Walden Pound
I know, I know, it's Walden Pond, but, the other day, Barack Obama seemed to be giving Thoreau quite a pounding. Fred Schwartz wrote at The Corner:
So when Obama said last night that "I reject the view that says our problems will simply take care of themselves; that says government has no role in laying the foundation for our common prosperity," he must have been talking about Thoreau, who wrote at the start of his rabble-rousing essay "On the Necessity of Civil Disobedience":
I heartily accept the motto,--"That government is best which governs least"; and I should like to see it acted up to more rapidly and systematically. Carried out, it finally amounts to this, which also I believe,--"That government is best which governs not at all"; and when men are prepared for it, that will be the kind of government which they will have.
Here's more -- showing that Thoreau was plainly against the Obama-ian notion of government and lavish government spending as some sort of big teat we can all suck off of, free of charge:
Yet this government never of itself furthered any enterprise, but by the alacrity with which it got out of its way. It does not keep the country free. It does not settle the West. It does not educate. The character inherent in the American people has done all that has been accomplished; and it would have done somewhat more, if the government had not sometimes got in its way. . . . Trade and commerce, if they were not made of India-rubber, would never manage to bounce over the obstacles which legislators are continually putting in their way; and, if one were to judge these men wholly by the effects of their actions and not partly by their intentions, they would deserve to be classed and punished with those mischievous persons who put obstructions on the railroads.
Why is it that some people -- more Democrats than Republicans, I think -- tend to believe government will save them, that government will be the answer? Haven't we all seen hundreds or even a thousand or more examples where exactly the opposite is the case? Do people just believe what they want to believe would be the way things would work -- despite piles of evidence to the contrary?
Amy - you are a hairsbreadth away from saying (as Thoreau did) that no government is best. I used to think that way, but have changed my mind. The current financial storm was caused by lack of control, not excess control. When no control is imposed, people do not behave nobly. If they are bankers, they create financial mayhem. If they are citizens of New Orleans or Baghdad - or anywhere else - they loot.
It's not use saying "when men are prepared for it, that will be the kind of government which they will have." That's just that same as saying if we all followed the bible or the koran or whatever, everything would be perfect. Ain't gonna happen. And the idea of a united world all agreeing about everything is about the scariest thing I can imagine. We are not pod people.
The job of government, in my opinion, is to make the rules within which the rest of us are free to operate. The trick is to devise a good set of rules so that individuals can pursue their own best interest, and yet the whole of society works well. Part of the reason we have a financial crisis just now is that the rational thing to do with your cash is to sit on it; but that does not help the economy as a whole.
Norman at February 26, 2009 1:16 AM
The key point here is "government never of itself furthered any enterprise". Government provides a necessary infrastructure, but produces nothing itself.
Governmental expenditures in the US have now risen to around 1/3 of the GDP. But GDP itself massively overstates the productivity of the country. If you were to smash all the shop windows on main street, the work to repair them would add to the GDP, even though the end result is only getting the shops back to where they were.
In actual fact, governmental expenditures probably exceed the real productive capacity of the country. Add to that the fact that many highly qualified people are now attracted to fields such as finance and law that are - by definition - nonproductive. The result is that the actual standard of living in the USA is dropping year by year.
One alternate view is the "Genuine Progress Indicator" - enter it in Google or have a look at this chart.
bradley13 at February 26, 2009 2:38 AM
I'm all in favour of less government, but not zero government. They key point is valid. The best thing government can do is get off people's backs and let them create wealth.
The problem is that there seems to be nothing to prevent governments from growing. In a free market, competition keeps production efficient. Where is the government's competition? Don't say it lies in having opposing political parties: all parties are signed up to the same underlying system. Parties get votes by providing what the voters want. There is no mechanism for them to get votes by providing less. It seems to be part of human psychology to believe that the government will "give" us something when in fact it has to tax us in the first place. I guess if the government is shifting money about (while taking a hefty cut to pay for the costs of the shifting operation) then people will vote for whoever promises to shift most in their direction.
I begin to think that universal suffrage is not such a good idea. Of course it's not universal at all, but it claims to be. What criteria would be fair? In "Starship Troopers" you were only entitled to vote after military service. Good old Heinlein.
Norman at February 26, 2009 3:45 AM
I am for some government. But the government has no business interfering in the economy. It has always made things worse. Recessions are required to purge excesses from the system. Any attempt to avoid these recessions simply prolong the downturn.
The sad fact is that our central bankers dumped too much money in the system. Chinese currency manipulation also had a significant part to play in this. But once our central bankers dumped all that money into our system, it had to go somewhere. Gov't then encouraged all that excess cash to go into real estate markets. We have to ask ourselves if we really want a few people controlling our money supply ... and if we want the government deciding where we should be investing.
Charles at February 26, 2009 4:46 AM
I am for very limited government, I'm a passionate Libertarian.
However, I find that the number of people who want stronger government control are pretty well evenly divided between the current crop of those calling themselves Democrats and Republicans. The Democrats want the federal government to control the economy (as if such a thing was truly possible) and the Republicans want the government to control everyone's moral decisions - and I recognize that this is not the historical mantra of the party, but it's what it's become.
Jessica K. at February 26, 2009 6:43 AM
"Why is it that some people -- more Democrats than Republicans, I think -- tend to believe government will save them, that government will be the answer?"
1) Fear.
2) Laziness.
3) Stupidity.
Pirate Jo at February 26, 2009 7:07 AM
Norman writes: "...people will vote for whoever promises to shift most in their direction. I begin to think that universal suffrage is not such a good idea. What criteria would be fair?"
Exactly: we are rapidly approaching the point that voters are voting themselves other people's hard-earned money.
There is a very simple answer: only those who help pay for government get to vote. If you pay for government, you can vote. If you are on welfare, if you receive farm subsidies - if you in any way receive more money from the government than you pay in taxes - then you have no right to vote.
bradley13 at February 26, 2009 7:28 AM
"Do people just believe what they want to believe would be the way things would work -- despite piles of evidence to the contrary?"
Short answer, "Yes"
Eagle Keeper at February 26, 2009 8:02 AM
I agree with bradley, except in the case of disabled vets and emergency responders.
And while we're at it lets make lobbying punishable by death
lujlp at February 26, 2009 8:17 AM
Bradley - "if you in any way receive more money from the government than you pay in taxes" That's an neat idea. Would that include people like, say, teachers? They work for their pay, but it comes from the government (at least in the UK it does, for most teachers). So it's not a handout.
Norman at February 26, 2009 8:35 AM
The current financial storm was caused by lack of control, not excess control.
No, it was caused by too much control by parties who did not share the risk.
The government (urged by "community activists") forced banks to lend to individuals who would not have qualified for a loan.
The government then transferred the risks associated with such shoddy lending practices to third parties (Fannie and Freddie). With implied government guarantees of solvency, Fannie and Freddie (and their mortgage backed investment products) looked good to investors.
The "no doc" loan was not a private industry way to make gobs of money, but a government guideline to increase lending to people who otherwise would not qualify.
Capitalism is about companies and individuals balancing risk and reward when doing business. When the government interferes and negates or artificially alters the risk part of the equation, that's excess control. And that caused the current financial storm.
Conan the Grammarian at February 26, 2009 8:50 AM
Do people just believe what they want to believe would be the way things would work -- despite piles of evidence to the contrary?
How else do you explain creationism?
Conan the Grammarian at February 26, 2009 8:53 AM
" ... like, say, teachers? They work for their pay, but it comes from the government"
But it shouldn't.
Pirate Jo at February 26, 2009 8:55 AM
Norman, I would dispute that the bank crisis was caused by a free market out of control. Very much the opposite -- the problem is fully the result of government regulation and the two government-owned entities, which I collectively refer to as Freddy's Fanny, which grossly, hugely, distorted the market. Take away the money and the legal cover that was given to Freddy's Fanny so that they could generate derivatives of the bad loans (so as to disguise the risk), and there is no crisis.
I'm also not certain that Thoreau's line about "governs not at all" was a call for anarchy. In Thoreau's time, people did not automatically think of law enforcement as a function of government. So when Thoreau asked for no government, I don't think he was asking for no law enforcement -- what he was asking for was to not be messed with by government. I oculd be wrong, though.
Norman does touch on a good point with that first post. You need at least a little government not only to maintain a semblence of social order, but to create a society where people have trust in the law -- they know that if they live their lives according to basic moral principles, then they need not fear the law. It's hard for us today to appreciate the difference between small government and anarchy because, from our current 50,000-foot altitude, we can't see it. Our current government is so huge that it renders any other concept invisible.
I'm also with Norman in that I'm troubled by the large percentage of population that exists today that derives benefits (both direct and indirect) from government, without bearing any of its costs. It's one of those things that is hard to talk about because as soon as you bring it up, some smartass says "oh, you want to bring back the poll tax? Racist!", and Godwin's Law kicks in. However, I'm really starting to think that there should be no such thing as a zero income tax bracket -- everyone who makes a non-trivial amount of money should pay at least a little income tax, if only to remind them of their obligations as citizens.
Cousin Dave at February 26, 2009 8:58 AM
Amy Alkon
http://www.advicegoddess.com/archives/2009/02/26/walden_creek.html#comment-1636206">comment from Pirate Jo, teachers? They work for their pay, but it comes from the government" But it shouldn't.
No, it should not. People who have children should pay for their children's schooling. The rest of us should pay for only the children of the very poor, and we need to have steps in place so, for example, 20 percent of Los Angeles (as I read in today's Los Angeles Times) isn't living on welfare.
Amy Alkon at February 26, 2009 9:32 AM
I agree with Bradley without exception. I have nothing but admiration for our vets, and I acknowledge the debt we owe disabled ones. We are where we are because of exceptions. They are all deserving, I'm sure. Yet now, if one believes the fiction that payroll taxes fund the Social Security Trust Fund, fewer than half of us pay for all of the government.
No exceptions, not even for a disabled Medal of Honor winner who volunteers as an EMT. If you fund the government, you have a vote, period. If you live off it, you don't.
Yes, I am against the unconstitutional deal to give DC a vote in Congress.
MarkD at February 26, 2009 9:39 AM
>>Take away the money and the legal cover that was given to Freddy's Fanny so that they could generate derivatives of the bad loans (so as to disguise the risk), and there is no crisis.
Cousin Dave,
I have to dispute your assertion that the risk here was "disguised".
It was more a massive financial game of pass the parcel - with the lovely short-term profits for the tiers of middle men keeping the bad loans in play until the shit hit the fan.
Jody Tresidder at February 26, 2009 9:55 AM
Amy, it's so much easier to not think about caring for yourself, to have no responsibility. That's why these systems keep coming up, time after time, when they always fail horribly. It's a common human weakness.
Our government was pretty great when set up. About the best ever, I'd say. It has taken powers not given it and done them shittily. That's a problem.
momof3 at February 26, 2009 9:57 AM
Proponents of more government always seem to forget that the scales aren't balanced. Bad government can do much more harm than good government can do good.
For an example, look at what Mugabe has done to Zimbabwe. Bread costs a trillion dollars a loaf, & even if you have a trillion-dollar bill you're out of luck because the shelves are bare. And now the country is literally drowning in diarrhea, with thousands & thousands dying of cholera. Bad government is the only reason why the former breadbasket of Africa is in this state.
And the whole world was cheering wildly back when Mugabe took office as the first black President. It would be nice if Obama spent a tenth as much time thinking soberly about the harm big government can do as he does making oh-so-eloquent speeches about all the wonderful things it can do.
Martin at February 26, 2009 10:32 AM
Where is the government's competition?
Open borders. Make the federal government as small as practical, let Massachusetts do one thing and Alabama the opposite, and let people choose with their feet. (Sound familiar?)
Pseudonym at February 26, 2009 10:37 AM
"... teachers? They work for their pay, but it comes from the government" But it shouldn't."
Fair enough. But surely there are some jobs that must be done. Civil servants? Military? They work for the government, and I'm not sure I'd want private armies - they'd become warlords. (There one in Scotland, owned by the Duke of Atholl. A historical anomaly.)
Norman at February 26, 2009 11:14 AM
@JessicaK: "...the Republicans want the government to control everyone's moral decisions..."
Point taken, but I'm not sure the Republicans are the only guilty party in this case. I can understand arguments regarding the GOP's positions on abortion, gay marriage, and other issues. However, the Democrats seem more likely to want to control what we hear on the radio (via the Fairness Doctrine), whom we hire (via quotas), or what we say (e.g., through campus speech codes, although I admit this may have less to do with Democrats than it does with craven college administrators). In any case, all the examples I've listed are moral impositions as well.
old rpm daddy at February 26, 2009 11:32 AM
Sorry Mark but anyone who scarifices themselves to protect the country deserves a say in how its run
lujlp at February 26, 2009 11:52 AM
If the hypothesis were correct, then those countries with the least government control -- whether due to capacity limitations or philosophical disposition -- would be the most successful. In fact, by most objective measures, this is not the case. Most of the world's most successful countries (whether measured by GDP per capita or more balanced indices such as the Human Development Index) are in fact countries with moderate to high government participation in the economy and society. I'm thinking of Northern and Central Europe, the Scandinavian countries, Japan, Singapore, South Korea, Canada, and, yes, the US.
Not to toot our own horn, but a year ago when Canada was trying to attract financial services investment to relocate to the country, we were told that our regulatory system was archaic and far too burdensome. Fast forward two years and we are being hailed as the most responsible and most effective banking regulators on the planet -- and the current healt of our financial services sector is testament to the effectiveness of that approach.
I'm just sayin'.....
scott at February 26, 2009 11:57 AM
Well, easy for Thoreau to say. His cabin was a mile from home, where he took his laundry in between writing essays. "Gee Mom, could you whip a fresh batch of Snickerdoodles? I'm almost done with this treatise on independent living and I could use the sugar."
Gog_Magog_Carpet_Reclaimers at February 26, 2009 11:58 AM
Amy Alkon
http://www.advicegoddess.com/archives/2009/02/26/walden_creek.html#comment-1636230">comment from Gog_Magog_Carpet_ReclaimersWell, on weeks when I'm really insane with the writing, Gregg basically keeps me alive (with a Wednesday food delivery), so who am I to talk?
Amy Alkon at February 26, 2009 12:00 PM
@Scott: "I'm thinking of Northern and Central Europe, the Scandinavian countries, Japan, Singapore, South Korea, Canada, and, yes, the US."
An interesting exercise might be to plot change in GDP against government control of the economy (using, for example, top tax rates as a proxy for control, although one could likely find something else). It might be a good idea to throw some other countries into the mix, too, like Ireland and Russia. I'd hypothesize that governments with the least intrusion probably have higher growth rates. This exercise has probably been done already, but I'm too lazy to look for it.
old rpm daddy at February 26, 2009 12:22 PM
Amy - Do people just believe what they want to believe would be the way things would work -- despite piles of evidence to the contrary?
Yes.
Norman - The current financial storm was caused by lack of control, not excess control. When no control is imposed, people do not behave nobly.
Wrong. The current problems were not caused by a "lack of control", they were created by 1) government interference in the housing market, and 2) extremely loose monetary policy, which only the government (the Fed) controls.
The government interfered in the housing by creating Fanny Mae and Freddy Mac, and then further interferred recently by pushing them to buy up risky mortgages in the name of "affordable housing". Those two "government sponsored entities" were created specifically to interfere in the housing market by lowering interest rates. That was their purpose. Many different government agencies at both the State and Federal levels (and NGOs, some of which used hard ball tactics like picketing the bank CEO's home) pushed lenders to give loans to people who were considered "underserved". These banks, for political reasons, felt the need to make loans that they would not ordinarily have made, and looked for ways to get rid of the added risk by foisting it onto other people; hence securitization of mortgages. Fannie Mae and Freddy Mac were more than willing to purchase and/or insure those mortgages because of the political directives imposed on them by Congress. With the imprimatur of quasi-governmental entities like FM/FM as backing, investors felt it was safe to re-purchase the securitized mortgages. As soon as a lender could make a risky loan and fairly easily resell that loan at a profit, the usual standards of granting loans disappeared. To say that this dynamic was due to a "lack of control" is quite simply wrong. It was the direct result of governmental action.
The secondary reason for the housing bubble was very loose monetary policy. The Fed expanded the money supply at an 8% annual rate from 2000 until 2008 (and it is going balls to the wall now under the assumption that more of what made us sick will make us better). Where that additional money enters the market is just as important as how much enters the market...and the majority of it entered the market via loans from the Fed to banks, banks which make their money via mortgages. You increase the supply of money available to purchase homes and the price of homes will go up. Once the housing market had seen a couple of years of performance that was better than the market, the herd mentality set in and more and more money flowed into the housing market, further elevating housing prices and reinforcing the mindset that housing prices rising at a rate significantly higher than inflation is "normal" and drawing in even more money.
Governmental politicization of mortgages in the name of "affordable housing" and extremely loose monetary policy reinforced each other, increasing the amount of money available with which to buy homes, driving the prices up beyond sustainable levels. Government in action, not governmental inaction, is the primary source of the problem.
MikeMangum at February 26, 2009 12:53 PM
"... plot change in GDP against government control of the economy ..." hell if I'd known you were going to look at evidence I wouldn't have started this rant. :-)
OK, here's some data. I've just done a correlation of tax rate against GDP/capita over 30 countries (Australia
Austria
Belgium
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Japan
Korea, South
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovakia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States). The figures are a bit ropey; the tax rate is the average of Single person without children, and One-earner family with two children, in 2004. The GDP/capita is from 2008. The correlation is 0.172, which in my experience is too small to be significant.
Norman at February 26, 2009 1:31 PM
@Norman: "The correlation is 0.172, which in my experience is too small to be significant."
You're right about that. Well, scratch one hypothesis. If I get the chance, I'll see if there's anything interesting I can dig up.
old rpm daddy at February 26, 2009 1:37 PM
Tax rate is not the way to look at government interference in the economy. Try looking at the economic freedom index and then doing a comparison.
http://info.hktdc.com/econforum/hkcer/hkcer000101.htm
If we arrange all countries according to their economic freedom by quintile and then view other economic characteristics such as per capita income, interesting results emerge. One of the most compelling results of the study is the relationship between economic freedom and prosperity. In 1999, countries that score in the top quintile of the "most economically free" countries had an average per capita GDP of US$ 18,108 (Figure 9) and an average growth rate of 2.27% (Figure 10). As freedom declines, so does the average per capita GDP and average growth rate. The bottom quintile of economically free countries had an average per capita GDP of US$ 1,669 and an average growth rate of -1.32%. If we look at the countries' scatter diagram, it shows that 64% of economic variation amongst countries can be attributed to the level of economic freedom (Figure 11).
Economic freedom correlates so well to economic growth that it is a now assumed to be a given, and the research work is now devoted to how best to measure economic freedom.
http://www.springerlink.com/content/j474882124437342/
Many empirical studies have found a positive relation between economic freedom and growth (see e.g. Barro, 1991; Barro, 1994; Scully and Slottje, 1991; De Vanssay and Spindler, 1994; Torstensson, 1994). Some of these studies have used one or two indicators of economic freedom, such as the black market premium on foreign exchange, while others have used different economic freedom indices. Although different indices show similar results, and even though there can be a high correlation between individual measures and an overall index, the choice of measure is important. A single measure does not fully reflect the economic environment and a highly aggregated index makes it difficult to draw policy conclusions. It is therefore important to investigate which components of the economic freedom indices that are important for growth and the direction of these effects.
MikeMangum at February 26, 2009 2:18 PM
I agree that tax rate isn't the variable you want to measure against, at least not if your goal is to test Thoreau's hypothesis (which I think was more geared toward the general intrusion of govt into the lives of individuals, not the fiscal burden of taxation).
At any rate, to be free as an individual requires more than just an absence of govt. Take Somalia, which has been effectively wihout a govt for the past decade, and you will see a highly unsuccessful country by any economic or social indicator. But the absence of govt has not translated into freedom for the individual because of the lack of personal and property security, the absence of a secure and predictable environment for investment or economic activity (or walking about), and the dearth of recourse to objective dispute settlement. You need some state intervention simply to create the kind of freedom we need as individuals to grow and prosper.
I know that some will say - okay, the job of the govt is to provide for the security of the person and the state and that's all - but I'm trying to be illustrative here and not exhaustive. And we could all point to examples that suggest otherwise.
For instance, Scandinavians have relatively interventionist governments and a very high standard of living, which is an outcome that would not be predicted on the basis of Thoreau's thesis.
Interesting topic though.
scott at February 27, 2009 6:51 AM
scott - For instance, Scandinavians have relatively interventionist governments and a very high standard of living, which is an outcome that would not be predicted on the basis of Thoreau's thesis.
The scandinavian countries aren't nearly as dirigiste as they used to be. Look at their rankings on the economic freedom index. Of course, when people talk about how well the "Scandinavian countries" are doing economically, what they really mean is Norway, which has a 45% higher GDP per capita than Sweden and Denmark. That difference is largely due to oil.
Norway is the 4th largest exporter of oil, and oil makes up over 25% of Norway's GDP. It has to fight very hard to stave off the Dutch Disease, which it has done moderately well via funds that keep foreign reserves out of the country, but Norway still has been impacted by currency appreciation. That currency appreciation has caused Norway to have one of the world's highest costs of living. High labor costs, partly due to currency appreciation and partly due to labor laws, greatly reduce the competitiveness of non-petroleum industries. This makes Norway very reliant on oil exports. If those exports fall, Norway's standard of living will drop dramatically.
It's fairly easy to have solid economic growth when you are sitting on a lake of oil.
MikeMangum at February 27, 2009 10:08 AM
Thanks Mike,
We're well acquainted with Dutch Disease here in Canada given the recent oil sands boom (and impending bust...?). I actually don't mean just Norway, notwithstanding their advantageous situation, since the standard of living in Sweden, Denmark and Iceland (stay tuned re. the latter) are still all very high according to the HDI (and again, that's probably a more inclusive indication than GDP/capita of the value of government to the people governed).
In fact, Iceland, Norway and Canada occupy the top three spots on the 2008 HDI, with Sweden at 7th and Denmark at 13th. The US is 15th. The limited capacity of govt to impose itself on (or provide for) the citizens of the Central African Republic and Sierra Leone contribute to those countries occupying the two bottom slots on the list.
I'm all for libertarianism in areas of personal responsibility (like what you put in your body, what you do with your body, and what you teach your kids) but I don't agree with shrinking govt to microscopic size just so people can pay less in taxes when there are crucial services to provide (like infrastructure, phytosanitary regulations, police services, air traffic control, water treatment, sewage disposal, banking regulations, etc etc etc).
Now....whether the money they have is being spent wisely is another question altogether...
scott at February 27, 2009 12:24 PM
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