committed by overbearing majorities in every State. In Virginia I have seen the bill of rights violated in every instance where it has been opposed to a popular current.
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The restrictions however strongly marked on paper will never be regarded when opposed to the decided sense of the public, and after repeated violations in extraordinary cases they will lose even their ordinary efficacy. Should a Rebellion or insurrection alarm the people as well as the Government, and a suspension of the Hab. Corp. be dictated by the alarm, no written prohibitions on earth would prevent the measure. Should an army in time of peace be gradually established in our neighborhood by Britn. or Spain, declarations on paper would have as little effect in preventing a standing force for the public safety. The best security agst these evils is to remove the pretext for them. With regard to Monopolies, they are justly classed among the greatest nuisances in Government. But is it clear that as encouragements to literary works and ingenious discoveries, they are not too valuable to be wholly renounced? Would it not suffice to reserve in all cases a right to the public to abolish the privilege at a price to be specified in the grant of it? Is there not also infinitely less danger of this abuse in our Governments than in most others? Monopolies are sacrifices of the many to the few. Where the power is in the few it is natural for them to sacrifice the many to their own partialities and corruptions. Where the power as with us is in the many not in the few the danger cannot be very great that the few will be thus favored. It is much more to be dreaded that the few will be unnecessarily sacrificed to the many.
Scott Sumner received his PhD in Economics at the University of Chicago.
My findings suggest that Stigler is wrong, as the more idealistic a country’s values, the more rapidly they moved toward free markets when statism became discredited. But to people like Paul Krugman, Joe Stiglitz, James Galbraith and Naomi Klein, the findings are equally inconvenient. Far from being a right wing plot, the strong move toward freer markets and lower marginal tax rates that occurred in almost all developed countries after 1980 was actually driven by idealistic values, indeed I would argue by “liberal” values.
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Even so, I couldn’t help wondering what was so special about this seemingly ordinary northern European country. How could one country be the most egalitarian, and the most free market, and the most idealistic, and the happiest place on earth? Was there something in the water? Does Denmark somehow provide the secret key to all the social sciences? In other words (sorry, I can’t resist):
Is there nothing rotten in Denmark?
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Actually there is. They have fairly high marginal tax rates, and hence they are somewhat poorer than Switzerland, and even farther behind ultra-low tax Singapore. These three countries, each with fairly similar populations, became my models of hyper-egalitarian liberalism, hyper-democratic liberalism, and hyper-economistic liberalism. I’ll consider Switzerland’s political system in another post, but let’s finish up this overlong post by briefly comparing the two extremes of neoliberal economic policies, Denmark and Singapore. You already know about Denmark, but Singapore also has a decent system of social insurance (universal health care, etc.) The difference is that Singapore achieved this result through a system of self-insurance, i.e. forced saving at roughly 33% of income. (With government transfer payments merely covering the gaps in the system.) This allows Singapore to have very low taxes on labor, and almost no taxes on capital and trade. And it has fully funded private retirement accounts. And health saving accounts. And huge budget surpluses. A nation ruled over by hundreds of Martin Feldsteins. (Sounds like a lot of fun!) As a result, Singapore has a per capita GDP (in PPP terms) as high as any non-oil country on earth (or any with at least million people.) Denmark is also reasonably prosperous, but far below Singapore.
I think McCloskey is on to something when she argues that free markets promote bourgeois virtues. I don’t expect to live long enough to see a world where Afghan tribesmen have a culture indistinguishable from the Danes, but I do think the world is moving in that direction.
Which brings me back to monetary policy. I argued that a misdiagnosis of the Great Depression led the world into a long, fruitless experiment with statism. Forty years in the wilderness. It is not hard to see the danger we face today. That’s why I am so passionate about diagnosing the current crisis correctly.
… over one half of all referenda in the 20th century occurred in one country; Switzerland. It is far and away the most democratic society in the world. And it is also one of the most successful. Of course no country is perfect, and Switzerland has its flaws. But it has avoided the worst excesses of nationalism, militarism and socialism. It is one of the richest societies on earth.
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What impresses me about [the new survey of the competitiveness of nations, put together by the World Economic Forum] is that apart from the obvious inclusion of the US … my countries are highly successful in totally different ways. Denmark has ultra-liberal values, but isn’t particularly rich. Norway is much richer, but didn’t even make the top ten. Switzerland is ultra-democratic, whereas Singapore is merely a quasi-democracy. Singapore is run by highly-trained bureaucrats who think incentives matter a lot, whereas Switzerland is obviously more populist. Each does one thing extremely well, and my hunch is that this spills over into other areas.
China would be the counter-argument to Liberaltarianism. They have utilized free markets to push their socialist agenda, leading to the classic central planning of socialist governments — One child policy, The Great Firewall of China, suppressing political dissidents, etc.
Now these Nazca Booby [birds] always lay two eggs but the second chick always dies, and I suppose we should see the second chick, from a Darwinian point of view, as a kind of insurance against the possibility of the first one dying.
The elder chick hatches about five days before the younger one. If the elder chick is still alive, it promptly kills the younger one. The parent makes no effort to restrain the murderer or assist the victim. But if the elder chick happens to be dead before the younger one arrives, the younger one serves as the insurance policy.
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Bringing two chicks into the world so that one may die seems horribly cruel to us, but natural selection has no pity.
Summary of the differences between Soviet and U.S. Afghanistan Wars, to-date:
Soviet War in Afghanistan: ~115,000 peak troops at any one time. ~15,000 dead. Started Dec. 27, 1979. Ended February 16, 1989 -> 3,339 days in total, or 9 years, 1 month, and 20 days.
United States War in Afghanistan: 120,497 Americans currently in Afghanistan, with a likely “surge” to come from Obama. Many of the 68,000 “contractors” are mercenaries. 804 soldiers dead. Started October 7, 2001. Continues today -> 2,894 days so far, or 7 years, 11 months, and 2 days.
Statistics for current American involvement, western intelligence reports for Soviet involvement, and The Washington Post’s Faces of the Fallen for current soldiers dead in our wars:
As reflected in Table 1, as of March 2009, there were 68,197 DOD contractors in Afghanistan, compared to 52,300 uniformed personnel. Contractors made up 57% of DOD’s workforce in Afghanistan (see Figure 5). This apparently represented the highest recorded percentage of contractors used by DOD in any conflict in the history of the United States.
Congressional Research Service, Department of Defense Contractors in Iraq and Afghanistan: Background and Analysis, Moshe Schwartz, Specialist in Defense Acquisition, August 13, 2009, Page 8, http://fpc.state.gov/documents/organization/128824.pdf.
The last Soviet soldier came home from Afghanistan this morning, the Soviet Union announced, leaving behind a war that had become a domestic burden and an international embarrassment for Moscow.
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At the height of the Soviet commitment, according to Western intelligence estimates, there were 115,000 troops deployed.
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The war cost the Soviet Union roughly 15,000 lives and undisclosed billions of rubles. It scarred a generation of young people and undermined the cherished image of an invincible Soviet Army. Moscow’s involvement in Afghanistan was often compared to the American experience in the Vietnam War, in which more than 58,000 Americans died.
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The first Soviet troops parachuted into Kabul on Dec. 27, 1979, to assist Babrak Karmal, who had become President in a coup within the Communist leadership.
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The Soviet-backed Kabul Government has generally kept a firm grip on the cities, but throughout the war has been unable to rout the rebels in the countryside, where the conservative populace was antagonized at the outset by changes in social and land policies that offended Muslim tradition.
