The truth of the matter is that government is an organization that does not create wealth. I’m not saying that’s a bad thing: the same is true of all law enforcement, including the military, the judiciary, etc.. My point is that none of those organizations performs the role of creating wealth. A government primarily stops people from doing things…preferably, only from doing bad things. Specifically, a government, when it is doing its job well, prevents anyone from taking your life, your liberty, or your property without your consent.

In truth, government is capable only of decreasing the number of jobs that people create: it is capable of job destruction. Government can destroy jobs in either of two ways: using its influence when it shouldn’t, or failing to use its influence when it should. In other words: governmental errors and omissions destroy jobs.

Government errors include (but are not necessarily limited to):

• preventing some people from competing with others (e.g., monopolies, licences, professional guilds, closed-shop unions, limits on school enrolments)
• taking from producers some of the wealth they create (e.g., taxes and fees)
• forcing people to follow irrational rules concerning the production or delivery of goods/services (e.g., regulations based on the precautionary principle)

A purely hypothetical example: Imagine there is a shortage of electricity, such that there is a market for more power generation (that is not currently the case in Ontario, but it will be once our current facilities wear out). The government outlaws any form of power generation that uses coal as fuel, because coal is unpopular and unpopular things prevent elections and re-elections. The government taxes the population, and gives one company the tax revenues so that the company can afford to build trendy wind turbines that cannot produce electricity at a profit. The government also passes laws requiring people to buy wind-generated electricity at very high (higher than market) prices.

Had those taxes not been collected, and had the government not arranged for wind turbines to be built, and had the law not prohibited people from building, for example, a coal gasification plant (which has exceptionally clean exhaust), then – if the coal gasification plant could have sold inexpensive electricity at a profit the jobs that were created in building wind turbines would instead be jobs created in building and operating a coal gasification plant. In other words, the government did not, by paying for wind turbines, create jobs that would not otherwise have been created.

Had the government not erroneously backed wind and shunned competitors, people would have been able to spend less on electricity, and more on goods and services. With the government’s wind project, fewer goods and services will be purchased. Fewer purchases means there will be less demand for employees to make those goods and provide those services. There will be fewer jobs in the provision of those goods and services.

Imagine, also, that a school teacher gets on the radio and says children at her school arrive happy, and leave feeling sick, or tired, or blue. Not willing to think that maybe that has something to do with how the children are being taught, she assumes that the school’s wireless router is emitting radiation that is making the children ill (and it’s also making bored little Jimmy put gum in Sally’s hair). The public are frightened. No, it’s not that there is any science to prove that wireless routers turn happy healthy children into sickened, mischievous people. It’s that “we just don’t know that the radiation is not causing children to get sick and to misbehave”. In the absence of knowledge, the government passes workplace legislation requiring the turbine company to provide all of their workers with special $2,000 suits that prevent wifi radiation from hitting their bodies (there’s no demand for such suits in the market, so the government subsidizes a company to make them). There are 200 employees, so that is going to cost the turbine company a cool $400,000.00. The company will now have to raise its prices (such that energy consumers will have less left-over money to buy other goods/services), or pay its workers less (leaving those employees with less money to buy goods/services), or lay off some workers. All three options involve a decrease in employment.

The law gives unions a monopoly on the provision of labour. The turbine workers form a union and go on strike for higher wages. The turbine company is prohibited, by law, from hiring non-union employees who are willing to do the work for less. While on strike, the worker’s aren’t being paid (in effect, they lack a job). The strike, and the law against hiring non-union employees, in effect means temporarily job losses and a temporary bar against employment. The company agrees to pay more. It then either hikes electricity prices, or reduces its work force. See above for how that decreases other employment in the provision of other goods/services.

I could go on and on with the ramifications, but you get the picture. Government cannot create jobs. At best, its errors in the use of government force can merely have the effect of picking winners and losers. At worst, it can destroy jobs.

Government omissions include (but are not necessarily limited to):

• failing to police violations of individual’s property rights (e.g., failing to prevent/punish trespass on land, copyright violations, theft, vandalism, etc).
• failing to defend individuals’ liberty (e.g., failing to clear the way for vehicles or individuals who are trying to enter a workplace to work, when they are being occluded by protestors; imposing laws that punish people for engaging in the peaceful trade of goods or services even when such trade, goods, or services do not involve the violation of a person’s life, liberty, or property)

A purely hypothetical example: A band of thugs begin terrorizing a suburb. They burn down or vandalize houses. At gunpoint, they force people in the neighbourhood to pay “tolls” to drive out of their driveways and onto the road. Back at thug headquarters, they make knock-offs of popular blu-ray movie disks, which they then sell at 20% of the cost of the real thing. They do mandatory “pat-downs” on women who venture out of their houses. The police do nothing about any of this.

The houses in the neighbourhood become worthless: nobody can sell them, so there is no need for moving trucks, classified ads, real estate agents, etc.. The population is afraid to go to and from work: after a few late arrivals or no-shows, they lose their jobs.

The thugs become quite successful at their knock-off business. The movie company cannot make any money on its movie because nobody is buying its disks. The movie company goes out of business. The artists have no work. The *legitimate* disc manufacturer lays everyone off and eventually has to close. The truckers who took those disks to video stores are no longer needed. The video stores – unable to get people to buy their disks at 500% of the cost of that charged by the thugs – lay everyone off and likewise go out of business. All of those people – the artists, the disc manufacturers, the truckers, the video store employees – have no money with which to buy goods or services. Other goods and services providers sell less, make less…and hire less.

The Answer: Govern Correctly

The government can stop causing job losses by governing correctly. Specifically, it can lower taxes, it can eliminate monopolies and special advantages that it grants to some players and not to others. It can also do a better job of recognizing and protect property rights.

Some of these improvements to governance can be seen in Freedom Party of Ontario’s 2011 election platform. As examples:

• The government can lower taxes (e.g., the health premium, the beer tax, the gasoline tax) so that people have more money to spend on jobs-creating goods and services;
• The government can make price and free market competition – rather than fighting global warming with subsidies to business and Green Energy Act fiascos – top priority in the provision of clean electricity, so that people have more money to spend on jobs-creating goods and services;
• The government can eliminate subsidies and monopolies (e.g., the LCBO/Beer Store monopoly) so that prices can come down, so that jobs in competing businesses can be created, and so that people can have more money to spend on jobs-creating goods and services;
• The government can do a better job of defending every individual’s property rights (e.g., by refusing to allow international political events like the G20 from being held in places like downtown Toronto, where the inevitable result will be vandalism (i.e., the violation of property rights, which devalues property), the shutting down of businesses (which negatively impacts employment, and traffic congestion (which, similarly, has a negative impact on employment).

If you want to say that such improvements to governance “creates jobs”, that’s fine for electoral purposes, but it is technically incorrect, and an inversion of the truth. As difficult as it may be for people to understand or believe, the truth is that such improvements are simply ways for the government to stop killing jobs.

Paul McKeever is the leader of the Freedom Party of Ontario, an officially registered political party in the province of Ontario, Canada.

For two libertarian champions of free markets and limited government, this legacy has the ring of a world-historic irony.

In response, I submitted the following letter to the editor of the Financial Post. From what I can tell, it was not published by that paper.

Dear Editor:

Of all of the things undermining our prospects for a growing, capitalist economy, perhaps the most damaging is the libertarian practice of passing-off Milton Friedman’s monetarism as a capitalist alternative to Keynesianism. Monetarism and Keynesianism both aim to avoid recessions and depressions. The concern of both is not the individual’s pursuit of his own happiness, but the survival of all, considered collectively. Both propose the seizure of some wealth from those who produce it: Keynes proposed that a percentage of the money supply be seized via taxation; Friedman proposed that a percentage of the money supply be seized by having private banks increase the number of dollars of private credit comprising the money supply.

The essence of capitalism is ensuring that no person obtains what another has produced without the producer’s consent. The essence of libertarianism being nothing more than opposition to government, it is not “ironic” but inevitable that libertarians would reject taxation (being an activity carried out only by governments) yet embrace private-sector expansion of the money supply. Thus, it matters little whether Federal Reserve Chair Ben Bernanke is a Keynesian or a libertarian Friedmanite: either way, he is essentially anti-capitalist, and that which is anti-capitalist – hence anti-producer – will always prove recessionary in the end.

Paul McKeever, B.Sc.(Hons), M.A., LL.B.
Leader, Freedom Party of Ontario

Take any Base money supply amount.

With FRBanking any increase in the money supply, and therefrom all money in circulation, is lent into existence, securing a loan amount (A) with a contract and [Promissory Note].

Between the loan contract and [Promissory Note] is an obligation to repay the interest on that loan along with the principal (A + B).

If ALL money in a debt-money system comes into existence as a debt, and if all loans require the repayment of a sum greater then the principal amount, then from where does the interest payment money come into existence?

This is partly covered in the Zeitgeist Addendum video, Part 1 [Note from PM: actually, the reader is referring to Part 2 of that video, at this point in the video].

Steven Lachance identifies the unpayable interest as the achilles heel of the debt money system, if you check it out here.

http://www.financialsense.com/fsu/editorials/2005/1212b.html

[...]

Your thoughts, please, if you are still posting on this subject?

The reader is referring to one of the oldest, yet most persistent, myths in the history of modern banking: what I’ll here call the “Interest Myth”. Essentially, as with all persistent myths, the Interest Myth consists of a mixture of facts and falsehood. The facts are:

1. All money is debt issued by banks (whether currency issued by a central bank, or credit issued by a chartered private bank).

2. Banks charge interest on every dollar of debt they issue.

3. Therefore, if the money supply (M) is equal only to the principal that must be repaid (P), such that M=P, then – at all times – there is not enough money in existence to repay all of the interest (I) in addition to all of the principal. In other words, at any point in time, M < P+I .

The falsehoods are:

4. Therefore, if P+I is to be repaid, additional money, equal to the amount of interest owing, has to be created by the banks. In other words, M has to be increased by at least as much as I.

5. However, because all money is debt, when you increase the money supply (M), you also increase the principal that must be repaid (P).

6. And, because banks charge interest on all principal, interest is also owing on the additional principal.

7. Therefore, the use of debt as money results in a situation in which the principal can never be repaid.

Upon this mix of fact and falsehood, any number of conspiracy theories has been founded for decades. What they have in common is the idea that: there has been a conspiracy, by bankers, to empower themselves – financially and politically – by making us all dependent upon a money system that turns us into indentured servants.

Who are the conspirators? That depends upon who is promoting the myth and who is their intended victim. The usual suspects are:

• Christians blaming “Mammon” (a devil) and warning that the world is doomed if we do not start praying the Rosary on a daily basis.
• “New World Order” conspiracy theorists, some of whom target one or more of the following: the Trilateral Commission, The Council on Foreign Relations, the Bilderbergers, Jews, Freemasons, “the Rothschilds”, “the Rockefellers”, Capitalists, Communists, (and on and on), or any mixture of any of the above.
• Other people who want something for nothing and believe, after reading about Clifford Hugh Douglas‘ “Social Credit” monetary system, that everyone could have something for nothing if we just adopted the Social Credit system (or one of its variants). See, as an example, the history of William “Bible Bill” Aberhart and the “Social Credit” party of Alberta (interesting note: the first student of Bible Bill’s bible school was Ernest Manning, who later became the Premier of Alberta. His son, Preston Manning, formed the Reform Party of Canada, which eventually morphed into the current, governing, Conservative Party of Canada).

A classic example of the use of the Interest Myth to found a conspiracy theory is a little comic book titled “The Money Myth Exploded” the story for which was written by Louis Even, one of the founders of the Pilgrims of St. Michael. The story is simple. A bunch of productive people are stranded on an island with no medium of exchange. A banker among them suggests that they borrow his paper money and repay it with interest. A while later, they figure out that the banker has tricked them by getting them involved in a collectively un-repayable debt. The comic book lays out the myth, roughly as described in 1-7, above.

I refer to “The Money Myth Exploded” not because I think it is a worthy read, but because the story actually demonstrates why the Interest Myth is a myth. There are two main problems with the Interest Myth, and each is illustrated by the facts of the story.

First, in the story, the banker does not participate in the economy except to lend money and to expect its repayment with interest; he is not trading. He buys nothing and consumes nothing. The key line is this: “And it’s money you’re asking for, not our products.” The banker might just as well be visiting from Saturn when he drops of the money, disappearing, and visiting again when he comes to collect it all plus interest. But, of course, that’s not how things work in the real world. Bankers are human beings, just like everyone else: they need food, shelter, clothing etc.. They don’t just lend out money: they trade the interest they receive for the goods and services offered by the very people to whom they lend money, and those people use their profits to pay others for goods and services (which others, similarly, profit), to pay interest to the banker, and to pay down principal they owe to the banker, over time. Bankers lend money to grocers, and clothing retailers…but they also buy groceries and clothing with the interest that they earn on the dollars they loan out. They use some of the interest to pay employees – - receptionists, secretaries, tellers, cleaners, security, etc. – who buy groceries and clothes. They pay some of the interest to power companies to light and cool the bank; to natural gas companies to heat the bank…and those power and gas companies pay employees…who buy groceries, and clothing, and gas, and electricity, etc. Yet, in the story, the banker somehow – without producing anything all year long, and without obtaining anything other than a shelter from his borrowers – eats, stays warm, gets from one place to another etc.

Second, in the story, the banker is expected to demand the simultaneous repayment of the entire money supply at some point. That is never the case in a real economy. People generally pay in installments of interest and principle but, more importantly, they do not repay all of their loans simultaneously. As some people pay-down principal, others take on debt. Old debt (i.e., money) is cancelled by way of repayment, as new debt (i.e., money) is issued by the banks to other borrowers. Note that, if all of the money were repaid: there would be no more money, because debt ceases to exist when it is repaid. Nobody, not even the banker, would have money if the banker called in all of his loans. Therefore, there would be no medium of exchange with which to satisfy/pay outstanding debts (such as interest, rent, etc.).

The entire story is silly. However, that which is wrong about the story is essentially that which is wrong about the Interest Myth itself. The Interest Myth rests on the implicit assumption that banks are not trading in the economy; that they exist and survive independently of the economy.

Now, all of that said, I know for a fact that the essential Interest Myth argument – that “there can never be enough money to repay the principal plus the interest when the money supply is debt” – can be a compelling one when it is first encountered. The argument is so easy to understand, yet so offensive, that ‘discovering’ it leaves one ready to believe that those who set up the debt-based money system did it precisely because “the principal plus the interest debt can never be repaid”, and because they wanted to enslave a nation. For that reason, I thought it might be helpful to my readers – including the reader who asked the question at the beginning of this post – to “explode” the Interest Myth, as follows.

On February 20, 2001, on Jon Chevreau’s now defunct wealthyboomer.com discussion forum, I was challenged to demonstrate how it would be possible for a person to borrow money and repay both the principal and the interest without any additional money being created. I gave a number of examples. The following excerpt includes just one:

Paul, if you wish please repost your example which you say proves that X can pay X+i.

Here is just one of the several examples I’ve posted, each of which demonstrate that $X+interest can be paid with $X. In this example, repayments of principal are not destroyed because your thesis is not that the elimination or reduction of the money supply makes it impossible to pay interest (that would be an easily supported thesis). Rather, your thesis is that $X+interest cannot be paid with $X, so we must always leave $X in supply to determine whether or not you are correct. Here we go:

Step 1: W = $0; M = $0; B = $0.

Because there is no money, there is no price system. No snow is expected for 10 weeks, so W (who shovels snow and cuts grass for a living) has nothing to exchange for M’s housekeeping services (one service per week) or B’s bread (one loaf per week).

Let’s see if W can repay $20 principal plus $2 interest in a system where all of the money supply – $20 – is issued by B to W as debt. Let’s make the following reasonable assumption: B doesn’t ask for all of the money to be paid at the end of one year. Instead, he asks to be paid in installments. Usually, they are monthly, but for ease of computation we’ll assume that B wants weekly installments of $22/52. Let’s again add-in person M.

Step 2: W=$20, M=$0, B=$0

Step 3: For 10 weeks after borrowing money from B, W does no work but buys bread ($0.50 per week) and maid services ($0.50 per week) for 10 weeks.

At the end of 10 weeks:

W=0+20-5-5-(10*22/52=4.23)= $5.77

M=0+5+5-5= $5

B=20-20+5+5+(10*22/52=4.23)-5= $9.23

Step 4:

Over the next 42 weeks, the banker will receive $42 for his bread. He will also receive $17.77 from W as repayment of principle plus interest. W has $5.77 on hand. So both parties have to raise their prices enough that W can pay the remaining $12.00: each party has to raise his/her price by about $0.30. So, W and M will now charge $0.80 each per week for their respective services.

Step 5: At the end of the 52nd week, things look like this:

W=$5.77+(42*2*$0.80=$67.20)-$17.77-33.60-21=$0.60

M=$5+33.60+33.60-(42*0.80=33.60)-21=$17.60

B=$9.23+21+21+17.77-(2*33.60=67.20)=$1.80

If my math is correct (and I’m quite willing to accept demonstrated proof that it is not), W has repaid both the $20 principle and the $2 interest on the $20 debt, and no extra money had to be created.

Now, you may argue that, because B is putting repayments of principal back into circulation without loaning them to anyone, the supply of debt money in my example is being converted into non-debt money, and that is correct. But it is entirely irrelevant. Were the repayments of principal simply re-loaned out to other persons by B, what was true for W (possibly at a later date) would be true for everyone else who rented notes from B: all, over time (and at differing times) would eventually be able to repay both their principal plus interest without B increasing the money supply.

Let the inevitable refrain of “but what you fail to realize, Mr. McKeever” begin…as it always has with this topic.

Just watched your carbon tax video – you completely botched your economics. You assume that the only thing you can spend post-tax money on is gas, which is blatantly untrue. Now assume two goods – gas and beer (and, to keep them separate, assume this is beer brewed locally from hops and barley grown locally – no gas, all walking).

Before the carbon tax, the average person spends 1 “dime” on gas and 1 on beer, and that half the people prefer each good when forced to choose. After the tax, the gas-preferrers will spend 3 “dimes” on gas and get 1 unit of it, paying 4 in tax, and the beer-preferrers will spend 3 dimes on beer and pay 2 in tax. The government still gets its 3 per person, but gas consumption has been cut in half, because when gas is more expensive people will shift their consumption to beer.

Now, I’m not defending Dion’s plan – it is quite explicitly a tax hike, with $5B or so in new spending. But there’s nothing wrong with a gas tax in theory.

I responded as follows:

Alex, my economics are not botched. You just think I was talking about something I was not talking about: the idea that Dion’s plan is “revenue neutral”.

My point, in the video, was this: Dion is falsely implying – with every “it’s simple, decrease income taxes, shift to pollution” – that his plan will not change any individual’s total tax burden. That’s false. It will increase the tax burden of those who consume fuel, and decrease the tax burden of those who do not. That is the point of my video: to ensure that people understand that, if the Dion tax does not change ones own tax burden, then the tax does not change behaviour (i.e., it does not decrease the consumption of fossil fuels); that if it does discourage fuel consumption, it does so because it is false that it would not increase your own tax burden.

Your example speaks to a different point: the idea that the Dion plan would not change government revenues; that it would be “revenue neutral”. Voter X doesn’t really give a damn about how much money the government has. He cares, instead, about how much money the government is taking from him in particular. Your example shifts the tax burden from beer-drinker Y to gas consumer X, and concludes: See? No harm, no foul.

I say: tell that to X.

I refuse to accept the notion that if one foot is in fire, and the other in ice, Leviathan is comfortably warm. It’s a collectivist notion, and an entirely evil one.

Finally: When your car runs on beer, call me.

[Elementary Teachers' Federation of Ontario (ETFO) president David Clegg] and his negotiators are refusing to sit down with Ontario Education officials — despite the generous salary offer made to ETFO members — until Ontario taxpayers cough up another $900-million per year so elementary schools can put more educators on the payroll (who, not coincidentally, would be additional members of the ETFO).

It concludes:

Pay teachers $90,000 a year. Pay them more if that’s what it takes to recruit good candidates. But pay these top salaries only to the top teachers. The abilities of educators vary. So should their paycheques.

Yes, the employer of a teacher should consider the quality of the teaching services it is buying when deciding how much to pay for said services. However, merit per se gives one no objective means of determining the correct salary for a teacher. It does not flow, from that fact that one is the best toilet scrubber or brain surgeon in Ontario, that ones correct salary is $90,000. Nor does it follow that the correct salary for Ontario’s best teachers is $90,000.

Any person’s services are worth exactly what a consumer is willing to pay for them: not a penny less or more. The teacher salaries problem is rooted in the fact that neither the providers of government-funded education (teachers) nor its consumers (most parents) are involved in determining what services will be provided in government-funded schools, how good those services will be, or what price will be paid for them. If we want all teachers to be paid what they are worth, we must eliminate education taxes and government-funded education; make dealing with unions optional for all buyers and sellers of educational services; and give parents the power to decide which teachers and schools get some of their hard-earned money.

Yoshida says that first of the two allegedly flawed approaches is a libertarianism which advocates liberty without actually caring whether or not it is achieved. He is most certainly correct to suggest that there are many self-styled “libertarians” who like to talk about principles, integrity and freedom only to make themselves feel like lonely geniuses, but who believe a free society to be impossible. It is that misguided pessimism which explains why you can rarely find a “libertarian” willing to help out at election time. But, so defined, such lazy, excuse-making, libertarian paralysis is not an approach to the achievement of anything at all. Yoshida is far too generous in giving such despondency the status of an “approach” to “construct liberty”*, and his mention of such libertarianism adds nothing to his argument. Accordingly, I will add nothing further in respect of the first “approach”.

Yoshida labels his main target – the so-called second approach – “libertarian Bolshevism”: a movement of fellows who are “…to regular supporters of liberty what Communists are to Social Democrats – extreme in method, rhetoric, and ideal and, ultimately, harmful to the overall cause”. He offers up, as the alleged libertarian Bolshevik’s approach, the approach of the heroes and heroines in author/philosopher Ayn Rand’s “Atlas Shrugged”, which he describes as follows:

In Rand’s book a libertarian society is created when all of the great minds of the world voluntarily withdraw their services and then, following the inevitable collapse of civilization that follows, take over to run things. The society envisioned by Rand in the final pages of Atlas Shrugged could only be a dictatorship and, given the descriptions of all that preceded it, probably a brutally oppressive one at that.

Responding to commenters, he later makes more explicit his connection of the story of heroes in “Atlas Shrugged” to Bolshevism:

Re-read Atlas Shrugged and consider the implications of the last chapter. [Rand’s] small cadre, like the Bolsheviks, wins through the total collapse of society and afterwards could only rule in the fashion described (the men of the minds ruling by their own will alone) through an absolute dictatorship…what a Randian society…entails is a form of totalitarianism – a boot stamping on the human face forever that happens to be marked ‘Liberty’

Chambers 101: The Fine Art of Straw-Manning, Smearing, and Defaming

At least three things need to be said about Yoshida’s description and use of Atlas Shrugged and of Ayn Rand’s philosophy, Objectivism. Obvious things first. “Bolshevik” is a term that refers not to a “small cadre”, but to “the majority” of a collectivist movement in Lenin’s Russia. Yoshida’s use of the term in conjunction with Rand, the arch anti-collectivist who escaped Russia (where her family was expropriated) to make her home in the freest country in the world, is utterly inapt and offensive. His is a shameful attempt to imply hypocrisy on Rand’s part, and it is a smear of the sort made routinely by society’s pathetic little liars on the left. That is not entirely surprising, however, given that, in response to comments to his article, Yoshida has explained:

My interpretation of [Atlas Shrugged] has a long history, going as far back as Whitaker Chambers who wrote that, from every page of the book a voice could be heard commanding, out of necessity, “you, to a gas chamber – go!”.

Either through ignorance or manipulation, Yoshida neglects to mention that Whitaker Chambers’ review of Atlas Shrugged was, famously, even more misrepresentative of the book’s content and meaning than Yoshida’s. It has been argued, in recent years, that Chambers’ own review is evidence that Chambers did not even read “Atlas Shrugged”. Yoshida neglects to mention that Chambers had himself been a communist spy working with Russia and, such being the case, he apparently considered Rand’s untainted defence of capitalism and the pursuit of happiness something he needed to combat. He neglects to mention that Chambers was writing his “Atlas Shrugged” book review for William F. Buckley’s National Review, and that Buckley was, throughout his life, trying to reconstitute and maintain conservativism in the USA in such a way as to exclude any person or group who had integrity; any person or group who did not accept the notion that everything – including the facts of reality and ethics – can be the subject of a compromise if some sort of gain can be achieved, or loss avoided, in the immediate term. National Review has re-printed the article a number of times (in 1990, 1999, and 2005) since its initial publication decades ago (1957), precisely for the purpose of trying to keep conservativism a short-sighted, pro-mystical, anti-individualist, pro-central-planning, non-Objectivist movement. The article was a smear designed to influence the nature and course of conservativism in the USA and, if Yoshida does not know it, he has not done the tiniest bit of research into the sources from which he chooses to “learn” about Ayn Rand’s philosophy and works.

Second, there is nothing about Atlas Shrugged which could lead any rational person to conclude that the heroes in “Atlas Shrugged” intended or would have to “rule” society as dictators. Quite the opposite is true. In Atlas Shrugged, the heroes do not attempt to win their freedom by means of coercive physical force: they win it passively, by refusing to produce that which cannot be produced without rational thought. The heroes refuse to think and produce for the rest of society. A dictatorial government attempts to use laws, threats and coercive physical force (including torture) to require the rational, productive people in society to continue thinking and producing. Toward the end of the book, the government straps the book’s hero to a torture machine in an effort to force him to agree to rule society:

“Get this straight,” said Dr. Ferris, addressing him for the first time.

“We want you to take full power over the economy of the country. We want you to become a dictator. We want you to rule. Understand?

We want you to give orders and to figure out the right orders to give.

What we want, we mean to get. Speeches, logic, arguments or passive obedience won’t save you now. We want ideas-or else. We won’t let you out of here until you tell us the exact measures you’ll take to save our system. Then we’ll have you tell it to the country over the radio.”

He raised his wrist, displaying a stop-watch. “I’ll give you thirty seconds to decide whether you want to start talking right now. If not, then we’ll start. Do you understand?”

Galt was looking straight at them, his face expressionless, as if he understood too much. He did not answer.

[...]

“Number three,” said Ferris, raising a finger in signal.

The mechanic pressed a button under one of the dials. A long shudder ran through Galt’s body; his left arm shook in jerking spasms, convulsed by the electric current that circled between his wrist and shoulder. His head fell back, his eyes closed, his lips drawn tight. He made no sound.

When the mechanic lifted his finger off the button, Galt’s arm stopped shaking. He did not move.

The dictatorial government’s attempt to make Rand’s hero assume the role of dictator fails because no rational person would want the job, and because every individual’s mind is sovereign: no amount or type of force can cause someone to think if they choose not to do so. In Atlas Shrugged, the dictatorial government – employing various taxes, wealth redistribution schemes, and outright slavery – finds its coercive efforts powerless to cause the novel’s heroes to produce anything. Coercion being no replacement for rational thought, the dictatorial government is powerless to save the economy, and it falls as the lights go out in New York City. In the last chapter of Atlas Shrugged, Rand’s heroes and heroines return from their hideaway in Galt’s Gulch because the rest of society has – in their absence – learned that survival and happiness depend not upon government’s laws, threats and guns, but upon each person’s choice to produce and voluntarily to trade values by thinking and acting rationally. Contrary to what Yoshida says, in the last chapter of Atlas Shrugged, society has finally rejected totalitarianism and is ready voluntarily to embrace a system in which government and economics do not mix. For Yoshida to use “Atlas Shrugged” as a proof that Rand’s ideal society is one of necessity governed by totalitarian government is evidence either of his failure to have read and understood “Atlas Shrugged”, or of intellectual dishonesty in the Chambers tradition.

Third, Atlas Shrugged was a novel. The purpose of the novel was to portray the ideal man in a way that explained to the reader Rand’s metaphysics, epistemology, ethics, politics and esthetics. It was not a proposal for how to achieve freedom in an unfree world. Ayn Rand did write about that subject explicitly in her non-fiction and she did not, in her non-fiction, advocate a repeat of John Galt’s plan. Nor have I ever heard any Objectivist or libertarian of note suggest that the path to freedom is a repeat of what the character John Galt did in Atlas Shrugged. Yoshida is straw-manning both Objectivists and libertarians.

“Man of Integrity” Does Not Imply “Revolutionary Dictator”

Having misrepresented Atlas Shrugged and its implications, Yoshida implicitly argues that an Objectivist approach for the achievement of a freer society:

…requires such a wrenching change – a jump from Tuesday to Friday – that it could never be achieved by any means compatible with freedom.

[...]

The Libertarian Bolshevik, on the other hand, doesn’t worry about [various problems associated with various proposals to eliminate oppressive laws] because they simply intend to sweep everything aside at once, using the magic which can only be accompanied by dictatorship.

In response, the Western Standard’s Peter Jaworski comments that:

I like to think of liberty as a “guiding star” of sorts. We ought, as best we can, to move in that direction, even if we already know that we can only get so far.

I have condemned Jaworski’s advocacy of libertarianism elsewhere, but he is more or less correct in this part of his response to Yoshida. As an Objectivist, as a proponent of freedom, and as leader of the pro-reason, pro-freedom Freedom Party of Ontario, I consider freedom – i.e., control over ones own life, actions, and property – a guiding star (one logically necessitated by the facts of reality, including the nature of man). For that reason, in 2005, I designed logos for Freedom Party International (see explanation and description here: http://www.freedomparty.org/about/about.the.logo.htm) and for the Freedom Party of Ontario (see explanation and description here: http://www.freedomparty.on.ca/about/about.the.logo.on.screen.pdf), each of which features Polaris in the asterism Ursa Minor (Polaris is the “north star” or “pole star” by which sailors, for centuries, determined their latitude and orientation). That year, I also wrote a forward to Freedom Party of Ontario’s party policies, in which I explained that the party’s policies:

“…do not and are not intended to represent an exhaustive or ultimate set of policy implications resulting from the party’s founding principle: they do not describe a final destination. Rather, they set out ports of call along the way to a freer, more personally responsible Ontario society. As such, they allow Freedom Party’s leadership to determine the right direction for the governance of Ontario, and to steer accordingly.

Nor are these policies exhaustive. Ethics, not law, is the foundation of political freedom. Laws designed to protect individual freedom are a necessary, but not sufficient, condition of individual freedom and personal responsibility. Changes in governance do tend to influence the dominant code of ethics, though law’s influence is limited, especially where the law is not respected. And, because a change in ethics takes place only within the mind of an individual, change in the dominant ethical code of society inevitably is gradual. Freedom Party of Ontario, being a political party, must be satisfied with its role: to attempt the restoration of the necessary legal and political framework for an ethical, hence free, society. In fulfilling that role, Freedom Party must be cognizant of the fact that pro-freedom changes to the law are likely to be transient if they are made so quickly that ethics has no chance to catch up. The policies that follow have been chosen in light of the fact that just as the erosion of freedom has been gradual, so will the restoration of freedom take time, patience, ethical growth and, with respect to changes in governance, gradual steps.

Although these policies specify ports of call, they do not specify which ports of call should be approached first, how quickly they should be approached, or what course should be charted around obstacles to their approach. Such decisions must be made in light of current events, and with wisdom concerning what is politically feasible.

In short, it is utterly false for Yoshida to state or imply that those who – like myself – refuse to compromise their ethical commitments are, of necessity, people who would resort to coercion in a misguided effort to achieve freedom, or people who propose overnight, revolutionary change. A gradual restoration of freedom does not require one to compromise ones commitment to freedom, ones rational code of right and wrong, ones commitment to reason, or ones commitment to the facts of reality. To the contrary, freedom cannot be restored if such compromises are made.

Freedom versus Coercion, Not via Coercion

Perhaps most outrageous of all are Yoshida’s admissions, made in rebuttal to commenters:

…I’m not absolutely opposed to dictatorship, certainly not in the Roman fashion, where it is necessary. I’m a life-long fan of, for example, Augusto Pinochet. But what a Randian society…entails is a form of totalitarianism – a boot stamping on the human face forever that happens to be marked “Liberty”.

and that:

Moving towards liberty is going to require time and some degree of coercion – I think that we need to be realistic about that. No genuinely democratic government, for example, is ever going to be able to do away with Medicare.

I do not think it is unfair, or misrepresentative, to sum up these two statements as follows: Yoshida does not reject totalitarianism per se. He is opposed to “genuinely democratic government”, and believes that freedom can be achieved through – and only through – coercion. He nonetheless expects the reader to believe his claim that he loves freedom, to take his advice when it comes to the matter of how a freer society should be achieved, and to believe that his so-called “libertarian Bolsheviks” are the people who undermine the efforts of his Reactionary Libertarian ilk to achieve a freer society.

I submit that freedom means control over ones own life, liberty and property; it requires physical force to be used only to defend or restore that control; it requires the absence of coercion. Totalitarianism refers to a system in which everyone’s life, liberty and property can be or is controlled by the state; in which force is used, by the state, to obtain that control; in which government has unlimited jurisdiction to coerce the governed. Though I do not think “totalitarian” is the technically correct descriptor for an autocratic monarch whose main aim is to reduce the scope of government’s involvement in the economy, someone who does not oppose totalitarianism is not truly a lover of freedom. The opinion of such a person on matters of how to achieve a freer society is not merely worthless. It is poison that, in the end, serves only those who abhor freedom.

*NOTE: I reject the notion that liberty is something that one constructs, but that is an issue for another article.

For the politically ambitious son of the Charter‘s most noteworthy father not to have spent more time learning about and understanding the Charter than, apparently, he has would be unforgivable…were it not for the fact that a bowl of Jello pudding bearing the Trudeau name would probably win the Liberal Party leadership – possibly even the Prime Minister’s chair – quite handily.

The whole thing is silly, of course. A silly response was, therefore, warranted…but one citing truths stranger than fiction. I provided the following response:

Never mind the fact that parts of the Charter apply to non-Citizens: socialized medicine will pose the greater problem should we be visited by “rights”-touting little green men (and womyn). You see, tax-funded (i.e., “socialized”, “universal”, “rationed”, “cruel”, etc.) medicine is available to all “residents”. One need not be a Canadian citizen (or even a taxpayer) to have ones noodly appendage put in a cast, or to have ones gender changed from fnork to dneeble.

And I fully expect such visitors indeed to demand “free” health care. Ask yourself: have you ever known someone who is “green” on the outside not to be “red” on the inside?

Paul McKeever, B.Sc.(Hons), M.A., LL.B.
Leader, Freedom Party of Ontario

I strongly recommend to everyone – including economics majors – that they watch the series in order, starting with episode 1, rather than just jump directly into episode 5 (see episode descriptions below). The reason: my conceptions, descriptions and terminology may differ considerably from that which you have read in economics texts. This is not to suggest that the economic texts “have it wrong”, per se. However, it has been my observation that many works of economics betray an ignorance of the nature of money, of banking, and of the mechanics of basic financial transactions such as the making of a deposit, the borrowing of money, etc. Hopefully, these videos will provide some useful insights to non-economists and economists alike, whether amateur or professional.

For those who have already watched episodes 1 through 4, jump right in (note: the video will be available world-wide within a day or two, if you cannot access it yet in your area…youtube videos take a while to propagate around the globe):

The Understanding Money & Banking series explains money and banking from the perspective of a lawyer with knowledge of economics, rather than from the perspective of an economist. The result is a rare, if not unique, opportunity to learn – in more precise terms – about the nature of money and of banking.

Episode 1, titled “What is Money?“, started with the basics that you will rarely, if ever, read in any book on economics. Topics covered include: the definition of “money”; the essential difference between money and that which is not money; key differences between “currency”, “debt”/”credit”, and “money”; the relationship between money and the use of force by government; the nature of cheques and of debit card transactions; the mechanics of how dollars/pounds really “change hands”.

Episode 2, titled “Anatomy of a Bank Loan“, gives you a rare insight into what is actually happening, mechanically and legally, when someone borrows money. Also discussed: the nature of credibility, and what one is actually buying with interest payments.

Episode 3, titled “Counterfeiting and the Quantity of Money“, discussed the relationship between prices and the number of dollars of which ones country’s money supply is comprised. Also covered: the relationship of productivity to the value of a dollar; the effects of increasing the total number of dollars; the essential reason that counterfeiting is a crime; who are the victims of counterfeiting?

Episode 4, titled “The Crafty Counterfeiter’s Motto“, this episode addresses the nature of current practice of increasing the supply of dollars as the economy grows (a practice that, during a period of economic growth, fights price deflation, even while falsely portraying the effort as one aimed to control price inflation). The central issue: is it wrong to take that which a person never knew they had coming to them in the first place?

Former OLA chief Randy Hillier wearing
a tee-shirt version of the sign found
on many farm properties in Ontario.

Approximately a year ago, Hillier resigned from the management of the OLA and used his popularity among members and supporters to win himself the nomination of the Progressive Conservative (PC) party in Ontario. Many advocates of property rights were perplexed by the move, given that the PC party historically (but with the brief exception of the leadership of Mike Harris) has been Ontario’s most substantively socialist/collectivist party. It introduced the Human Rights Code, rent controls, and the provincial income tax; it banned private health insurance and set up a tax-funded government monopoly on health insurance, etc.. Rather than conclude that Hillier has given up on advocating property rights, it would appear more accurate to conclude that Hillier’s expectations are merely naive, and that he believes he can (presumably with some ongoing assistance by the OLA) transform the “red tory” PC party into a party that is in favour of government that defends rather than violates, property rights.

That he is likely to fail in his effort to turn a pig’s ear into a silk purse becomes even more obvious when one considers the decidedly mixed bag of political wants held by members of the OLA. At times, the mutually exclusive nature of these wants has become high-profile. For example, when the OLA clogged the traffic arteries of Toronto’s core at and around the Ontario legislature, the media did live radio interviews with the many people driving their tractors to the event. There were indeed some libertarian-sounding property-rights advocates among those interviewed, but such members were decidedly mixed with farmers that wanted something akin to tax-funded subsidies for failing agricultural ventures, etc. (Interesting aside: the effort to get headlines by creating a traffic jam and storming the legislature grounds with tractors got overshadowed in two ways: 1. a competing farmer association [probably supportive of the governing Liberal party] pulled the exact same stunt one week earlier, and 2. when the OLA did it, a man pulled up in a truck, babbled incoherently, poured gasoline on himself, and lit himself on fire…guess which story got the bigger headline? It makes one wonder how many “Thank-you” and “Job Well Done” cards the man received from the Liberals).

All of which brings us to the news today that the OLA is – loudly, and with a press release – threatening to “clear cut” 100 square kilometers of wooded land in Eastern Ontario. According to today’s pre-fab report by the Canadian Press (you know the sort: printed in newspapers of every stripe; just add a headline, print it in your newspaper, and pretend that you are still a source of news), the threatened clear cutting relates to a law which violates property rights so as to protect endangered species:

If an endangered bird is found on someone’s property, [the OLA's Jack] MacLaren says their property values plummet and they can no longer use part of the land for farming.

“Ah”, you might infer, “the OLA is objecting to the endangered species legislation, saying that it violates their property rights”. Well, sadly, no. The Canadian Press explains that:

[McLaren] says that’s not fair because the government doesn’t offer to compensate those landowners.

Might I suggest changing the OLA’s sign a bit: “This land is our land. STOP. Back off government...unless you come with gifts of money taken forcibly from other people“.

This is yet another example of people wanting “freedom for me, but not for thee”, and it all results from wanting freedom for the wrong reasons. The rightness of defending ones control over ones own land is properly founded on the necessity of that control if one is to use the land in accordance with ones own rational decisions about its use. In other words: property makes it possible for one to live a rational (hence productive and happy) life. Asking for “compensation” from the government in exchange for the violation of ones own property is not a call for freedom. It is a call to push the costs of tyranny onto someone else’s shoulders. It is not a defence of property: it is a call to tax others and hand the loot over to landowners; it is a call to violate other peoples property; it is a sanctioning of government violations of property; it is a call for the government to protect landowners from the effects of tyranny, by imposing additional tyranny other others.

If the OLA is successful in their bid to loot other Ontarians, one can only hope that they spend a few bucks on a copy of Atlas Shrugged (and that they actually read it), so that they can realize, before it is too late, just how badly they are defeating their stated goal.

The McGuinty government isn’t making it very attractive to do business in Barrie…

This implies that, according to conservative ideology, government should pass laws or spend money in an attempt to encourage persons to open/keep businesses in a given community. In other words: according to conservative ideology, the government should centrally plan the economy. This, incidentally, is one of the reasons why you will hear John Tory use the weasel term “free enterprise” (which simply refers to private businesses operating within a centrally planned economy) but not the term “free market” (which refers to a market that is not centrally planned, but shaped by the production and consumption choices of individuals).

The advocate of a free market complains not that the government has not made things “more attractive” to business, but that the government has not “eliminated legal disincentives” to business.

ADDENDUM:

One might ask: “Well, surely the same can be said about the Liberals, so why aren’t you picking on them?”

My answer is: Ontario liberals are openly socialist/corporativist/collectivist.  They’re not trying to fool anyone about their ideology.  In contrast, the conservatives – who likewise are socialists/corporativists/collectivists – try to win the support of capitalists and individualists by using weasel words and by condemning the liberals for being opposed to tax or spending cuts.  Yet, all the while, its a matter of documented fact that the conservatives have raised, not lowered taxes, and have increased government involvement in non-governmental things (like health care), not decreased it.  As a result of this dishonesty and political cross-dressing, the conservatives have achieved three main things:

1. people have been deceived into believing that they are at the “right” end of the political spectrum, even though that is false;

2. the size and existence of the conservatives’ parties have ensured that voters have two choices: socialism/corporatism/collectivism dressed up in red, or socialism/corporatism/collectivism dressed up in blue.

and

3. people have come to associate the word “conservative” with: dishonest, bait-and-switch, say-one-thing-and-do-the-oppositism; with “secret agendas”.

If Ontario voters are going to have the ability to vote for a sizable party that is not socialist/corporativist/collectivist, the the socialist/corporatist/collectivist party that pretends to be a capitalist/individualist party must be exposed as what it really is: pro-socialism, pro-corporatism, pro-collectivism, and willing to falsely claim to be capitalist/individualist in order to ensure that no actual party of capitalism/individualism is believed to be necessary.