Tag Archives: mises.org

Free Trade, Brexit, and the WTO

Free Trade, Brexit, and the WTO

The debate surrounding the EU referendum in Britain, scheduled in two weeks, and the fate of the UK outside of the EU, is now in full swing. Unsurprisingly, little of substance has been said so far on the issue. One would expect that both sides would be better prepared with arguments to support their cause, but many aspects discussed have not only been erroneous, but have appealed to people’s fear rather than their intelligence. Both the Remain and the Leave camps have failed to show how either decision would enhance economic and political freedom; instead, they have tried to one-up each other in the preservation and growth of the existing welfare state, military complex, and bureaucratic apparatus.

Setting aside the disappointing democratic discourse within the UK, an even more irritating factor have been the pronouncements of international organizations regarding the effects of a possible Brexit. As if economic progress were impossible before the creation of European inter-governmental institutions, the IMF has repeatedly warned that a Leave vote would “precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output.” The latest to join in this is the World Trade Organization, arguably the least entitled to display self-righteousness given its track record. Roberto Azevedo, WTO’s director general, has declared that in the event of a Brexit, he doesn’t “know exactly how members are going to behave [toward the UK] and what kind of engagement there will be. [Negotiations might take] two, three, four years. It can take a decade or more. It depends on the complexities of the negotiations and the appetite for members to do it quickly… [but] there would be a vacuum. The UK would be the only WTO member without a list of its commitments… it’s a legal uncertainty. I don’t have a crystal ball and the message I am bringing to you is that nobody has that crystal ball.”

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Ludwig von Mises’s 9 Best Tax Quotes

Ludwig von Mises’s 9 Best Tax Quotes

04/15/2016

In honor of tax day, a look at the best quotes from Ludwig von Mises on taxation:

1. “Some experts have declared that it is necessary to tax the people until it hurts. I disagree with these sadists.”

Source: Defense, Controls, and Inflation 

2. “If the present tax rates had been in effect from the beginning of our century, many who are millionaires today would live under more modest circumstances. But all those new branches of industry which supply the masses with articles unheard of before would operate, if at all, on a much smaller scale, and their products would be beyond the reach of the common man.”

Source: Planning for Freedom 

3. “Taxing profits is tantamount to taxing success.

Source: Planning for Freedom 

4. “Estate taxes of the height they have already attained for the upper brackets are no longer to be qualified as taxes. They are measures of expropriation.”

Source: Defense, Controls, and Inflation 

5. “Progressive taxation of income and profits means that precisely those parts of the income which people would have saved and invested are taxed away.”

Source: Economic Policy 

6. “The metamorphosis of taxes into weapons of destruction is the mark of present-day public finance.”

Source: Human Action

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Gun Control: Fashionable Prohibition for Modern Lawmakers

Gun Control: Fashionable Prohibition for Modern Lawmakers

Ryan McMaken

With the latest school shooting, all humane people are expected to jump up and do something to stop the next shooting. The most popular response among media pundits and national policymakers right now is an expansion of the various prohibitions now in place against guns.

For anyone familiar with the history of prohibitions on inanimate objects, however, these appeals to prohibition as a “common sense” solution are rather less convincing.

Americans and others have tried a wide variety of similar prohibitions before, and with mixed results at best. Nowadays, prohibitions on drugs are in decline as states continue to unravel prohibitions of the past and make the nature of prohibition less drastic and less punitive. And, of course, the prohibition of alcohol has been dead for decades.

The prohibitions of old have been deemed failures. But fortunately for prohibitionists, there’s a fashionable form of modern prohibition that won’t go away.

Why Not Ban Alcohol?

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How to Make a Bl(UN)der Out of World Peace

The Economist recounts the turmoil the U.N. is now going through trying to elect a new secretary-general. Aside from the usual bickering and reciprocal blocking of candidates among the five nations with veto power, voices from inside the organization have recently revealed other problems, including the “colossal mismanagement” of peacekeeping budgets and a “sclerotic personnel system.” On the one hand, it is clear that these latter issues arise from the bureaucratic nature of the organization, which is bound to prove impossible to manage in an efficient manner. However, the broader problem the U.N. and its secretary-general are confronted with is one of credibility, after having missed almost every opportunity to provide a resolution to conflicts across the world over the last decades, from Rwanda to Sudan and Sri Lanka. While some other international organisations such as the IMF and the World Bank retain some (misguided) popular trust, the United Nations appears to almost all discerning eyes as a grand-scale failed endeavor.

It’s easy to assume that bureaucracy has single-handedly brought the U.N. down, but a more nuanced explanation can be found in Mises’s writings, which provide us with insights into the ideological foundations on which the U.N.—and its interwar predecessor, the League of Nations—were established. Mises (1943a1943b) writes:

The noble-minded founders of the League of Nations… were right in their idea that autocratic governments are warlike, while democratic nations cannot derive any profit from conquest and therefore cling to peace. But what President Wilson and his collaborators did not see was that this is valid only within a system of private ownership of the means of production, free enterprise, and unhampered market economy. Where there is no economic freedom things are entirely different.

Ours is not an age of laissez fare, laissez passer, but an age of economic nationalism. All governments are eager to promote the well-being of their citizens or of some groups of their citizens by inflicting harm upon foreigners. Foreign goods are excluded from the domestic market or only permitted after the payment of an import duty. Foreign labor is barred from competition on the domestic labor market. Foreign capital is liable to confiscation. This economic nationalism must needs result in war, whenever those injured believe that they are strong enough to brush away, by armed violent action, the measures detrimental to their own welfare. […] Economic nationalism is the corollary of the present-day domestic policies of government interference with business and of national planning as free trade was the complement of domestic economic freedom.

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Henry Hazlitt Responds to 10 Common Objections to Capitalism

05/13/2016

A correspondent who describes himself as “a 26-year old college graduate who strongly supports a system of free enterprise,” recently wrote me to say that he is “continuously confronted with questions that are most difficult to answer.” He appended a list of 10 of them, and asked for my comments.

I offer my answer here. To save space, I have not repeated his questions, assuming they can be clearly guessed from my replies.

Dear Mr._____________________ :

The number of faults that have been alleged against capitalism are without limit. Few of the allegations have any merit, and when they do the reason will usually be found to lie deep in the weaknesses of human nature itself. Practically all the criticisms tacitly assume that the imputed faults could be easily cured by some form of socialism or communism, or some ad hoc government intervention that would, in fact, usually make the complained-about condition much worse.

With these preliminary remarks, let me try to give brief answers to your ten questions.

1. Capitalism does depend upon the consumption of natural resources, and some of these could eventually be depleted. But this must happen under any conceivable system of production when the population becomes large enough in comparison with the resources. But capitalism has proved resourceful in finding substitutes or for providing for renewal of resources (as in scientific forestry, for example).

2. There will probably always be some efforts toward collusion and private price-fixing. Encouraging private competition is probably the best cure for this, plus appropriate laws against clearly harmful collusion.

3. Not only do utilities often give lower rates to those who use more power; nearly all sellers give lower rates to bigger consumers because they can be supplied with the commodity at a lower cost. If big automobile companies consume more steel than a small hardware manufacturer, this does not necessarily mean that big companies are using steel more wastefully.

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Is Trump a Bigger Threat to Wall Street than Sanders?

05/05/2016

And then there was one.

Proving once again that the endorsements of celebrities and sports heroes is more important than politicians, Donald Trump dominated the Indiana primary, prompting the official end of Ted Cruz’s and John Kasich’s campaigns. While his victory means the Trump-brand headache continues in the halls of power in Washington DC, there is perhaps no area of the country that has more to worry from a President Donald Trump than Wall Street. In fact, in spite of the rhetoric from Bernie Sanders, the other Indiana victor, Wall Street would likely rather Feel the Bern than Make America Great Again.

After all, for all the time Sanders has spent (fairly) railing against the Too Big to Fail Banks, he has never come close to diagnosing the core of their strength: the Federal Reserve and the protections they receive from the Federal government. Instead, the Bernie Sanders interpretation of the financial crisis that has all the nuance of the theatrical version of Facebook meme: big banks got greedy and government didn’t do enough to stop it, with policy prescriptions that match.

Lost in this cartoonish narrative are some important details. The Senator from Vermont ignores the corruption and moral hazard of government housing giants Fannie Mae and Freddie Mac. He overlooks the consequences of the Community Reinvestment Act. He has no interest in acknowledging that it was government regulators and their chosen rating agencies that downplayed the risk of bad mortgages. Most importantly, he fails to acknowledge that it was the actions of the Greenspan Fed that directly inflated the devastating housing bubble.

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Why Socialism Will Always Fail

04/27/2016

The director wants to build a house. Now, there are many methods that can be resorted to. Each of them offers, from the point of view of the director, certain advantages and disadvantages with regard to the utilization of the future building, and results in a different duration of the building’s serviceableness; each of them requires other expenditures of building materials and labor and absorbs other periods of production. Which method should the director choose? He cannot reduce to a common denominator the items of various materials and various kinds of labor to be expended. Therefore he cannot compare them. He cannot attach either to the waiting time (period of production) or to the duration of serviceableness a definite numerical expression. In short, he cannot, in comparing costs to be expended and gains to be earned, resort to any arithmetical operation. The plans of his architects enumerate a vast multiplicity of various items in kind; they refer to the physical and chemical qualities of various materials and to the physical productivity of various machines, tools, and procedures. But all their statements remain unrelated to each other. There is no means of establishing any connection between them.

Imagine the plight of the director when faced with a project. What he needs to know is whether or not the execution of the project will increase well-being, that is, add something to the wealth available without impairing the satisfaction of wants which he considers more urgent. But none of the reports he receives give him any clue to the solution of this problem.

We may for the sake of argument at first disregard the dilemmas involved in the choice of consumers’ goods to be produced. We may assume that this problem is settled. But there is the embarrassing multitude of producers’ goods and the infinite variety of procedures that can be resorted to for manufacturing definite consumers’ goods. The most advantageous location of each industry and the optimum size of each plant and of each piece of equipment must be determined. One must determine what kind of mechanical power should be employed in each of them, and which of the various formulas for the production of this energy should be applied. All these problems are raised daily in thousands and thousands of cases. Each case offers special conditions and requires an individual solution appropriate to these data. The number of elements with which the director’s decision has to deal is much greater than would be indicated by a merely technological description of the available producers’ goods in terms of physics and chemistry. The location of each of them must be taken into consideration as well as the serviceableness of the capital investments made in the past for their utilization. The director does not simply have to deal with coal as such, but with thousands and thousands of pits already in operation in various places, and with the possibilities for digging new pits, with the various methods of mining in each of them, with the various methods for utilizing the coal for the production of heat, power, and a great number of derivatives. It is permissible to say that the present state of technological knowledge makes it possible to produce almost anything out of almost everything. Our ancestors, for instance, knew only a limited number of employments for wood. Modern technology has added a multitude of possible new employments. Wood can be used for the production of paper, of various textile fibers, of foodstuffs, drugs, and many other synthetic products.

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