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Tariffs: A Definition

When you buy, you seek the best price that suits the budget you are disposing of, without ignoring quality. Normally people do not care where the good comes from or who made it, they just want something functional that supplies their needs and/or desires perfectly or almost perfectly. In normal market conditions, where there are no taxes being imposed and there is no government with vested interests, transactions are made with virtually no problem at all. However, today we have many problems in understanding an economy and even more in leaving it alone. One of the greatest problems is the economic relations between two nations and the taxes imposed on imported and exported goods, known as tariffs. Whether we believe it or understand it or not, the economy is tremendously influenced by these phenomenons.

As it was mentioned in “Crony Capitalism”, exchange is a concept that defines two sides of a transaction; it affects both the buyer and the seller. These two parties have a considerable amount of responsibility upon each’s shoulders to supply the needs and longings of their trading partner. If one fails to comply, both of them will be damaged in the present, affecting future exchanges. It is as simple as a man buying a television of some local brand with a malfunction. The man will be uncertain if he ever wants to buy a television of such brand in the future. If the man and his buddies never buy again, the local television producers will lose money and will not be able to prevail in business. Any person with an average amount of intelligence is able to comprehend this economic logic. However, when political rationale is mixed in with economic logic, the former ends up defeating the latter.

This is clearly seen in tariffs. Tariffs, even though they involve money, our freedom to do whatever we desire with it, and exchange, are not an economic battlefield, but a political one. The arguments favoring tariffs are confused with immigration and have a slight taste of patriotism mixed with discrimination. After all a nation must protect itself from any foreign enterprise that is more productive and competitive in a market, capable of reducing costs and prices causing a greater consumer satisfaction. The government is obligated to subside ineffective native producers by raising or establishing tariffs upon imported goods that they may defend from better foreign products and have less competition, ultimately meaning that these native companies have become potential monopolies; monopolies that have no idea how to be successful in catering consumer demand effectively.

Do you see the problem? If a product from a bordering nation is cheaper and better than a native nation, which would rather you buy? When you buy the foreign good, the native producer will be hurt economically and convince the government to save jobs by raising tariffs on the foreign producers’ goods. Although, this will eliminate jobs on the foreign country and reduce their wealth to buy goods coming from your nation, finally meaning that jobs will reduce in your nation, as well. Yet, that is not the worst part of the problem, how your number of choices will be shortened is. Consumers will not be able to have a broad range of prices to choose from, but instead face native monopolies with high prices and decreasing quality. It is either that, or pay a tariff. Whatever the case, individual consumers lose wealth and liberty on both sides of the border.

Now, why does this occur? Because people, namely voters, confuse people with goods, and prosperity with disguised taxes (tariffs). They accept arguments saying that importing goods will change a nations culture, and its decisions will be negatively impacted. However, a good does not have a mind of its own, a culture, and even better, doesn’t vote. A foreign good brought to a national market increases competition, in this way raising quality and reducing prices. In better words, our national industries become better competitors in international markets.

With tariffs, customers lose authority to choose freely and the state gains more authority to allocate resources. Economic allocation moves from the market to the ballot box and there is an obvious reduced wealth for everyone (except the government) in the name of protection. The greed of the government and the false sensation of patriotism are the propellers of tariffs. They not only impact negatively a bordering nation, but also your own nation. Remember that.

Crony Capitalism

If there is a store selling American-made cotton t-shirts at 20 dollars and another store selling the same t-shirts, but Mexican made at 16 dollars, which shirts would you rather buy? They are the exact same shirts, same quality, same color, only different price and manufacturer, which would you buy? If you listen to your budget, the cheaper ones, if you are patriotic, the American-made ones. However, that is not what is important. The point is that if you would rather buy cheaper, even if it meant ignoring a hometown manufacturer, imagine what other nations do when American-made goods are more expensive than theirs. This is the direct but unseen result of an interventionist government establishing tariffs.

Who likes taxes? Government officials do for it is money received, but not the average citizen for it is money plundered. Yet, when it comes to tariffs (taxes imposed on imported goods) the average person agrees with being taxed due to misconceptions which are specially popular in protectionist nations, as the United States. People actually think that what is really an involuntary transfer of wealth on imported goods benefits their country, even if it harms the exporting nation. In other words, people believe that reducing customer’s freedom increases the productivity and prosperity of their nation. This is obviously false. Tariffs injure economic prosperity and the trading relations between two countries. Exchange is a two-side, mutual process that either benefits or hurts both sides. It seems that politicians who favor tariffs do not understand this. Let’s analyze what happens.

Suppose the Mexican manufacturers of cotton t-shirts are getting the American manufacturers a little tied up. Obviously this is not a personal matter, it is just business that is allowing customers to decide what they prefer. Even so, the American producers cannot take anymore losses, so they appeal to the government to protect them from their own marketing mistakes and raise tariffs (taxes) on Mexican-made cotton t-shirts.

The American producers will enter an organization in charge of lobbying the government to eliminate foreign competition. What they will basically do is bribe politicians by giving juicy amounts of “donations” for their campaigns and/or policies. In a nutshell it goes like this, if a congressman votes in favor of tariffs, he gets money. If he votes against tariffs he practically doesn’t receive any money from these organizations. What do you think the politician will do?

Now this is not what they tell normal people like you and me. Congress gives a legal justification: a border that separates the countries. Therefore, the constitution authorizes tariffs across the national border. Here it is important to mention that national borders are not the only existing borders. There is a border separating your house, street, city and state. Every one of these borders, including a national border is different culturally and judicially, but the same when it comes to exchange. Imagine the government charged tariffs for goods imported from other cities in the same state or goods that you imported from someone’s house. Of course people would rebel against this. Although, when it comes to national borders people don’t think the same.

A good is different than a person. A good doesn’t vote or bring a whole ideology that will impact and utterly change a nation. Goods do not seek citizenship, they don’t seek anything. People do. Hence, an invisible line offers no economic impact on the exchange of goods and services between two nations. Unless, of course, there is a tariff imposed. Tariffs do not allow customers to buy according to their tastes or preferences. They are a manifestation of discrimination that reduces trade. Tariffs help eliminate competition creating monopolies. Tariffs give the government more sovereignty and revenue. Tariffs not only reduce imports but also exports. This last fact is because the nation we do not buy from will have less from our currency to buy from us. Tariffs are imposed on you, not on the ones who imported the good.

If tariffs really did what politicians say they do, then it would be better to also impose them across states and cities. This would increase the production of each individual state and city creating greater wealth for the country. However, no one believes this to be true, then why do we still believe it in national borders? Tariffs destroy jobs on both sides of the border. If one nation decides to buy less from another nation, the other nation will do the same to that nation. That is to say that if the USA places tariffs on Canadian goods, Canada will do the same on American goods. This will do away with jobs.

The government and those whom it favors are the only ones who win. National customers lose, foreign producers lose, foreign customers lose, national workers lose, and foreign workers lose. The government decides that if a certain exchange will not be profitable to the government in terms of tariffs, then that exchange will not be legitimate. Nothing else will matter, your money will be taken and not only your wealth will be shortened but your liberty will be hampered. This is welfare state economics. This is crony capitalism. The triumph of a gun supported by a badge. The victory of the things seen over the things not seen. If you promote tariffs you don’t understand economics. I hope you don’t listen to someone saying that tariffs will increase productivity and wealth again, because thwarting people’s freedom will never make a country richer.

A nation cannot destroy another economically. A nation can only destroy itself economically.

Misleading Conceptions

We inhabit a world where the lie is decently disguised that virtually nobody dares to see it as it genuinely is. Democracy is part of this lie. People hear many things, they view tons of propaganda, and are invaded with numerous rhetoric. “You, the people, are the ones who hold the authority, it is you who govern and choose the best policies for your nation. Your vote is what makes the difference, but remember to keep it a secret.” Forgive me, but this is just plain bogus. Democracy is an illusion that enables the easy manipulation of self-interested people whom hold office and claim to represent the people.

Today, we have people and politicians believing in the falsehood of political representation. One man is placed as a leader to represent more than 700,000 people. This population has distinct ideals, philosophies, points of views, necessities, desires, and interests. Obviously, these people will not be in absolute or any accord with one another. In addition, not all of these people voted for that one man to represent them and the majority who voted for him only know him on superficial grounds. How can a man represent contradictory beliefs? How can you place a single resolution to satisfy contradictory beliefs? You evidently cannot do this, you will necessarily terminate favoring some and disfavoring others. Who do you think the politician will end up favoring?

Most, if not all political representatives are not to be taken as trustworthy people who will administer government to the convenience of the people, even if this one is not in accordance to their personal interests. They are not obliged to carry out the will of the people and they will not answer back to the thousands or millions they supposedly portray. As a matter of fact they are essentially free to do things as they please. Why? The answer lies inside the reason that people are poorly informed about politics and that representation today is on behalf of opposite ideas. Therefore, if it is practically impossible to actuate a depiction of this magnitude then we must ask ourselves, “does democracy really function and, who could the politician possibly stand for?” Let us be straightforward with our response, this system does not work and those who hold its offices will most likely just represent their interests.

Government´s Monopoly

Government power is upon the shoulders of a few. Perhaps you have not realized it yet, but this handful has a monopoly in all of the things the government is alleged to do. A monopoly is a firm in the market which has acquired nearly the whole of the market share. If you have the fullness of the portion in a specific market, you will be the only one sought for the provision of such product or service. Hence you will be able to increase the price of your product and offer it at extremely poor conditions, little by little, without the fear of losing your customers.

The government taxes and offers justice to the people. They have a monopoly on these two things, thus they can do as they please without the fear losing their “customers”. Consequently, the tendency to raise the price of justice and the incentive to drop its quality will both be latent.

Such things occur due to the mere fact of preferring leisure over work, known as the disutility of labor. When the government is the only one who can tax and the only one who can proportion this or that, do you not think that they will favor less work over greater charge? Justice will also be increasingly distorted to the favor of the government. Some might debate and say that this is the reason why we have a constitution that impedes the government of implementing its proper laws. To those people´s surprise, I say that the rule of law is a myth. This could sound as an outrageous declaration, but allow me to develop it.

Mythical Law

Governmental courts are the ones responsible of interpreting the constitution and they will most likely use it to satisfy the government´s interests. Why can I say this as if the constitution was a flexible document that could be utilized to suit any individual´s inclinations? Because the constitution is precisely that. The law is self-contradictory.

I once watched a movie with a computer that was programmed by the government to monitor and follow the laws of the United States to the letter. The USA, as usual, was looking for an Arab terrorist and based on their intelligence, they thought they had found him. Nevertheless, the computer gave them a low percentage possibility that it was the terrorist and placed an abort recommendation. It turned out the computer´s calculations were correct and they ended up bombing innocent people, violating, in this way, the Constitution, Declaration of Independence, and the Geneva Convention. All major political officials in the United States violated these documents, except for the Secretary of Defense. Therefore, “regime change” was the solution that would abide the United States laws.

Ultimately, the computer decided on its own agenda to apply the death penalty upon these officials and other American citizens on the basis of national security. This was because their acts had caused a burst of terrorist attacks on US soil, making them accomplices. Since the computer was programmed to follow the law perfectly, everything it did was legal, including mounting a major “terrorist” attack during a meeting in the United States Capitol building. In the end, the computer was stopped and it could not achieve its objective. The movie ends with something like this, “We must remember that sometimes the very things we use to safeguard our liberty may become threats to liberty itself.”

The law is written in such a vague and general language that it can be interpreted in whatever way necessary to achieve the desired result. Imagine an art auction where a painting is sold at $100, when it is actually worth millions and no one knows. Here, there is a consistent norm that governs similar situations: “a contract of sale may be rescinded when there has been a mutual mistake concerning a fact that was material to the agreement.”

The painting´s seller made a mistake and he takes the case to the court where he will win if everything succeeds as in the case of Sherwood vs. Walker. Considering this case, a farmer sold to another a cow which was thought to be sterile by both. Notwithstanding, the cow was fertile and the seller was granted a recession in the contract of sale on the ground of mutual mistake. If the case is performed as the one of Wood vs. Boynton, the seller will lose and the buyer will win. In this case, a woman sold a jeweler an unknown stone at the price of $1. It resulted that the stone was an uncut diamond worth $700. The woman sued for recession of contract on the foundation of mutual error. Well, the court rejected her claim and the contract was upheld. Both parties had known they were dealing with a stone whose value was unknown, so there was no mistake.

Do you see what I mean? A law can be interpreted in whatever way necessary that suits the objectives of people. This is why we have such a “big government” in the nations. People prefer to live by the rule of law than by the rule of men, when it yields the exact same outcome. People are more presumable to accept the exercise of power over them when this one is specially fixed to seem objective, impartial, and impersonal.

Voting

It does not matter who we vote for, they are lastly forced to follow the written law, which, as we have realized, can be interpreted however they desire. For this matter it is very important that we thoroughly analyze our decisions when it comes to voting. Today, there is a wide consensus among social scientist that voters are uninformed. Yet, we are told that our ignorance does not matter due to the miracle of aggregation.

The miracle of aggregation says that the voting mistakes people commit cancel each other out. In other words, the errors of some voters will go in the opposite direction of others, giving victory to the votes of the informed or vice versa.

Take this for example, a common man is running for president against a man like Hitler. A remnant of 10% of the people are informed about the politicians and they will not vote for Hitler. 90% of the people only know each candidate by their favorite color, their pastimes, their skills in golf, etc. This majority do not know Hitler´s real dictatorial intentions, ambitions, and so on. The 90% will vote for either candidate, depending on who they like most, let´s say, they vote 45% and 45%.

The miracle of aggregation says that the 45% who voted for Hitler lose, because the 45% who voted for the common man added votes to the 10% of the informed. In the end, the result is 55% vs 45% and Hitler loses. However, what happens when 70% of the uninformed favor Hitler?

The scholar Bryan Caplan says that the miracle of aggregation is also bogus. He states that voters are not committing random errors, but systematic errors, because they are biased towards a certain direction, not distributed arbitrarily. When you vote, do you close your eyes and vote for whoever your finger lands on?

Caplan mentions that “rational ignorance”, as exposed by Public Choice, is not the reason why people gravitate towards false beliefs, instead of remaining agnostic. Uninformed people are very confident in their decisions and angry at those who disagree because of irrationality, not ignorance. If it was just a matter of ignorance, then you will make a random mistake, but you do not for the mere fact that you indeed favor someone.

Caplan says, “In a sense then, there is a method to the average voter´s madness. Even when his views are completely wrong, he gets the psychological benefit of emotionally appealing political beliefs at a bargain price.”

False beliefs are cheap, but they can destroy you. Politics is filled with misleading convictions, democracy enhances them, the law abides them, and voters support them.

Erroneous Ideas

People commonly believe that the Industrial Revolution was a time when almost everyone worked in extremely horrible conditions. They hold this idea practically based upon a fifth grade textbook picture. Implicitly hidden within this thought is the claim of saying that this is the consequence of not having sufficient government intervention. As with almost everything they tell you, have you thoroughly analyzed and inquired the facts about this revolution by putting aside your preconceived ideas?

Have you asked yourself what was life before the Industrial Revolution, and what could have convinced the people into obtaining a job of such “terrible” conditions? Do you think the factory owners coerced the people to start working for them? If so, under which power or authority? The heart of the matter is that the owners were only able to hire people who were ready and willing to work for the wages offered to them.

Before these factories appeared, many people were living in absolute poverty. Women had nothing to cook with and feed their children. The children were miserable and starving, they entered the factories because they were the only refuge they could find. Agriculture and trading were the only things people could participate inside the economy before the Industrial Revolution. Well, many of those people had nothing to farm and no tools to trade, the factories were obviously their option to avoid death by starvation. Therefore, saying that the owners dragged the women out of their kitchens and forced the children out of their play is nothing more and nothing less than a mere deception.

Furthermore, there are some people that declare that the reform and protest movements are clear evidence of the worsening conditions. Nevertheless this is also incorrect. Poor people during the 1000, 1100, 1200, 1300, 1400, and so on also lived in detestable conditions, and no one protested. Could that possibly mean that due to the lack of protesting, all people lived in a mansion with ten Ferraris? No, actually, people did not protest because they did not believe that something could be done about their devastating status, until the Industrial Revolution demonstrated them the opposite.

In point of fact, real income, real wages, food consumption, and birth rate all increased, while death rate decreased. Additionally, the environment and the nutrition improved during the Industrial Revolution. More and more common people were able to acquire goods that before would have just been provided to high social classes.

Both, the standard of living and the economy are augmented effectively without government intervention.

The Fantasy Government and Today´s Government

Today, there exists a false belief within the general public considering government officials. Popular thought is that they are public servants devoted to enforce the good of “their” people. Reality is though, that individuals are self-interested and they remain self-seeking when they enter the government.

Politicians desire to maximize their vote total to ensure reelection, bureaucrats want to potentiate their income and power, and voters want to upgrade the material benefits they receive from the government while minimizing what they pay into it. If we are not people with the same mission, then we will never achieve anything profitable and attain a rewarding outcome. The Public Choice school of economics exposes the following.

When you are thinking about purchasing a good of some sort, say, a tablet or a smartphone, you exploit time in your decision-making process in order to do the correct thing. When you buy a smartphone, for example, you begin to analyze thoroughly the benefits of each smartphone and the costs of acquiring them. After researching for a certain period of time, you become fully informed and make a secure choice to buy the one that suites your needs and budget.

However, with the state, things do not function in the same manner. Here you probably see the gains, but you have no idea what the costs are. Therefore, the decision process will be different, because we do not obtain the bills, but get taxed for things that we will perhaps never use. Is it not true that when you do not see the cost of something, you do not pay much attention to your choice, like free food? This situation will create different incentives inside of you.

If you pay for pizza, you get pizza. But if you vote for a politician and his policies, you will probably earn what you want only if 50% of everyone else agrees with you. Acting in the market yields a direct benefit or a definite cost loss, if you took the wrong decision. Nevertheless, there is no such feedback within voting, hence, there is less percentage of procuring what you long for. Through this we know that our quantity of thought invested will be utterly different in making either of these decisions. Private exchanging ensures a mutual profit, but “public” exchanges do not guarantee any “general” good, only groups of people benefit.

Afterwards, we also have logrolling in politics. Such tactic is used to favor the minority, therefore, when your candidate wins elections, do not expect that he will still be doing the things you want him to. The tyranny of the minority is utilized in order to force the majority in bending votes towards some projects. These minority politicians can feel content about their “favored” regulation in which they will not bear the costs of applying. Then, bureaucrats face no market feedback, thus they can ideate acutely mediocre and costly regulation without facing any consequences.

Inform Yourself

Maybe you say that you are informed enough to not make a dumb vote. Well, do you know who your U.S. congressman is? If you do, then, do you know what your U.S. congressman´s last vote was?

See, why are people poorly informed when it comes to political issues and candidates? The answer is simple, opportunity cost. The majority of people prefer to earn money, spend time with their families, exercise, and enjoy their leisure, instead of acquiring political knowledge. Enjoying leisure and all those things has a direct, positive impact in one´s life, unlike the mere act of voting. In other words, many people do not want to pay the price of sacrificing their family time for political knowledge and voting.

Then, voters realize that their vote has zero chance of influencing an elections outcome, so they have no impulse in gathering information. This “rational ignorance” in voters causes them to vote on the basis of big issues and slogans. For this matter, negative advertising becomes very effective and because many base their choice on shallow grounds, preposterous attacks over politicians regularly influence voter´s selections.

Adding this whole process together, will obviously equal to inconvenient choices. Poor candidates will be elected and their policies will eventually jeopardize the people. Thereby, people are rather unimpeded in giving vent to whatever emotion or anything else while they vote. Consequently, voting is basically done for personal satisfaction, like when you cheer in a sporting event and the athletes cannot hear you. You feel falsely involved in doing something significant for the nation.

As mentioned before, choosing a politician is not analogous to choosing a product on the free market, and not just because you do not earn what you want only if 50% agrees. In a supermarket, you drive an empty cart where you place in all the things that you need or desire. Let us say you place in it some wine, butter, cheese, shampoo, and beauty cream, but you don´t put in it bread, diapers, and a facewash, that you do not want and need.

A candidate is like going into a supermarket that only has prefilled grocery carts. Cart A has a facewash, cheese, wine, bread, and no butter. Cart B has shampoo, butter, diapers, and no beauty cream. Possibly, you can choose cart A despite the fact it has the facewash, bread, and no butter, or you choose cart B ignoring it lacks the beauty cream and has the diapers. Imagine each candidate has a position from A, B, C, or D. Do people prefer certain candidate because of his position on this or that situation, or in spite of that? Even so, when people vote for that candidate he or she feels they are supported by the people in all of their political views.

To continue with the analogy, the prefilled cart is so full it might also have a little “surprise” under all the products, and it will only come out after you have removed everything from it. For instance, you did not see the diapers until you emptied the cart. This occurred because the diaper manufacturers asked the store to place their product in all carts. Things like these happen with a politician; some of his policies are revealed after he has taken office. Many of those policies come from special interest groups who gave him money.

Conceivably, next elections you might want to read the economic papers and inform yourself profoundly on who is trying to become a leader in your nation.

Examples of Today´s Government: Front-loading and Political Engineering

A somewhat helpful example of the way government functions in America is front-loading. Here, for example, in the military, they overpromise about a weapon to get the government to start funding the project. They say that the weapon is the newest, most accurate, effective, cheapest etc. The government is convinced and they begin raising tax money, as soon as possible, to pay for the project. Nonetheless, when the weapon project is finished, it turns out it is not the newest, most accurate, effective, and is highly expensive. Some might think that the army is doomed and the project will be turned down, but the taxing has already been done and it is too late. Also, this institution is astute and they apply another strategy.

Political engineering is activated and they have to build the product all over again. The project´s jobs, profits, and tax revenues are propagated all around the country to as many political and congressional districts as possible, where the congressman is an influential committee chairman. By doing this, they will now have congressmen with vested interests to keep the project going.

Issues like these have befallen numerous times, like when they propose to design a weapon against a specific enemy, and the enemy ends up not existing. Yet, the production of the weapon continues to unfold laying oppressive taxes, which are difficult to stop, on the public´s back.

What is this in practical terms? The governmental plundering of the public to give money to a certain group that benefits mutually with the government.

Examples of Today´s Government: The Success of Africa

Another great example of politics without “romance” is the “success” that Africa had with governments that wielded great power over the different African economies.

These countries were not exactly socialists, the heart of the matter is that you cannot truly define their form of government. What you can say about them is that they had plenty of government intervention, specifically upon their nations´ economies. There was also a great cult of personality around the leader, “enhanced” by the daily news.

In Zaire (known as Congo) there was a man whose name was associated with corruption and undeserved, formidable wealth. He was Mobutu Sese Seko, who ruled from 1965-1997. During the 1970s of his governing, there was a raise in copper prices, which benefitted the copper rich nation of Zaire. Unsurprisingly, basically all the money earned went to the 11 palaces of Mobutu, the buying off of his enemies, and the immediate millionaire prosperity of his friends.

Mobutu became one of the wealthiest men on earth, by accumulating approximately 3 billion dollars in his “big” pocket. This man also said that the future of Zaire looked bright, but went and placed his money in European banks (apparently that is where the real brightness was).

Mr. Seko, too launched what could be known as the African “authenticity” program. To prevent people from standing against him, he “united” Zaire. All Zairians were told to change their Christian names for African names and they could not wear western clothing. Mobutu Sese Seko also canceled Christmas and placed his portrait on all of the churches. Next, he drove out Asian merchants, Belgian technicians and businessmen, and snatched $500 million worth of foreign business property.

Now, Zaire would be prosperous and keep all glory to itself, until the 1980s when copper prices fell and the country´s economic boom ended. With this said, Mobutu had to invite the Asians, Belgians, etc. back to Zaire. In the end, there was high price inflation, the transportation systems were broken down, there was a heavy debt, and hospitals were left with no bandages, oxygen, machines, etc.

There are many other examples, like this previous one about politicians to be thought of as public servants, but ultimately creating policies that destroyed their peoples. The last one I will expose to you, is that one of Julius Nyerere who ruled Tanzania from 1961 to 1985.

Nyerere said that his country would not have an army, they would be neutral in the cold war, there would be a tiny difference between rich and poor, the country would receive no outside aid, and that he would welcome an opposition party.

Many western intellectuals, specifically left liberals who believed in lots of government intervention in the economy absolutely exalted Nyerere. They said that he was going to save his country. According to them, he was a smart man who said that wise government did not believe in the superstition of free market and capitalism. It was claimed that he would demonstrate the capability of the government to make people prosperous. Julius had a western education, was a smart guy, who gave the appearance of nobility by working on a low salary and making budget cuts in his nation.

Well, all things came to light and he ended up toppling three neighboring countries, and did not allow the newspapers to disagree. No one could dissent with “the teacher”. In 1964 he appointed a commission to design a “democratic one-party state” whose job was not to consider whether Tanzania should be a one-party state. That decision had already been taken, their task was to say what kind of one-party state they should have.

Julius Nyerere received more foreign aid than any other president in black Africa, nationalized the economy and rental property, and raised taxes to redistribute wealth. During the year of 1967 he formed the Arusha Declaration. It dictated people to work hard, not strive for personal gain, and grow more; then they would have the Tanzania they wanted. The declaration, though, was just an excuse to arrest capitalists in the country, like Asians.

Therefore, he crushed all incentives in the people to produce and be rich, due to the 95% of taxes that were charged to those who gained $30,000 a year.

What beautiful governments that do the best for their nation, and are not self-interested at all. You think these are outrageous rulings? Well, the truth is that our government is not far from them.

Communism Is Better?

One of the Great Proposals by Great Philosophers

Viewing the outcomes of socialist and communist societies, would you have desired to be part of any one of them? Even so, today you still encounter people that claim that communism is better than having a free market. This is said because capitalism has been utterly misunderstood by the great majority of its oppositions, beginning from Karl Marx.

Karl Marx stated that communism would inevitably replace capitalism. With this we find that all ideas are contradictory, ones say fascism is the conclusion of capitalism and others say that communism supersedes capitalism. Ultimately, which is correct? The reality of it is that neither of them is true. Actually, it seems that people are afraid of inhabiting in a society full of free will, but that is our God-given right. He formed us with a will for a purpose, and that is to live in liberty, choosing and doing what we prefer without the control, manipulation, or intervention of others.

When a free volition is part of our real nature, the result of trying to thwart it will be catastrophic. Yet, many “great philosophers” have intended to invent different persuasive arguments that distort the truth and enable the convincing of people to live under political systems that limit their freedom.

One of those “great philosophers” was Karl Marx. Marx made socialism and communism expand to the world. These two systems are very similar. Socialism is an earlier stage of communism, where the only difference is that socialists are paid more if they work hard, whilst communists all get paid an equal share and are given more responsibilities instead of higher wages, when performing good toil. Both systems, however, sustain the control over the means of production. The means of production are not privatized and they all belong to the government.

As explained in “Basic Free Market Principles: A Price System”, when there is private property in the means of production, then those companies will know which resources are highly or little demanded. Therefore, through a system of prices they will receive feedback, and this will allow other companies to comprehend the price of the final product.  If firms did not know how much their primary resource costs, then how would they know at what price to establish their final product?

Marx answered to that question using a reasoning known as the labor theory of value. He exposed that what determines the exchange of value between commodities is the distinct ratio of labor that went into the production of each one of them. For example, if you have a pair of shoes and a rolling chair, and the shoes are worth twice as much as the rolling chair, what makes the pair of shoes be valued twice as much? Marx’s answer is the amount of labor pain placed in the shoes in comparison to the one suffered to make the chair. If, you were to trade something for a pair of shoes, that thing would have to be worth an equal quantity of labor pain as the shoes.

Nevertheless, there is no equal sign in exchange. When you purchase a pair of shoes for 65 dollars, this does not signify that the shoes are worth equally the same to you as the dollars. If that were to be the case, then why would someone buy the shoes when they already have the 65 dollars? The truth is that he or she prefers the footwear than the money, so they are not equally valuable to the individual.

The same is proper for determining prices. Prices are resolved by the people’s valuation of things, not by the labor that was used to produce them. What if someone intended to vend an oak tree or an irreplaceable work of art, how much toil did they perform to acquire the commodity? None, hence the price of those and all goods is designated by the people’s estimation of things.

However, Marx still uses the labor theory of value to prove his point in that capitalism “exploits” workers by squeezing the “surplus value” out of them. In other words, capitalism does not pay you according to the quantity of labor you produce, but only “enough to keep you alive”. Therefore, capitalism will always make workers worse off in absolute terms, says Marx. But when you are wrong in a theory, the reasoning you develop out of it will most likely be incorrect.

Marx declares that capitalism supposedly deteriorates the working conditions of employees, and at some point, workers would have to engage in drudgery. When this occurs, the proletariat, who now live in destitution and are somehow virtually the owners of an advanced capitalist society, will spontaneously gain class consciousness and revolutionize from capitalism into communism. The revolution will not be plotted, but come about through historical circumstances.

First of all, would you like to work in the conditions of someone of 1850? You would not desire that unless the reward was suffice to compensate the terrible conditions. Karl Marx never explains what would befall if the people actually preferred the drudgery for very high wages, than the better working conditions. How would Marx react to that? That it is incorrect to engage in drudgery even when you want to do it? If so, Marx would be taking away the autonomy of the people. Also, when you live in destitution, almost in the verge of starvation, how can you manage to participate in a revolution to form a temporary extra-legal institution before a new constitution can be established? Marx never explains, but continues with his reasoning.

He states that all economic forms of organization can only survive if they can have the ability to thoroughly utilize society’s resources. Capitalism undergoes the business cycle and this demonstrates that this system cannot maintain the full use of society’s resources.  To make good use of resources in a communist society, the workers will elect managers and public officials who will administer society and the economy with an economic central plan. After this, the instrument of the exploitation of one class by another (the state) will fade away.

This last argument proves that Karl Marx did not comprehend capitalism. A free market economy has nothing to do with business cycles. This system always tries to utilize resources in the most efficient manner and elects those that will manage them successfully. In “Money, Government, Prices, and Concealed Corruption” it is exposed how the provoker of business cycles is the government and its central bank when it intervenes in the matters of the economy.

When you have a democratically regulated economic central plan determining what to produce, says Marx, people will be less selfish, more versatile, more creative, and more autonomous. The people’s full potential will be encouraged, because they will have an overall control of what and how to produce. Under communism, people will not have to specialize in one single area, thus the division of labor will be abolished and everyone will be free to move among different occupations. With communism, everyone is entitled to goods based on their need. This leads people to work, not because they have to, but because they want to and in whatever sphere of activity they desire. Through this whole process, work becomes an outlet for creative self-expression. In the morning, one can be an architect, at noon a lawyer, and at night an actor.

Having the opportunity to decide whether or not you will work maximizes your leisure time, because people can choose to do nothing. Marx thinks that capitalism leads to unconscious economic decisions. Producing only what the market wants is unpleasant, monotonous, and dehumanizing, because you do not produce what you want, but what others want. Greed and selfishness are what guide human beings in the free market, but in communism goods are distributed to people, each according to their need and want for them.

Every single thing that Marx says is incorrect and contradictory. How can the state wither away when you have a central plan? Ultimately, a minority of people would end up making decisions for millions that have different ideals, different point of views, different philosophies, etc. Would this increase autonomy? Absolutely not, actually the general public would become less free in having a small group of people, whom do not know every single citizen of the nation, making economic decisions for the entire country.

A centrally planned economy, would not allow people to use work as an outlet for self-expression. How can your central economic plan function when everyone is doing whatever they want? How will you have resources to distribute when people can choose to work or not to work? Doesn’t it make you self-centered when you want to produce what you desire, and not what the market needs or wants? People might have more leisure time under communism, but at the expense of starvation.

The free market increases leisure time along with the standard of living. It is by capitalism that a truly rich man can fly on his own jet and a poor person fly on coach, but they can both fly. Capitalism increases the productivity of labor and this makes free time possible. Also, people can choose no free time in exchange for higher wages in the free market. The free market increases individuals’ autonomy and freedom, communism stifles both of them. Communism is another “great proposal” made, by “great philosophers” who only prove they really do not know anything.

Fascism vs. Capitalism

“Fascism is capitalism in decay.” – Lenin

Fascism is a structure of government that rots the beauty of liberty and crushes the diversity that exists within every person as an individual. All is centered in a benign, supreme, venerated, and charismatic mortal man that captivates the heart of the people with illusionist ideals. This man becomes the leader of the whole and subjugates the people under his will.

Every decision is made by the central government of the nation and the leader is the wise custodian of his homeland. He is like a god, one that along with his followers encourages death and violence. They convince the people that there is no greater glory than to die for your nation and battle in favor of your land. You should not care about your life, necessities, family, and desires when it comes to your nation and the single will of your custodian. You shall go to war and fight for there is no greater pride than to kill others for the glory of your flag. As Mussolini would say, “Everything for the state, nothing outside the state, nothing above the state.” You, citizen, are not important, your ideas, your property, etc. does not matter, just the nation and its unity depending on the constitution of the will of your leader. Verily, your individual rights are subordinate to the good of the country. It is about what the public (government) is interested in, not you.

All followers of fascism consider it to be the third way between the “incorrect” communism and the “dog-eat-dog” capitalism. The Italian Benito Mussolini, whom was a socialist, became a well-known fascist after Lenin’s economic fiasco. He supported the involvement of his nation into World War I and came to hold the maximum authority of Italy in 1922. In the beginning of his governing, he did not yet create a secret police or abolished parliament. Italy’s press continued to enjoy freedom and the liberty of his opposition’s leaders had not yet been compromised. However, during 1924, the most vigorous leader of Mussolini’s opposition, Giacomo Matteotti, was murdered. Benito Mussolini proceeded towards the extremists of his camp and in 1925, he announced the initiation of fascism. Some time later, his competition’s newspapers would be banned and his contraries would be confined to an island.

Fascism only brought slavery to Italians, a slavery with a false sensation of patriotism. The press would foster the cult of the personality of the leader and lassoed the people’s minds to not believe anything different. The year of 1931 invaded with fear many professors, as they were required (forced) to sign an oath that declared loyalty to the government. Merely, just eleven professors refused to write their signatures. Different economic groupings were brought together under the supervision of the central government. Each group had government’s workers and employers that had specific fascist leaders assigned to each one of them. This is known as the corporate state, one that is characterized by a secret police, a fascist salute, etc. How was economy altered in Italy? The output per capita declined during the era of fascism and by 1940, wages, in both the industry and the agriculture were down. The end result of government manipulation and totalitarianism will always be poverty in the general public of the nation.

Doing business under fascism was practically made impossible, if you desired to practice it in freedom. State auditors would visit industrialists with orders to examine the balance sheets, book entries, etc. of the companies. Nevertheless, the concealed truth was that this was just a pretext to expropriate the capitalists. Supervisory boards would estimate how much iron, steel, rubber, and other raw materials were needed by the entire country to be able of carrying out certain production programs. Once again, this was a case of price controls that just lowered the product’s quality to cope with the price ceilings established by the government. The people were not just getting what they did not want, but they were also not getting what they needed. To make things worse, authorities would approach businessmen in the guise of being normal consumers to try to make the entrepreneurs violate the price policies and have something to accuse them of. The priorities of the government, stepped on the heads of the priorities of the individuals, and this ruined the economy.

In conclusion, Lenin’s claim does not understand capitalism. Fascism is not the end of a system that favors the individual FREE will of every single human being. The free market proposes an economy with none or the tiniest amount of government intervention possible. It is a system that is based in exchange, were one person trades off something for another they prefer and vice versa. Capitalism encourages decentralization and does not believe in the falseness of prosperity in war, but in the “seen and unseen” of Frederic Bastiat. A free market economy does not rejoice in having taxation, false interest rates, unbacked paper money, and price ceilings or price floors. This economy believes in commodity money as a medium of exchange, little or no taxation, real savings pushing interest rates down, the protection of private property, and in fluctuating prices that depend on the demand and the value given to products by the will of the people. Unlike fascism, the free market opposes slavery, death, war, and a controlling totalitarian central government that believes in nationalism. Declaring that capitalism is a late stage of fascism is nothing else than lack of knowledge and comprehension of what these two systems truly are.

Constitutions and Limiting Government

We are possessors of a will with which we choose the paths we want to follow and the things we desire to do. Our will enables us to govern ourselves correctly or incorrectly and we suffer the consequences of the decisions we make. Without a will we would not be capable of governing our beings. No one can touch or use our will, but us and only us. We always have the decisive call. If someone tried to control or manipulate us and attained to place a yoke of servitude upon our shoulders, this would be a guide for us to desperately desire freedom and be willing to do anything to obtain it. Once we acquired that long desired liberty, we would find the means of securing it to not allow someone else to have the absolute power to govern us ever again.

Just as we yearn for the freedom of our volition, the states, during the times of colonization, also sought independence. They wanted to be autonomous and self-governed. They had a need to feel the certainty in that their rights and liberties would be secure and enforced, but why?

The colonists found an opportunity and fled from the oppressive British government to the “New World”. When they arrived to the land, they established different colonies that would later become independent states. These states would all be ruled by different predictable norms and predictable laws that would constitute distinct predictable sanctions over the people. The states wished to have a government that functioned differently than the British government.

The British way of government had an unwritten constitution based on tradition. Having an unwritten constitution began to cause various problems between the colonies and the British government. Britain commenced to act with the colonies in manners that were not accompanying tradition. Those actions, however, were justified by the British in saying that they were constitutional if a group of men, known as Parliament, said they were. A tiny band of men is easy to influence and convince to fulfill the things that are favorable to one side or the other, but a group of states is not.

As exposed in Longing for Liberty, when there is a diversity of states that enforce separate policies, there exists competition between them. The people can flee from one state to the other if the first is becoming very suffocating in its policies. Therefore, the states have an incentive to govern and treat their citizens more righteously. That is the reason why the colonists fled to America. They wanted freedom and opportunities to prosper and follow a new way of life, one that would not be interfered by with government.

There was a necessity in the states to find the protection of the rights and liberties of the people. The Revolution was fought for this purpose. It was battled against an unpredictable and volatile constitution that had no written foundation and thus, no predictable continuity in its interpretation and tradition. Britain’s constitution was found in the mouths of a merely small number of living and breathing men that held the complete authority to rule over the country and the states as they pleased.

Those are the dangers of having a government where the power to make decisions has been centered in a few people. Governments already have a monopoly in the initiation of the application of force and with no restrictions to resist them, their power could and would be utterly endless. There must be borders between governments for them to fear the fleeing of those that provide their income through taxation, and persuade those outside their territory that they are least oppressive. This is why there were different states in the “New World”. However, those states, when obtaining their independence and having been victorious in the Revolution, they united. The unity gave birth to a written constitution that would establish the limits on the central government in telling them what they could or could not do and who would do it.

A hierarchical system of various authorities that delegated different tasks in society was protected by the new constitution. If an individual could not fulfill a task, he or she went to the family. If the family was not capable of resolving the mission, they went to the community. If the community could not delegate the job, they went to the city’s government. If the city’s government was not able to solve things, then they went to the state’s government. If the state’s government could not do something about it, they went with the central government. Finally, the central government could only accomplish the task if the states had agreed to it in the constitution. If the constitution’s articles did not mention the central government could do such things, then they amended the constitution, of course, with the permission of every state. This process ensured the freedom and autonomy of the states and protected the rights of every citizen in the United States.

In other words, the central government would not hold all power to make decisions. There would actually be flexibility in the enforcement of policies because the needs of every state were taken into account. If one state did not agree with the policy, it had the right to not obey it. In extreme cases, if the state did not coincide with every single norm, it could nullify all of them and separate from the union. Dividing political authority prevented the engagement of wicked policies that subjugated the people. Nothing that could be solved by an individual, family, etc. was delegated to the state or central government.

We do not find the same case in accordance to self-governed states and the respect of the written constitution, today. It is now declared that “it is unreasonable to confine ourselves strictly to the text of the Constitution. We should interpret the Constitution broadly to allow the Federal government to exercise powers we need it to exercise, even if they are not actually listed in the document. The Constitution is a ‘living and breathing’ document which changes along with the times. If we are going to perform something, let us explicate the Constitution, not by intending to understand its original signification, but by adapting it to the standards of the present.”

This is proclaimed as of 2014 and practically ignoring that if something was not written in the Constitution, because it was forgotten or whatever, you have the possibility of amending the document. Think about it, if you can construe something in which ever fashion you want, you will do so in a way that such interpretation favors you, or the side you support. Judges today have a monopoly to understand the Constitution by their own means, and favor the Federal government. Hence, judges in the Supreme Court will comprise the Constitution in ways that give tremendous power to the central government. Then people say, “Of course, Judges can only know what the Constitution signifies. How would you know what the Constitution was intended to mean?” And the normal answer is, “No one can really know, so… let’s do whatever we want.” People like these disregard the fact that Thomas Jefferson and James Madison said that the document can be comprehended using the State Ratifying Conventions.

Besides, if you must apply the Constitution to the changes of society, then you utilize the amendments to reflect the transformations. Some states might approve the amendment and others might not, but that is when people within the states that do or do not want the addition can go to those states that will or will not use it. As Thomas Jefferson said, “I had rather ask an enlargement of power from the nation, where it is found necessary, than to assume it by a construction (interpretation) which would make our powers boundless. Our peculiar security is in the possession of a written constitution. Let us not make it a blank paper by construction (interpretation).”

Nevertheless, that is what has occurred, it has indeed become, if not a blank paper, then one close to that reality. You do not find the Tenth amendment put into application any longer. It is Thomas Jefferson who called it the “cornerstone” of the Constitution for it safeguarded the liberty and autonomous government of the states. It reads, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States are reserved to the States respectively, or to the people.” With this addition, the states were basically telling the central government that if they had failed to mention anything else in the document that the United states could not render, then the central government should not do that either unless the states allowed it to.

In those days the states chose very meticulously what powers the central government could and could not have. They had fought a revolution to not continue receiving a “living and breathing” constitution with volatile interpretation and violator of tradition, giving the government infinite power and unpredictability. The states wanted to sustain the power to nullify the things the Federal government was able to do and even withdrawal from the union, if necessary. We find historical cases when they used the power of nullification to not apply the government’s policies.

Before I expose the historical facts, I hope you have now known that the Constitution was not a contract between the states and the Federal government, but it was actually a compact between the states themselves. The Federal government was created by the compact and was not a party to it. The central or Federal government was the result of the agreement of the states in the compact. Therefore, being the result of the compact, the states could nullify the central government’s declarations, and even use secession. Secession is not like insurrection, for it does not necessarily involve violence.

When Thomas Jefferson became president, he made an embargo and many states nullified it. In the month of January of the year of 1809, the state of Massachusetts declared the embargo unconstitutional and did not comply. In the same year, in the month of February, Connecticut’s governor ordered state officials to not cooperate with it. Lastly, in the month of March, Rhode Island declared that its government would protect its people against the Federal government’s unconstitutional exercise of power and the official ban of trade was not carried out in the states.

This was a limited government, one that did not possess a monopoly in power and was absolutely controlled by the will of the states. Liberty was ensured, but we have slowly been losing it, allowing the Federal government to expand and interpret the Constitution as ‘living and breathing’. Construing in this way spits in the face of the patriots that fought and died during the Revolution to have a firm constitution that endowed freedom and secure rights to the people in the land. The free will of the citizens has little by little been obstructed. But remember, we always have the decisive call.

Longing for Liberty

VERY IMPORTANT NOTE: Coincidentially, today is 4th of July. I did not write this essay referring to this day. Therefore, I am not writing it in a pessimist attitude towards today’s celebration.

Why do we long for freedom? The simplest and most logical answer I can find is because we have not yet acquired it. Today, many boast in that they reside in a free land, but at the same time they are glad to be ruled by a central government that intervenes in almost all of society’s matters. We are accustomed to live in such a way that we assume things are to be done in a no different manner. Our minds have become partakers of a structure that hides in plain sight and is rooted deep within the heart of our society. A structure that manipulates, controls, and darkens our understanding, not allowing us to see a different and more righteous path to take. It stays long enough from generation to generation that it filters within our DNA, not permitting us to achieve different results, but only worsen the conditions of our circumstances. Yes, indeed, it all begins inside our families.

“In that day the Lord with his sore and great and strong sword shall punish leviathan the piercing serpent, even leviathan that crooked serpent; and he shall slay the dragon that is in the sea.”  – Isaiah 27:1

In the year 1651 a man named Thomas Hobbes published a book titled “Leviathan”, presenting forth his model of political life. In it he basically described that society is a single whole, a mass of individuals that simply endow a central government with the power to rule over them. No other social authority precedes this central government. Therefore, it cannot be denied when it monopolizes the engaging of force and coercion over its citizens. This model’s efficiency was proved wrong during the 20th Century, when the world saw the totalitarian Modern States committing genocide, facing fewer and fewer obstacles to their controlling power, and having conscription and income taxes pierce rooftops. Even so, this system persists in present time, avoiding exposure and delivering the same results less noticeably. However, to the world’s relief there exists a different view and model of political life.

Years before Hobbes created his model, in 1603 a man named Althusius wrote a book titled “Politica”, and in it presented a more rational model of political life. He said that the basic unit of society, and for that reason of government, is the family. Then, families may form villages, and the villages will form provinces, and the provinces constitute a kingdom. In other words, society is much more than a group of people put together and being governed by a ruler. This is what becomes known as a Federative Polity, which is a society in which power is distributed and shared by various social authorities. Power is not held monopolistically by a central government, but by many different social authorities placed in a specific hierarchy that possess rights and liberties of their own. Their rights and their liberties cannot be arbitrarily interfered with, preceded, or cancelled by a central government.

The Althusius’ and Hobbes’ ideas of how society is organized are in each polar end. They are also perfect to place the setting of the two theories that exist about the American Union. The compact theory states that the union was created by the collection of self-governed States whom all in one accord gave power to a central government. The nationalist theory, says that the union is not a collection, but a single whole and that the Union came before the States. The States are just parts of the union, but the union is the original unit, not the States. In simpler terms the compact theory would call the USA, “The United States are” and the nationalist theory would call the USA, “The United States is.”

A false sensation of patriotism conceals the consequences that the nationalist theory of the union faces. Individuals basically do not have a will. It is like saying, “the marriage came first and after came the bride and the bridegroom. The man and the woman had no choice if they wanted to get married or not, or if that was the person they wanted to marry with. The marriage already existed, so the bride and the bridegroom must deal with it. And do not worry, even though we are going against their will now, they will feel love once their children are born. Meanwhile, they will have to live together and not separate, even if they disagree with each other to death.” How would you feel, with a union like this? That is how the states would have felt with the nationalist theory of the union, but now are filled with a sensation of “patriotism” and “unity” that is planted from the cradle to the grave and allows all sort of control to be enforced.

Nevertheless, the Declaration of Independence clearly favors the compact theory of the union. The declaration calls the states “free and independent states” that “have full power to levy war, conclude peace, contract alliances, establish commerce, and to do all other acts and things which independent states may of right do.” The states came together and one by one willingly ratified the Constitution of the United States. In 1776 it was declared that the crime of treason would be thought of as being perpetrated not against the states united into an indivisible blob, but against the states individually. Also, Article II of the Articles of Confederation written seven years before the union says that the “states retain their sovereignty, freedom, and independence.” Finally, in the treaty of Paris made in 1783, the British acknowledged the independence, not of a single whole, but of a group of states, which they proceeded to list one by one.

As this American history clearly evidences, the compact theory of the union was used by the States to demonstrate that they came before a central government. The states are the ones who have the sovereignty and the power, not the central government. The states have the ability to resist a central government, separate from it, and/or dismantle it, for they were the ones who formed it from the beginning. If the compact theory is correct, then the United States initially defied Hobbesian ideas.

The veracity of it is that the greater the expansion of the government is, the more capability it will have to pursue its interests by subtly controlling the people to its favor. If all power is situated on a central government’s shoulders, this one will be able to treat the people as it pleases without giving them the opportunity to have options and flee to other governments that provide more freedom in the economy and other areas in society.

Imagine a family in which the father is the only one who can make decisions and the mother and the children cannot do anything regarding it. They have no voice against the father, even if everything he decides goes against the will, desires, or needs of the mother and children. The woman cannot escape along with her children to someone else. Society is in favor of the father and no one would ever listen to the oppressed and defenseless woman. This would be a horrible situation of control and despair, where anyone would feel powerless. Sometimes, we have to run away because we cannot stand against people or circumstances. But if we cannot flee, what will we do?

As the previous example clearly demonstrates when only one institution, agency, or any kind of authority sustains the central and absolute power to conduct decisions, without having any sort of competition around it for people to flee to, it can do whatever it wants and society will inevitably support it. The oppression of taxes, regulations, etc. will be stronger and greater as the state continues to expand.

On the other hand, if we have an organized society that distributes the power of making decisions between each social authority, the people will be able to have righteous resolutions. For example, the central government only chooses what the union says it can. The states do what the groups of communities say they can do. The communities do what their particular churches, clubs, or whatever say they can do. The churches, clubs, etc. do what the families allow them to do. The families do what the father, mother, and child of each family has decided and agreed to do. Finally, each member of a family will do what they have acquired from God to do, being God the base and sovereign authority over all and the supplier of human rights, liberties, and norms.

The smaller the state, the easier it will be represented. Today, we see the complete opposite of “small” in the United States of America. The House of Representatives have 435 members, each representing about 713,000 Americans. How difficult do you think it is to represent 713,000 people? If you represent someone, it means you know their philosophy, necessities, point of views, desires, etc. How will someone know all of these characteristics in 713,000 people? It is impossible. Even if they knew who every single person was, it would extremely complicated to place forth a solution that satisfied every single being.

Shocking as it may seem, in the year of 2014 just 435 representatives, 100 senators, and one president decide on the spending of about $3 trillion. Only 536 people decide for a nation of about 300 million citizens on how and where to spend its money, without the worries of being punished if they use the money to favor their own interests. It is very important to ask, for the sake of liberty, “How did the government obtain the money?” And the answer would be, “Through the involuntary, non-contractual, and coercive transfer of the wealth of the people from their hands to government favored institutions.” As Donald Livingston says, “Never has so much financial power been controlled by so few.”

If the power of the states is not going to be enforced and respected to the point of allowing it to separate of a nation, what sense is there in having states? If a central government will decide for the whole, what point is there in having different levels of supposed authority within a nation? The family is not respected anymore, the authority of the parents over the children to educate and raise them is being thwarted by public and government affiliated private schools today. What sense, then, is there in having a family, if the supposed authorities within it will not be respected? Family is the basis of society, the system we live in today recognizes this, and that is why it has spent so much time attacking this base to make it stumble and try dismantling it. In this way it will be able to hold the ability of maintaining control and expanding it much easier. Dear reader, is this freedom?

Money, Government, Prices, and Concealed Corruption

Developing a Price System

The beginning of paper money resides in the direct trade of goods. Society used barter before money came into existence and it directly exchanged one good for another, like a towel for a pillow. As time went by, people commenced to realize that through barter it is complicated to acquire what you desire or have a necessity of when you are not certain that someone is willing to give away their good for what you offer them. For instance, you need a pair of shoes and to obtain them you are willing to trade a blanket. You must travel around your town to find someone who needs or wants a blanket and to obtain it has decided they will give a pair of shoes. If they are not willing to give away the shoes, you have to make the intent in convincing them. This requires much effort, energy, and perhaps resource, which altogether make trade by barter an exhaustive and/or inefficient manner of doing things.

Efficacy and accuracy are achieved in exchange when you discover a good that all people desire. This good has to be one that is utile in itself and can be divided in a form people will continue to find it attractive. Gold becomes a medium of exchange and eventually into money through this encounter. Gold is a rare precious metal that has many uses, many people would appreciate having, and unlike a hat can be divided into smaller pieces or turned into bigger ones to trade anything with it in accordance to its value. Therefore, whether you need gold for your personal uses or not, you value it and find it attractive because with it, you can acquire anything you want or need. The more gold you have, the more things you can obtain and the less gold you have, the less things you can procure.

A price system then begins to develop as people begin to find a good more valuable (you need more gold to purchase it) than the other. Imagine an auction, where people bid and the highest bid takes the product home. An auction is the model that represents how a price system begins to unfold along with the market. When people are trading a hat, maybe one will offer ten gold coins for it, another 12 coins, and the final will bid 15 gold coins. All hats of its type might now be worth 15 gold coins because there are people that value the hats in that quantity. Perchance later in the future, the type of hats might become more or less valuable to the people, but it is the demand of the product and the volition of the people that will always determine the price of all things.

Origin of Paper Money

Metals, like gold, can require much space and be difficult to carry, that is until banks are created. A bank was utilized as an area to conserve the gold of others safe. In the past, when people took their gold to the bank, this one gave them a piece of paper that proved and contained the amount of gold they had stored. Whenever a person wished, they could go to the bank, present the paper, draw the sum of gold it represented, and use the gold to exchange. Similar to what took place with barter, people noticed that much time, energy, and maybe resource are required to fulfill this process. Instead of going through the whole process of traveling to the bank to use the gold for exchange, people began to only trade the paper depicting a quantity of gold.

Money (including the one made of paper) exists through a natural and spontaneous process in which the will of people began to devise a medium of exchange and use it for trade in the need of achieving accuracy in the market. The government did not create money. They did not come in and say, “We must now put to use gold during trade and in the near future, pieces of paper called ‘dollars’ with the portraits of the nation’s leaders on them. If you have ‘this amount’ of dollars, you will be rich or poor.” That would be simply absurd. Just suppose that someone comes toward you and gives you a yellow paper with their picture on it and said, “Here, have ‘ten Jacky Ops’, you are now rich.” How would you know you are rich? If he or she gave “ten Jacky Ops” to everyone and told them, “This is your new money.” How would they know their value and use them for trade? You simply cannot. However, if “ten Jacky Ops” were backed up by 50 kilograms of gold, then you would know how much they are worth and how to use them.

Commodity and Fiat Money

Today, the money we use is not backed up by gold and the government did not create it for the reasons just described. There exist two types of money, commodity and fiat money. Commodity money is based in a medium of exchange or good that is valued generally, like gold. On the other hand, fiat money is something more complex to describe.

Society accepts commodity money through the natural process of finding a medium of exchange. Then, the government monopolizes the production and certification of the generally valued good. The government begins to issue out paper notes that can be redeemed in a given weight of gold and begin to circulate as a convenient substitute for carrying gold coins. These money certificates are finally given different names like dollars, yens, pounds, pesos, etc. Naming the paper notes conditions the public to think of the dollar (or whatever) rather than the gold itself as the money. In the end, the government confiscates all the gold of the people in exchange for the paper note, leaving the people with unbacked paper money.

In simpler terms, fiat money begins as certificates redeemable into a commodity (like gold), and then the government takes the gold away, leaving only the paper. The paper money, though, continues to circulate because people recall the past structure of prices, so the paper money, in this case is not being imposed out of nowhere by the government.

Disadvantages of Fiat Money

Many complications accompany fiat money. Gradually fiat money is created more and more and in this becomes less and less based on gold, until it ultimately is not. When the government increases the supply of money, prices rise to a substantially high level. Because, when there exists more money to bid with, the value of things increments, like in an auction. These increasingly high prices disserve people on fixed incomes for they are receiving, say 500 dollars weekly, but the price of things keeps rising, making the 500 dollars worth less and less.

Fiat money is easy to produce for it is not based in a commodity. Therefore, its production cannot be controlled, which contributes to an uncontrollable and ever growing raise in prices. However, those who receive the newly printed money first are the fortunate ones. Because prices have not yet risen, the first recipients have the possibility to buy the things at a more economical price making them richer. The people who later appropriate the newly printed money that has already worked its way through the economy and has also raised prices are least fortunate, because the money is already less valued.

This means that paper money and paper money inflation artificially encourage consumption over saving. Hyperinflation is an extreme example pf this. Let us pretend that you have purposed yourself to buy something worth 10,000 dollars at the end of the year. Little by little you save your money, but you do not recognize that the government is printing millions of dollars each day, and every month prices are increasing by 50%. The end of the year comes and you notice that the 10,000 dollar product you had saved up to buy is now worth an outrageous 70,000 dollars. Your saved 10,000 dollars are worth practically nothing in this circumstance.

In normal inflation conditions, the results are the same, only less outrageous. This takes people to rationalize and come to understand that it is more convenient to spend their money instantly before it is less valuable. A situation like this one is compatible to business cycles, In these cycles, interest rates fall artificially because the government keeps creating money out of thin air and giving it to banks, not allowing the savings of the people (which are made impossible to have with fiat money) to be the ones that push interest rates down.

Other disadvantage of having fiat money is that it gives more power to the government of controlling the people. When the government has the ability to create money out of air, it becomes easier for them to get hold of the resources of the private sector. It will not matter whether we have high taxes or not, the government will still be able to get hold of your wealth and through inflation control your prosperity.

Government Control

It all involves prices, our demand and value of products or services and our personal interests in preferring one thing for the other. Notwithstanding, apart from inflation (increasing production of paper money), the government also tries to get its involvement in prices to control them, especially in times of crisis.

Price controls are efforts by the government to limit the ability of prices to move up or down, creating either price ceilings or price floors. Prices always fluctuate because tomorrow there might be less or more demand of a product being less or more valuable to the people. Usually, when speaking about price controls, most people refer to price ceilings.

Just as most of the things the government does and intervenes in, price ceilings are also accompanied by many issues. If firms cannot sell a product above a certain price, the demand of the product might increase and the production of it will not suit the quantity and speed of the demand. The result of this will obviously be shortages. Shortages will damage the economy and in an overwhelming manner in times when resources are extremely urgent.

Imagine a sudden disaster impacts a random city. The people must now seek temporal residence in hotels, leading to a crescent request of rooms available in them. To prevent prices from rising, the government intervenes to keep them at the same value as they were before the destruction.

Now, a family of four normally rents two rooms. And because they see prices at a relatively low price in the crisis, they choose to rent rooms as usual, not counting the other hundreds of people that have a necessity of refuge. Rooms are valued greater in this time and have a truly high demand, not by desire, but by necessity. Therefore, prices must reflect the circumstance taking place and cause people to be prudent and leave resource for the others to utilize. If the prices would have been high, the family of four could have thought twice before buying the rooms and settled with just one. Doing this, they would have left an empty room for another family in need.

Nevertheless, government intervention has created price ceilings for the hotels and perhaps an uncounted family of four will be left out of a hotel room and ultimately of refuge. Government control in prices creates great misbalances in the economy and causes shortages.

Concealed Corruption

Economy today is a puzzle. Even if the government did not control prices, companies would still end up ruined with the existence of false interest rates caused by unbacked paper money. In sequence to this printing, prices inevitably rise because there is more money circulating in the market. Yet, the government insists in prices to not be risen. They say this ignoring that things are valued greater, have higher demand among the people, and their money printing continues to unavoidably raise prices.

Firms purpose themselves to do long-term projects, but they cannot save resources when the people are consuming greatly and not saving money in the bank. Saving is not convenient when inflation is raising prices constantly. Therefore, to conclude I cannot find better words to describe this system than calling it an upside-down, intersecting, contradicting, self-tangled, and corrupt system that alters the economy, making people poorer and giving those that are in control the privilege of becoming richer.

On the contrary, if gold were used today, the value of saving it would increase. As time passes by, gold is worth more or the same, but never less. This would give people the incentive to save for the future, keep interest rates down, consume fewer resources and allow firms to invest in long-term projects successfully. Prices would eventually stay low and follow the voluntary value and demand people give to things. Finally, gold is hard to find and acquire, thus, sooner or later, society would have to conform to a finite quantity. Causing a society of 100 people using 1,000 gold coins, which has an increase in population by the double, to use the same amount of gold, but dividing prices in half, making everything more economically accessible.