Letter to Gerald Celente

Gerald Celente just e-mailed his summer issue of Trends Research Journal. It is full of valuable information that offers an imaginative alternative to the legacy media, and I highly recommend it. In this issue Celente advocates direct democracy, a policy that would be a serious error. I respond in the following e-mail:

Thanks for your recent issue. I agree with much of it but not  with your claim that direct democracy will  end America’s economic and political decline.  Your Swiss example is intriguing, especially with respect to Switzerland’s decentralization, but direct democracy is inapplicable to America because the size, culture, community, and  incentives differ.  You note that a Swiss canton can be as small as 14,000, but the average American congressional district is  about 735,000.  Switzerland’s population is less than New York City’s.   

Today’s problems result from pathological incentives--privileged groups’ benefits from lobbying outweigh their costs.  Included in lobbying are the same groups’ control of information, their ownership of the mass media, and their influence in the education system.  Direct democracy won’t change the incentive structure that benefits special interests and inhibits the public’s ability to think rationally about events. Your own subscription fee of hundreds of dollars, which is beyond most people’s ability to pay, evidences the inability of the public to obtain good information. 

Thus, in a direct democracy special interests will continue to influence politicians; the information needed for the public to make intelligent decisions about complex issues will be bounded by bad and ideologically driven education and Wall Street-influenced media; and, added to the mix will be the gullibility of the public that is easily brought to  an emotional frenzy and lacks information not controlled by the state.  As Madison put it in the Federalist Number 10:

…a pure democracy, by which I mean a society consisting of a small number of citizens, who assemble and administer the government in person, can admit of no cure for the mischiefs of faction. A common passion or interest will, in almost every case, be felt by a majority of the whole; a communication and concert result from the form of government itself; and there is nothing to check the inducements to sacrifice the weaker party or an obnoxious individual. Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths. Theoretic politicians, who have patronized this species of government, have erroneously supposed that by reducing mankind to a perfect equality in their political rights, they would, at the same time, be perfectly equalized and assimilated in their possessions, their opinions, and their passions.

The current decline in America’s economic and political system began more than a century ago with Progressivism, which introduced the referendum and the recall as part of an overall thrust toward (a) democratization coupled with (b) the installation of expert management of the economy, including the Federal Trade Commission and the Federal Reserve Bank.  Regulation reflected the Progressive belief that experts would be free of political pressure while, in areas experts designate,  enhanced democracy would enable the public to express its interests given the structure and options that the experts delineate. The Progressive system has failed—special interests capture experts and mislead the public. The public is not capable of understanding underlying issues, even fairly simple ones like monetary policy.  Environmental issues are complex and I have not met anyone who can explain the details of, for instance, the Waxman-Markey cap and trade bill.  Are you certain that it would not have had perverse effects such as forced evictions of honest home owners?  Hence, policies that harm the average American, such as Keynesian and monetarist economic theories, can be sold through the propaganda of supposed experts that convinces even the most intelligent voters.  Orwell was right about language—freedom is easily painted as slavery and the public cannot figure it out.

Direct democracy will be subject  to greater manipulation than the current system. Rather, a reinvention of republicanism, the less obvious solution that Hamilton and Madison proposed, and a sharp Jeffersonian  limitation of government power across the board are needed. Democracy has failed. Its enhancement will be worse.  

The Downside of Mandated Sick Leave

Michael Saltsman published an excellent article about Connecticut's mandated sick leave in today's Wall Street Journal.  Connecticut, under Governor Dan Malloy (D), has mandated sick leave for all Connecticut employers. Saltsman shows why this policy will destroy jobs and harm the state's poorest workers.  The propaganda that supported the new law used statistical means and medians, making claims such as "the average employer did not find that they had to reduce employment levels." But this use of measures of central tendency reveals misunderstanding of how economies work.

All employers are different.  About 70% of Connecticut employers already gave sick leave, and 70% said in surveys that mandated sick leave would not affect them.  Rather than the average, the marginal employer, such as a bodega, which is deciding whether or not to hire a part-time, low-wage employee, had been less likely to offer sick leave. This kind of employer will reduce employment and fringe benefits, including training. It will stop hiring less-qualified employees, forcing young people into European-style permanent unemployment.

The people whom Governor Malloy and the Democrats have hurt are the poorest and most vulnerable: high school dropouts who need to develop platform skills that will enable them to function in honest jobs.  Some will now remain in permanent unemployment, dependent upon the State of Connecticut for welfare.

As well, the claim that low-margin employers will benefit from the mandate, made by the law's supporters, is nonsensical. Once again we see Progressives grinding the poor under their Gucci heels. They do so by claiming that they help the poor, when in reality they are helping crony socialists, labor unions, attorneys, and large employers, whose smaller competitors cannnot afford to offer benefits.

The states that have seen employment decline the most, have the most income inequality, and have the largest rates of exit, like New York, are the same states that have passed regulations that harm small employers at the expense of large, reducing the economy's dynamism by freezing out new and entrepreneurial firms and ideas.  It is not surprising that academics, who benefit directly from the socialist gravy train, generally support such measures.

Coprolite: A Good Vocabulary Word to Describe Congressman Maurice Hinchey

I found a good vocabulary word to describe Congressman Maurice Hinchey.

cop·ro·lite

   [kop-ruh-lahyt] 

–noun

a stony mass consisting of fossilized fecal matter of animals.

America No Longer Home of the Free

I have heard from an anonymous source in one of the organizations that rates the degree of freedom in nations around the world that the rating for the US going to fall to approximately 10, i.e., that following the administrations of Barack H. Obama and George W. Bush America is now roughly the tenth freest country in the world, down several notches from the last rating. The source was not willing to divulge the exact ranking but when pressed said that there would be a significant downgrade.

This generation of Americans bears responsibility for putting its commitment to the two party system ahead of its commitment to liberty. That the average American's real hourly wage has not grown in 40 years is due to the ignorant belief that large-scale social programs can outperform a competitive economy in producing gains for the average American. In fact, the stagnation of the real hourly wage began in 1970 or so during the expansion of regulation that began in the late 1960s and continued into the early 1970s.  We can expect further declines thanks to the ignorant policies of Democrats and Progressive Republicans and advocated by the legacy media.

In the late 1940s Friedrich von Hayek described America's path as a road to serfdom. The train is in the station. Americans are becoming serfs, just as Europeans have always been.