Sunday, May 23, 2010

Shoplifting, ObamaCare and Property Rights

“For a priest in northern England, the commandment 'thou shalt not steal' isn't exactly written in stone,” according to Gregory Katz of the Associated Press. The Rev. Tim Jones told his congregation it is sometimes acceptable for desperate people to shoplift as long as they do it at large national chain stores, rather than small, family businesses. He said it is justified if a person in real need is not greedy and does not take more than he or she really needs to get by.

Archdeacon Richard Seed of the Church of England rejected that view: “Father Jones is raising important issues about the difficulties people face...but shoplifting is not the way to overcome these difficulties.”

At stake here is the issue of property rights: whether some people's need justifies violating other people's property rights. And that is the same issue at the root of President Obama's health care reform. He claims that some people's need for health insurance justifies taking vast sums of money from others to pay for it. This is to be done by reducing doctor's fees, increasing the income taxes on the rich,
taxing medical device manufacturers, imposing fines on those who fail to buy health insurance, a 40 percent excise tax on insurance companies that is keyed to high-end insurance policies, forcing low-risk enrollees (mostly the young) to pay more in order to cover the higher risks of others, etc.

There is another parallel here, too. Both Rev. Jones and President Obama ignore or “interpret” their way around a very clear principle they are supposed to uphold. What could be clearer than “thou shalt not steal?” It certainly makes no exception for stealing from the rich. Perhaps that priest believes in a “living” ten commandments just as Obama believes a “living” Constitution allows him to interpret
it in a way he believes appropriate to modern times and completely contrary to its historical meaning.

Where does the Constitution grant authority to the federal government for the president's health insurance program? Has Obama—who has taken an oath to uphold the Constitution—somehow interpreted that document to include the Marxist dictum “From each according to his ability, to each according to his need?” It seems so. The top one percent of American taxpayers already pays more income tax than the bottom 95 percent combined. The top 10 percent pay 72.4 percent of the total. Yet Obama wants to further increase taxes on the rich.

Of course, the bottom 90 percent has more votes than the top 10 percent, but is right and wrong determined by votes—or principle? If nine men vote to steal from a tenth man, does that make it right? If 90 percent of voters elect a majority of politicians to do the stealing for them, does that make it right? The principle of equal protection of the law should apply to protecting the wealth of everyone, the rich as well as the poor, just as “thou shalt not steal” does.

It is well known that the Founding Fathers were generally religious, but their recognition of property rights did not depend on the Christian commandment “thou shalt not steal.” Property rights are far older than Christianity. In fact, the word “steal” in itself reveals a prior recognition of property rights. In the hierarchical structure of language, words can be developed from earlier ones and depend upon them for their meaning. For example, the word “orphan” requires a prior knowledge of the word “parent,” without which it can have no meaning. Similarly, it is impossible to understand the meaning of the word “steal” without first having an understanding of the word “property,” without first knowing what rightful ownership of something by somebody means.

In the fifth century before Christ, the Greek city of Piraeus was the center of commerce in the Mediterranean. “This primacy was due,” writes historian Louis Rougier in The Genius of the West, "first and foremost, to the scrupulous respect given to private property. Each year, on entering office, the Athenian archon listed the possessions of every citizen and guaranteed him his ownership and rights of disposal.

"This primacy was almost equally due to a strong monetary discipline....And never throughout their long history, regardless of the difficulties in which they found themselves, did the Athenians ever change the legal title or the weight of their money....

"At a time when most other Greek cities were still living from the fruits of their lands and the production of their households, the Athenians had developed an exchange economy based on money. The money changers became the bankers who accepted deposits, made secured loans, and issued letters of exchange....

"Toward 450 B.C., Athens provided the first example of a state prepared to rely on overseas areas for its food supplies and to pay for these by cultivating a few special crops (vines and olives) and producing manufactured goods best suited to its natural aptitudes and resources....By the fourth century, Athens was importing four times as much food grain as it was producing...[and] paying with finished goods, such as vases, jewelry, arms, and fine cloth, for raw materials, food stuffs, metals, gold from Thrace, purple dyes from Phoenicia, hides from Syria, and wheat from Egypt and Scythia.”

From the coasts of the Black Sea came ship timber, salted fish, honey, wax, pitch, tackling and cordage for vessels, leather, and goatskins. From Phrygia and Miletus, fine wool and carpets. From Etruria, boots and bronzes. From Arabia, perfumes. And “all the sweet productions” of Sicily, Italy, Cyprus, Lydia, Pontus, and Peloponnesus found their way to Piraeus, wrote Augustus Boeckh in 1857 in Public Economy of the Athenians. Athenian coins (drachmas, 65 grains fine silver) wound up as far away as India and northern Europe.

Now, trade in all of these commodities required property rights. Each item had to be owned by somebody, and other people had to recognize that ownership and exchange their own property right to their commodities (or money) in return. And this was true long before our Greek example.

Eight centuries earlier, by 1250 B.C., the Phoenicians, the most expert navigators of the ancient world, were the major traders throughout the Mediterranean and traveled to the edges of the known world. They were famous for their ivory carving, silverwork, and the manufacture of glass and fine fabrics, which were especially admired for their “Tyrian purple” dye.

Property rights were essential not only to trading but to the division of labor. Unless one had a property right to what he could produce by and for himself, a division of labor—with all the complexities and economic efficiencies it brought for the advancement of civilization—could not have arisen. Indeed, it is difficult to imagine how society could have advanced beyond the simplest tribal level without developing a division of labor.

Trade brought not only economic wealth but another type of wealth: ideas. The Phoenicians carried their alphabet wherever they went. To them it was merely a convenience for record keeping, but it shaped literature, learning and science of the Western World. Their alphabet, which used symbols for sounds instead of hieroglyphs or cuneiform was a tremendous advance. In addition to adopting the Phoenician alphabet, the Greeks adopted Mesopotamian weights and measures, the lunisolar calendar, and architectural techniques, which aided the progress of Greek civilization.

There is evidence of property rights thousands of years earlier than our examples of the Greeks and the Phoenicians. From prehistoric times, trade existed across the Sahara desert, a terrain worth crossing only in circumstances for exceptional gain. By the end of the 7th millennium B.C., Egyptians had imported goats and sheep from southwest Asia. Foreign artifacts in Egypt indicate trading with Syria in the 5th millennium B.C. By the 4th millennium B.C., trading was established with Nubia to the south and with cultures along the eastern Mediterranean.

By the middle of the 4th millennium B.C., lapis lazuli was being traded from its only known source in the ancient world, northeastern Afghanistan, as far as Egypt and Mesopotamia. By the third millennium B.C., it was being traded in the Mohenjo-Daro civilization in the Indus valley of India.

In the sixth century B.C., the Chinese were trading salt, iron, fish, cattle and silk, which could end up as far away as Greece. The Chinese also were trading with people in India, where they could obtain coral, jade, glass and pearls. In the third century B.C., the extensive silk trade that developed during the Han dynasty led to the famous Silk Road, a 4,000-mile transcontinental network that connected earlier routes that had been in existence for centuries. This greatly facilitated trading not only in silk but in slaves, satin, perfumes, spices and jewels.

Now we have elected to the presidency of the United States an economic primitive, who is “fundamentally restructuring” America in a way that is contrary to the process of economic progress that has been advancing civilization for thousands of years. He has shown little understanding of property rights and certainly no respect for them. His agenda is a negation of them, rooted in collectivism at the tribal level.

Throughout history, men have always made trades for their own self-interest. They sought deals that brought them things of greater value than what they were giving up in return. In a trade of, say, a vase for a goatskin, each man considered the other's commodity of greater value than his own; otherwise there would be no trade. The man trading the vase may have come from an area where people did not raise goats but were very skilled at making vases. The man who traded the goatskin may have come from an area that lacked suitable clay for vases. The trade was a “win-win” situation. The same was true if a man used money as an intermediary, exchanging his vase for money now and then using the money to buy a goatskin or something else later.

Nobody was forced to trade for what he would regard as a loss—or even for less gain than he could obtain elsewhere. Maybe one man traded a vase for a goatskin but another decided he would be better off by trading his for salted fish or wheat or perhaps simply for money to be saved for a future purchase. Trades were made on an individual—not collective—basis, with each man tailoring his trading for the greatest value to himself, given his own circumstances, needs and desires. When everyone traded to get the most for his money (or vases or goats etc.), society prospered. No chief or king could have created a more prosperous system. He simply couldn't have decided the terms of countless trades by thousands of individuals that would have been more beneficial than what they determined for themselves.

Obamacare would reverse or negate every aspect of the process history has shown to be essential to successful commerce and human advancement. It begins by regarding the wealth of private citizens as a collective resource, as though its disposition is to be determined by the wishes of a collective ruler—a tribal chief or king—rather than by the individual choices of the people. It requires negating their property rights rather than utilizing them. In the name of the collective good of society, it forces people to make transactions for the benefit of others—those without health insurance—instead of one's own self-interest. Since this necessitates losses, the system is a series of “lose-win” transactions, which cannot match the “win-win” of free trade. In this, the most advanced, complex economy the world has ever seen, Obamacare mandates uniform compliance for the entire population, regardless of the vast differences in people's circumstances, needs and desires. Can this possibly result in lower health care costs as Obama claims? How can this 2,700-page bill—which few if any legislator read—produce greater efficiency than the market choices of people exercising their rights to liberty and property?

The underlying message of this legislation is that force is superior to freedom, collectivism is superior to the individual choices of capitalism, and Washington politicians can act more wisely than the system that created America's greatness, which they are helping to destroy. This is legislation that turns the function of government on its head, from protecting people's rights to violating them under the seductive slogan of a right to health insurance and health care at others' expense. This is what Obama's phrase “change you can believe in” really means. Obamacare is a victory for envy and tyranny over the experience of history, liberty and property rights.

Obamacare will have adverse effects far beyond the health care system. It will negatively impact the entire U.S. economy and thus further weaken the dollar, already in decline from decades of inflation. The last restraint on U.S. debasement of the dollar was its last link to gold, the provision allowing foreign central banks to redeem dollars for gold, which President Nixon ended on August 15, 1971.

As Professor Rougier pointed out, Athens success was due “first and foremost, to the scrupulous respect given to private property” but “almost equally due to a strong monetary discipline.” Obama is at least as ignorant of the importance of the second as he is of the first. His colossal spending programs will only accelerate the dollar's downward spiral and lead to its abandonment as a reserve currency in the international monetary system.

Under the 1944 Bretton-Woods agreement, countries could hold their monetary reserves in either gold or dollars, with only the U.S. required to maintain convertibility of dollars for gold. When Nixon abandoned this gold link, the dollar still remained as a reserve currency for other countries.

The dollar's instability was becoming increasingly dangerous to international trade even before the Obama administration and the Fed began flushing billions of dollars into bailouts and stimulus programs. The instability led to attempts to offset monetary uncertainty with derivatives, which played a part in the current economic downturn. Economist Judy Shelton noted: “The total outstanding amount of financial derivatives, according to the Bank for International Settlements, is $684 trillion (as of June 2008)—over 12 times the world's gross domestic product. Derivatives make it possible to place bets on future monetary policy or exchange-rate movements. More than 66 percent of those financial derivatives are interest-rate contracts: swaps or forward-rate agreements. Another 9 percent are foreign exchange contracts. In other words, some three-quarters of the massive derivatives market, which has wreaked the most havoc across global financial markets, derives from the capricious monetary policies of central banks and the chaotic movements of currencies.”

Foreign countries are becoming increasingly fearful of holding their monetary reserves in dollars that are continuing to lose value because of U.S. policies. In recent months, the leaders of France, China and Russia, in addition to a committee of the United Nations, have called for replacing the dollar as a reserve currency. Obamacare and the rest of the President's spendthrift policies will only accelerate the day of reckoning, which will reduce not only the value of the dollar internationally but reduce the buying power of the dollars Americans have saved.

Gold has a long history as an indispensable standard for international trade. In Money and Man, Elgin Groseclose noted that in the sixth century A.D., Cosmas Indicopleustes, a noted Egyptian traveler, wrote: “It is with their gold piece [the bezant of Constantinople] that all nations do trade; it is received everywhere from one end of the earth to the other.”

Jack Weatherford writes in The History of Money that “a reasonably healthy system of coinage continued to operate in the eastern Mediterranean under the aegis of the Byzantine emperors at Constantinople,” but in Rome the process of decay was well underway before the end of the third century. “Step by step, the imperial government took over the direct administration of the economy and crowded out the small, independent merchants, landowners, manufactures, and entrepreneurs....An increasingly greater portion of the economy fell under direct control of the bureaucracy, which consumed ever more of the national output of agricultural and manufactured goods.”

With the collapse of the Roman empire, “the classical money economy that had survived for barely a thousand years also collapsed. So completely had the Roman economy deteriorated that almost a thousand years would pass before the money economy returned to full force.”

Then in 1252 A.D., after a long period of monetary disarray, the city-state of Florence reintroduced gold coins, florins, leading the western nations back to gold. Genoa quickly followed. In 1254 Louis IX of France commenced gold coinage. Some thirty years later Venice joined in. In 1328, Germany began minting the Bavarian, which closely imitated the florin. One by one, these and other countries countries turned to gold when they realized the monetary stability it provided was beneficial to trade and prosperity. With today's massive international trade from a globalization trend that shows no signs of stopping, where monetary stability is needed more than ever, and where government policies are creating monetary crises with worldwide consequences, such a day will surely come again.

1 comment:

Tom said...

Brilliant. I'm reading "Makers and Takers", containing many of the same ideas.

Prosperity flows from freedom and limited government. Socialists think all good comes from big government.

We have entered the period of big government, where 44% of GDP is government spending, and 19% of GDP is devoted to regulation compliance. Total 63% of GDP, meaning the private 37% must support itself plus government. That cannot work well, as Europe and Japan have proved. We will remain stagnant until we greatly reduce the size and power of government. I suggest limit all government (federal, state, local) to 30% of GDP, like in 1950. That would double the income of the private sector.

We need great, fundamental history and theory of human progress like Contoski provides. See also Julian Simon, Bjorn Lomborg, Indur Goklany, and Matt Ridley.