As a political junkie, I have been talking a lot recently about many of the issues that this country is facing, and what has caused them.
As an anarcho-capitalist, I know that in fact the government is the culprit behind much of it.
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| Anarcho-capitalism |
That is not to say that there aren't bad business people, but they are often times aided and abetted by the people in power who do them favors in exchange for votes and campaign contributions. It's only because of this aid that these bad actors can do what they do.
I am convinced that we will never find incorruptible people that will make "things fair" and think of the little guy... That is why these topics that I will dissect below should be handled through voluntary contractual means, free of government involvement.
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| These are the "10 planks of the Communist Manifesto", originally written by Karl Marx in 1848. These were 10 things to put in place in order to transition from a (quasi-)capitalist country, to a communist one. Take a long hard look at this, and think of how many of these we have at least partially (if not entirely) implemented. |
Money and banking
I have written much about the Federal Reserve in previous articles, so I won't go on too much about it here.
Here's a link to the blog I wrote about it originally:
Federal Reserve blog
If you think that America is a capitalist country, start by examining the monetary system, and ask yourself these questions:
"Where does the money come from? Does it emerge as a commodity on the market (as it has historically) or is it created by a central authority?"
"Where does the money go? Who gets it first? Poor people?"
"What determines interest rates at which money is loaned out? Are they determined by the amount of savings in bank vaults, or are they determined by a central authority?"
"Why aren't foreign currencies or different currencies between the states allowed to be used, as they were in America's past?"
"Why is so much money going into the stock market, rather than the "Main Street" economy? Does it have something to do with the current tax and regulatory incentive structure?"
"People blamed the last economic crisis on greed. As a few economists have said: 'Blaming an economic crisis on greed is like blaming a plane crash on gravity. It's a constant, and planes fly all the time in spite of it.' Weren't people greedy during the 80's, 90's, and other great economic times too?"
Since money is half of every transaction, whoever controls the money supply influences the direction of the entire economy.
It could be argued in fact, that since the money is controlled by the government, we live in what is in many respects a partially centrally planned economy. It just isn't full blown.
Healthcare
I recently had the pleasure of picking up this wonderful book, by one of my favorite economists and a doctor:
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| Robert P Murphy |
If there is one underlying point that this book is making, it is:
The American healthcare system is far from being a "free market" arrangement. Anything close to a free market in healthcare hasn't existed in at least 100 years.
The book explains all of this further in greater detail, but I will give a few examples here of why the above statement is true:
Government controlled licensing:
This is controlled by the American Medical Association, which is basically a glorified union.
It was founded in the mid 1800's in order to ensure safety and basic medical standards.
While I am willing to believe that many of its original members had good intentions, like all power it has corrupted those that have it.
As the late economist Milton Friedman pointed out, when a single group is given control of who can enter a particular industry, they tend to use the power to gain a monopoly on it.
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| Milton Friedman |
The AMA has done things such as:
-Restricted the number of doctors, so that its members can make more money. This is passed onto customers, in the way of higher fees.
-Outlawed alternative medicine such as homeopathy and osteopathy.
-Shut down many medical medical schools, thus making it harder and more expensive to train doctors.
-Required that new hospitals only be open in a new area if they have a "certificate of approval" from the AMA. (Meaning that they make the AMA money.)
All of this being said, I'm not against standards for the quality of doctors and clinics, I just don't think that the government should grant a single group a monopoly on setting those standards.
I think that the AMA should continue to exist, but there should be an allowance for competing agencies.
If you look at most other fields, (such as restaurants) you'll notice that there are numerous ratings agencies.
I would also argue that having multiple "seals of approval" would be far better for customers than just the one granted by the State.
I also find it odd, how many people that argue for the current government controlled system ignore the fact that hospitals have an incentive to attract quality people because they want the business. It's not like hospitals would stop hiring good people if doctors weren't certified by the government.
And under the an-cap system that I would like, there would still be malpractice and torte law, so it's not like butchers and quacks would be allowed to operate unchecked.
"Please a customer, they'll tell one person. Upset a customer, they'll tell ten."
The Food and Drug Administration
Many of the same principles of what I wrote above about the AMA apply here as well.
Problems with the FDA:
-The FDA charges millions of dollars to approve drugs.
Although millions are spent initially, the companies earn billions in the long run. The giant companies love this arrangement, because although they sacrifice initially, smaller and medium sized companies can't afford these costs. This blocks out many potential competitors.
-The FDA has delayed the availability of good drugs, (like beta blockers for the heart) and allowed bad ones (such as thalidomide or Vioxx) onto the market. I would argue that with competing rating agencies, this would be far rarer.
-Whoever is in charge of the FDA often has a "conflict of interest". For example, Obama appointed a former Monsanto boss, (There are numerous other Monsanto associates in the FDA as well.) who still has ties to his previous employer. This is why Monsanto is able to put its garbage onto the market, despite "requiring federal approval".
- The way the current patent system works, as far as restricting who can produce a drug. A currently company will buy a patent for 20 years or so, and shut out any potential competitors. This basically grants them a monopoly on the product, which means they can charge as much as they want.
(I plan to write a blog about patents soon, so stay tuned!)
For anyone who is interested, this is a discussion about whether or not patents (or something like them) would exist in an anarcho-capitalist society.
Again, this is not arguing against standards for food and drugs, I just think that this could be accomplished better through private means.
I think that there could be doctors in the respective fields, as well as nutritionists (or agencies staffed by these people) who could run tests, and then write certificates of approval for potential new drugs if they passed the test. This could be done in exchange for a fee, or a cut of the profits perhaps.
The insurance companies (notably Blue Cross/ Blue Shield)
It demonstrates how a person's behavior is altered based on whose money is being spent.
People are less likely to care about costs going up when other people pay for it, (Example: Medicare) but be very conscious if their money is on the line. (Example: If I paid my doctor directly, I would shop around to make sure I get the best value relative to what I'm willing to pay.)
A few other points:
-The fact that insurance is even required, whereas doctors used to be paid directly. This gave both the patient and the doctor an incentive to control costs.
-The fact that insurance risks are now pooled over large groups of people, not individuals. ("Community rating")
Example: A person who exercises regularly and eats healthy has to pay a bit more to subsidize a person that smokes like a chimney and is obese.
-Laws forbidding people from buying insurance in other states.
I don't think that medical insurance should be a requirement. Insurance makes more sense for risks that are more fixed and measurable, (such as flooding, fires, homeowners', etc.) but not healthcare where there are so many changing factors.
It originally emerged as a way to disperse costs over a group of people which were rising for some of the reasons stated above. (And others, which the book explains in greater detail.)
Obamacare ( AKA the "Affordable Care Act")
This hasn't done anything to increase medicine from a supply standpoint.. That is, train more doctors, make medicine more available, and so on.
Obamacare just increases demand artificially which while dealing with a fixed supply, just drives up prices.
I liked Bob Murphy's analogy for this:
"If the government passed a law requiring that everyone buy apples, but then burned half the trees... What would happen to the price of apples? And how would this financially affect everyone who would now be forced to pay for them?"
I have also written a blog on some of these topics if anyone is interested:
Healthcare blog
I wrote this blog before reading the book. The blog talks about some of the same things, but the book goes much further in depth. I would encourage everyone to read the book if they have the chance.
Also since then, I have read professor Roderick Long's report on healthcare in the early 20th century. During this time, the average citizen could buy a year's worth of healthcare for only $1-2. This was about what the average person made in a day back then.
That would be like me paying $100-$200, and be covered for an entire year now.
Professor Long's report, for those interested.
Colleges and Universities
With the upcoming election, there has been much discussion about which way our education system should go.
Many are arguing for "free" (tax payer funded) college.
Meanwhile, the student loan debt has just reached $1.4 trillion.
"Why is this the case?"
As I'm sure you're expecting me to say, the college industry is not a "free market" institution.
How can anyone say that it is when the government itself guarantees the loans?
And how tax grants and subsidies to politically connected colleges can be part of "the free market" is beyond me.
A few common sense questions:
"Would a bank loan an 18 year old, say $100,000 for a car or house?"
The whole point of loaning money is to make money, i.e. through interest.
It's only because the government guarantees the loans that the banks will do it.
This bears a strong resemblance to the sub prime mortgage lending (loaning money to people that are far less likely to pay it back), which was one of the factors that helped bring down the economy in 2008:
- Relaxing the lending standards immensely.
- The government guaranteeing the loans through Sallie Mae (Similar to Fannie Mae and Freddie Mac "securitizing" the mortgages.)
- The amount of money loaned out keeps increasing while wages have stayed the same or even gone down, meaning that it is far less likely that these loans will be paid back the more time that passes.
"What incentive do colleges have to control their costs when they're guaranteed (virtually unlimited) funds?"
The cost of college has risen roughly 1,000% since the late 70s.
How does the government handle this?
It just guarantees bigger loans.
The whole notion that colleges would keep their tuition low for "the common good" is absolutely absurd.
Colleges are run by human beings that are motivated by self interest, just like any other people
running any other institutions.
"What market value would a college degree (like a BS or BA) have if everyone were to have one?"
Many say how a bachelor's degree has become the new high school diploma.
What's next? Should everyone need a Masters or PhD to start working in a given field? Where does this end?
Could there be some better way for people to distinguish themselves, without going bankrupt in the process?
"Is it beneficial for the 'common good' to pay exorbitant sums of money for people to study things that have zero market value?"
I think this is self evident.
I don't want to tell people what to read or listen to on their own, but I don't feel that I (or anyone else) have a moral obligation to pay for them to do it.
I read about politics, economics, history and psychology all the time.. but I do it at my own expense.
Part of the reason I don't do these things on a professional level is because there isn't lots of demand for them right, and it isn't worth spending so much to get a degree in that I'm unable to pay back.
I think too, that parents and guidance counselors have to do a better job with market research and going over what demand there is for what the potential student wants to do, what the cost is, and whether it's worth it or not.
"What about IQ and other aptitude tests?"
These have been outlawed, courtesy of the Supreme Court.
Look up the case "Griggs vs. Duke Power".
IQ tests aren't allowed to be issued because they're considered "discriminatory".. which is actually kind of the point.
If you run say, a restaurant.. you're not going to get a team of people with an IQ of 140 (genius level). Those people will more likely going to more mentally demanding jobs such as law, finance, business, etc.
You will have to be willing to accept less, in the same sense that the average person isn't going to be getting dates with high profile people.
"Okay, well if the government doesn't guarantee loans.. wouldn't only rich be able to afford college?"
Are only the rich able to afford cars, cell phones, nice meals, computers, and so on?
(Hint: When all of those things first came out, they were only accessible to the rich.)
If it weren't for all of these loans, colleges would be forced to cut their tuition to rates that the average person could afford, or go out of business.
I would also argue that this current arrangement with government granted loans and inflated prices is delaying the onset of more affordable, more streamlined education.
A comparison to that would be how the existence of slavery prevented the development of agricultural machinery, since there was no reason to drive down the costs of production.
Grade schools
The cost of grade school education (per student) has roughly doubled since the late 70's.
Does anyone honestly believe that it has improved?
"How does the current American school system compare to the historical experience of education?"
I would highly recommend John Taylor Gatto's (Former Teacher of the Year in both New York City and New York State for several years in a row) works on this. He has gone through the history of the American Education system ("The Underground History of American Education" is his magnum opus), as well as other systems in different countries, in various time periods.
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| John Taylor Gatto |
Benjamin Franklin, George Washington, Abraham Lincoln, Thomas Edison, Admiral David Farragut and numerous others all went to school for fewer than five years each. Lincoln in fact, only went to school for one.
Yet in spite of all of this, they became some of the greatest minds in history.
Before being president, Lincoln was the top lawyer in the country. Thomas Edison was running a business at a young age. Admiral Farragut steered a ship back from Peru to Massachusetts as a pre-teen.
I feel like there's this notion that without the government "educating" everyone, civilization would collapse... even though we built the wealthiest, most powerful country on Earth long before his was the case.
I would argue (as would Gatto) that in today's world, self directed learning would work far more efficiently, due to the Internet and how accessible information is.
I think of what Stefan Molyneux always says:
"The reason politicians advocate for a higher minimum wage is because it covers up how worthless the government run education system is. The fact that the government has you for 12 or more years, and yet you can't produce at least $7 an hour of value on your own is pretty sad."
"Without government providing school? Won't only the rich be able to afford it?"
I answered this in the last section regarding college, but I'll make a few more points.
Under our current system, the poor have it the worst; the schools are funded through property taxes, which yield a lot less revenue in poor areas, since the property values are obviously much lower.
Middle class and wealthier kids have access to better schools, due to the higher amount of dollars collected from their property.
Although complete privatization of school isn't on the horizon, we could start with a compromise. I really liked David Friedman's (son of the late Milton Friedman) idea, which is to do a voucher system nationwide.
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| David Friedman |
Since schools would now be competing with each other to attract students, this would boost the quality of schools. Schools would now have the pressure to hire better teachers, offer new curricula, try different teaching methods, control costs, and so on.
Schools where children became better students and got into better colleges would be desired, and less attractive schools would have to either reform or close.
Also under this system, nothing would stop new schools from opening.
"Wouldn't there still be class distinctions under this system?"
As I stated above, we have terrible class distinctions now. Poor kids go to terrible schools, middle class kids go to decent schools, and rich kids go to really nice schools.
I find it ironic that opponents of school privatization argue this point, when it's clearly already the case... and it couldn't be much worse.
Under this sort of system, there would still be fancy private schools that the rich would send their kids too. These would most likely be supplemented with additional tuition fees.
However... since there would be competition among schools for students, this would encourage schools to improve. So the class differences wouldn't disappear, but they would blur a bit.
I would also argue that kids who act up would be able to be kicked out for good. This would ensure a positive learning environment for all children interested in learning, particularly those who come from poor urban areas.
This is a major thing that bothers me with the current system. I've often wondered how many smart kids living in these situations just don't make it.
Crony capitalism
A few more factors that aren't part of the free market:
The Oil Industry
They got about $24 billion in subsidies from us in 2014.
The Farming Industry
-They are sometimes paid not to grow things.
-These also have "crop insurance" where they get paid money if they get a low yield on their crops.
There have been cases of farmers deliberately growing crops in poor soil, in order to get the insurance money.
- Tariff (taxes on imports) restrictions, especially on things like sugar in order to shut out foreign sugar. This is why high fructose corn syrup is so commonly used.
The Export-Import bank
This bank provides cheap credit for companies like Boeing.
Is it moral to tax the general public for this?
"Big Pharma"
-These major companies (like Pfizer and Proctor and Gamble) get about $275 billion a year from us in subsidies. This is deemed "necessary" due to the high costs of drugs, which of course are the results of previous government interventions such as the FDA, Medicare Plan D, and patent laws.
"Big Auto"
-The automobile industry has gotten bailed out several times, first during the 70's (Chrysler), and then GM, Ford, and the others got bailed out under both Bush and Obama. This has cost taxpayers over $30 billion.
The Big Banks
Where do I begin?
- Continental Bank was bailed out in 1984 for $9.5 billion.
- The Savings and Loan Crisis during the late 80's in which the S and L institutions were bailed out to the tune of $293.3 billion. (I don't want to go off on too much of a tangent about this, but there were many bad decisions made prior to the crisis. I can talk about this somewhere else, or direct you to some sources on this if you're interested.)
- Federal Deposit Insurance (FDIC) which guarantees a (tax payer funded) reimbursement for people with accounts in the bank, if the bank fails.
I'm personally against this, because it creates moral hazard. I also feel that it's too broad based and doesn't take into consideration factors such as the bank's investment track record.
- The $700 billion dollar bailout (TARP) signed into law by George W. Bush in 2008.
- The entire Federal Reserve system itself.
Conclusion
It's interesting to me, how my friends on the Political Left wanted (and still want) the government to get involved in housing, healthcare, and education in order to make them more affordable... And yet, costs in these three areas have gone through the roof, and are more than likely going to come crashing down within the next few years.
Power corrupts those who have it, and all power is dangerous. This is the reason we must dismantle this corrupt system, and let market forces decide things.
There is an Objectivist (Ayn Rand) argument which makes the point that the economy and state need to be separated for the reason that religion and state need to be separated: The State becomes the "gun in the room" that everyone clamors to get a hold of in order to destroy competition.
This will not be easy by any means but the more informed we are, the better. This is one of the reasons I'm writing this.
Thank you all for writing! I will have that article up on patents soon.
-STK
