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Tuesday, July 12, 2011

Will The Plunder Ever Stop?

"Honor, justice, and humanity, forbid us tamely to surrender that freedom which we received from our gallant ancestors, and which our innocent posterity have a right to receive from us. We cannot endure the infamy and guilt of resigning succeeding generations to that wretchedness which inevitably awaits them if we basely entail hereditary bondage on them." — Thomas Jefferson

160 years ago a French legislator and lawyer by the name of Frederic Bastiat published a pamphlet that he latter republished a small 85 page book called “the Law” Bastiat saw the saw the rising trend towards socialism within the French Republic and the ominous threat it would bring to the people of France.

You can study economics for years and read books and publications by Locke, Hazlitt, Hayek, Friedman, Williams along with other economists and philosophers of the school of conservative though. You can study the writings of our Founders, like Adams, Jefferson, Madison, Mason and Hamilton, to gain an understanding of the words life, liberty and the pursuit of happiness. All of this is recommended, but in about an 30 minutes of reading Bastiat’s The Law all of this vast body of thought and writings will become clear.

In Bastiat’s 35-page book he lays out the case to freedom and the threatBastiat that socialism, of any stripe, presents to our economic freedom and property rights. Bastiat saw these threat years before the Fabian Socialists, corporatism, and fascism of the 1920s, groups that influence western society today. Bastiat condensed much of his arguments around the term of “plunder.” He believed that the government could impose tyranny through the legal plunder of the people, something our Founders had despised and warned against in 1776 and 1787 with the Declaration of Independence and the formation and adoption of the U.S. Constitution and it’s Bill of Rights.

Like others, Bastiat recognized that the greatest single threat to liberty is government. To help us identify and understand evil government acts such as legalized plunder. Bastiat says:

“See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”

With such an accurate description of legalized plunder, we cannot deny the conclusion that most government activities, including ours, are legalized plunder, or for the sake of modernity, legalized theft.

Frederic Bastiat could have easily been a fellow traveler of the signers of our Declaration of Independence. The signers’ vision of liberty and the proper role of government was captured in the immortal words “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain Unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, governments are instituted among Men.” Bastiat echoes the identical vision, saying:

“Life, faculties, production—in other words individuality, liberty, property— that is man. And in spite of the cunning of artful political leaders, these three gifts from God precede all human legislation, and are superior to it.”

Bastiat gave the same rationale for government as did our Founders, saying, “Life, liberty and property do not exist because men have made laws. On the contrary, it is the fact that life, liberty and property existed beforehand that caused men to make laws in the first place.” No finer statements of natural or God-given rights have been made than those found in our Declaration of Independence and The Law.

Bastiat defines three type of plunder.

  1. The few plunder the many.
  2. Everybody plunders everybody.
  3. Nobody plunders anybody

Bastiat defines there three forms of plunder as:

Limited legal plunder: This system prevailed when the right to vote was restricted. One would turn back to this system to prevent the invasion of socialism.

Universal legal plunder: We have been threatened with this system since the franchise was made universal. The newly enfranchised majority has decided to formulate law on the same principle of legal plunder that was used by their predecessors when the vote was limited.

No legal plunder: This is the principle of justice, peace, order, stability, harmony, and logic. Until the day of my death, I shall proclaim this principle with all the force of my lungs (which alas! is all too inadequate).”

According to Bastiat the proper function of the law is:

“And, in all sincerity, can anything more than the absence of plunder be required of the law? Can the law—which necessarily requires the use of force—rationally be used for anything except protecting the rights of everyone? I defy anyone to extend it beyond this purpose without perverting it and, consequently, turning might against right. This is the most fatal and most illogical social perversion that can possibly be imagined. It must be admitted that the true solution—so long searched for in the area of social relationships—is contained in these simple words: Law is organized justice.

Now this must be said: When justice is organized by law—that is, by force—this excludes the idea of using law (force) to organize any human activity whatever, whether it be labor, charity, agriculture, commerce, industry, education, art, or religion. The organizing by law of any one of these would inevitably destroy the essential organization—justice. For truly, how can we imagine force being used against the liberty of citizens without it also being used against justice, and thus acting against its proper purpose.”

Bastiat write of the seductive lure of socialism:

Here I encounter the most popular fallacy of our times. It is not considered sufficient that the law should be just; it must be philanthropic. Nor is it sufficient that the law should guarantee to every citizen the free and inoffensive use of his faculties for physical, intellectual, and moral self-improvement. Instead, it is demanded that the law should directly extend welfare, education, and morality throughout the nation. This is the seductive lure of socialism. And I repeat again: These two uses of the law are in direct contradiction to each other. We must choose between them. A citizen cannot at the same time be free and not free.”

The process that built the United States into the world's wealthiest country has reversed; it's tearing down what it once built. Americans once sang proudly of "America the Beautiful"; now they avert their faces in guilty silence while demolishing everything that once defined them. They welcome strangers to replace them. This is an ending; it cannot end well. Long downhill slides never have.

British colonists came to North America for opportunity denied by the rigidities of their home society. The British had made the most of the Industrial Revolution up to that time and they brought that with them. Some tried communal forms of organization; those quickly failed and were replaced by private property, which worked because people produced when they could own and enjoyed the result. Private property was a foundation inducing colonists to produce; a result was their buying and taking land to develop from the Indians, a process that accomplished the replacement of the Indians by the colonists.

Spanish colonization awarded the land to elite settlers and absentee owners who enslaved the Indians to work it rather than driving them off, making a very different society compared to the farmers, traders, and manufacturers who appeared in most of North America. The southern plantations were the closest parallel but for their use of imported Africans to replace Indian labor.

The American who developed out of this was optimistic, ambitious, hardworking, capable, and willing to sacrifice for future gain; what came to be called the Protestant Work Ethic was his sigil. He viewed an enormous land rich in resources, there for the taking. His government saw the lure for other governments and encouraged him to take as far and as fast as he could. The government protected manufacturers, provided farmland to homesteaders, and used huge land grants to encourage universities and railroads; the railroads in turn sold land cheaply to encourage farming, ranching, and mining as sources of business. Roads, canals, bridges, and other improvements were favored. By 1850, the United States had laid the base for its development into world leadership in manufacturing and agriculture. Immigrants from depressed countries flooded into the U.S. to share the opportunity unavailable on such a scale anywhere else, furnishing large amounts of both labor and knowledge. This was a potent mix on a new scale.

American industrialization piled factories onto an agricultural society, accelerating urbanization. As it had in Europe, it displaced people, which provided fertile ground for politicians selling socialism in various forms as a means for relieving the economic distress. In Europe, the socialists were immediate beneficiaries of the Industrial Revolution. In the United States, the Civil War displaced additional people, especially in the South, and fed political corruption. Political reformers clustered around the idea that the solution to such large-scale problems had to be the federal government. Approaching the end of the 19th century, the came to call themselves Progressives and eclipsed Americas' acknowledged socialists. They accomplished their first national political successes with passage of the Interstate Commerce Act, the Sherman Antitrust Act, and the Forest Reserve Act, which began government control of commercial carriers, of corporations, and of natural resources, all before 1900.

The first Progressive president was Republican Theodore Roosevelt; the second, Woodrow Wilson, a Democrat. Both effectively forwarded Federal government control of the U.S. economy and encouraged legalized plunder. Herbert Hoover, contrary to popular impression, was a Progressive and an activist in expanding government's role; Franklin Roosevelt ran against his spending but many of his Depression policies were rooted in Hoover's, resting in both cases in expansion of government in the economy. Though the legend of Hoover's laissez-faire approach toward the Great Depression still lingers, the truth is much more interesting. Neither president's policies succeeded in relieving the Depression; recovery was built on the growth following World War II.

Let's analyze: Resources, labor, and investment came together in America and government stayed out of the way but for encouragement. That was capitalism, more free and unrestricted than it had been anywhere else, a result of an open land lacking the social and legal restrictions of Europe, magnified by the disparate backgrounds and interests of the new Americans that loosened social boundaries. Such unrestricted capitalism is rare in history and the sheer scale was unique; that was the basis for America's unequaled wealth-production.

The lack of cultural uniformity and cohesion that freed economic forces to operate efficiently accelerated the relentless changes that also provided numbers of displaced people, the losers in the capitalist reward system. Many were only temporary losers but some were stranded. That portion of the "creative destruction" of a free market provided elected politicians with target voters — those who saw plunder as their salvation. The Civil War, fought to decide whether industrial or agrarian interests would control policy, added extensively to these displaced voters, strengthening the Progressive movement and opening to it the halls of power. The very factors that provided capitalism its effectiveness also provided the wide range of outcomes, the winners and losers that rewarded politicians for attacking it. They had only to offer government as the equalizer, promising to offset life's unfairness by taking from the rich to give to the poor, and that they found easy to do.

By producing still more losers, the Great Depression vastly accelerated Progressive policies and government growth. World War II added to it. So did such later programs as President Lyndon Johnson's "Great Society" — one of the greatest examples of legal plunder our Republic ever experienced. Today, it will require some thought to find an aspect of the economy without government presence. Such omnipresence does not arrive free; it consumes or restricts an increasing share of resources, denying their free-market use. A point where government overwhelms the economy's freedom arrives and it slips quietly into Statism —. The highest form of legal plunder.

If free-market capitalism carries the seeds of its own destruction, so does the suffocating, stultifying statism that results from it. Call it socialism, liberalism, Progressivism, Marxism, Communism, or anything else you like; it ends of its own incompetence. The politicians chasing power have to escalate their promises over time to hold off rivals. The world's resources are finite and at some point, political promises outrun the available resources and the edifice collapses. That's what brought down the Communists and it's what we see happening in Europe and in the U.S. now, with governments quite deliberately pushing things. With green excuses, governments are depressing the living standards of the developed world, primarily by driving up the price of energy and secondarily via regulation, continually limiting industrial production and individual choices. Change comes fast now; technology has changed nothing but it has accelerated response times.

It would be nice to know what will follow the present statist cycle after its financial collapse, but that isn't given us to know. We can predict statism following free-market capitalism and we can predict statism's ultimate collapse, though not neatly wrapped with a date. But it's not far off, by appearances. Statism self-destructs by impoverishing itself; all you have to do is look around.

So free-market capitalism is the natural source of Progressivism and Progressivism is the destruction of free-market capitalism. Free-market capitalism creates wealth; Progressivism destroys wealth, except for the political elite who acquire it via appropriation from others — legal plunder.

Socialism is the fraudulent bargain that we each can (and must) live at the expense of others. Since this destroys several essential components of our prosperity, it cannot be "sustainable". This is ironic in light of the fact that socialists in the form of environmentalists love to scold the rest of us about "sustainability". But a socialist economy destroys the very price information that ever participant in the economy needs in order to make economic evaluations. When enough participants consume more wealth than they produce, the economy must consume its capital resources. That is what we are doing at this very moment.

This was put in plain language by Margaret Thatcher when she is reported to have said that socialism works until they run out of other people's money.

A recent example of this is legal plunder is a newly passed law in the State of California. The job-killing internet sales tax law just signed by Governor Jerry Brown will only accelerate the decline of our most populous state.

Consider the facts. Already, on the recent ranking of states on the basis of their tax climates done by the Tax Foundation, California is almost at the bottom at #49. On the ranking of states for economic freedom done by the Mercatus Center, it stands at a risible #48.

Moreover, as business relocation consultant Joe Vranich reports, California has seen a rapidly increasing business flight. California was averaging one "disinvestment event" (read: a business either relocating an existing facility to or deciding to open a new facility in another state) per week in 2009. Last year it jumped to an average of 3.9 disinvestment events a week. So far this year, this benighted state has seen that average soar to 5.4 a week.

The business exodus is so pronounced that some California state legislators — accompanied, ironically enough, by the state's Lieutenant Governor Gavin Newsom, the ex-mayor of San Francisco — recently visited Texas to get some clue as to why so many of California's businesses are fleeing there, as if they didn't know already.

And California's unemployment rate still hovers around 12%, one of the highest in the nation.

In the face of all this, Democrat Governor Jerry Brown and the Democrat-controlled legislature decided to enact a law that would require internet retailers such as Amazon to start collecting and forking over state sales taxes on all internet purchases by Californians.

Now, in 1992, the U.S. Supreme Court ruled (in Quill Corp v. North Dakota) that while states could compel mail-order companies (and, by probable inference, internet companies) to collect sales taxes for a state if, but only if, those companies had a physical presence — bricks-and-mortar facilities — within that state.

This ruling, parenthetically, makes fairly good sense. If we view the legitimate purpose of sales taxes on businesses as being to help pay for the police and fire protection those businesses receive for their facilities, then it seems unconscionable to collect taxes from any business that has no facilities in that state.

But the unintended negative consequence then becomes obvious. When a national internet company like Amazon has affiliates in a state, and that state imposes an internet sales tax, the logical thing for the big internet company to do is just to cease doing business with its small affiliates in that state. The small affiliates then either have to move to another state or cut back their operations. Either response costs jobs in the state imposing the internet sales tax.

That is precisely what Amazon did when Illinois passed such a law recently: Amazon ceased doing business with its Illinois affiliates. And before California passed its similar law, Amazon warned it that it would do the same in the Golden State.

Even knowing all this, the wise solons in Sacramento passed the law anyway, and Governor Brown signed it. The promise is that it will raise $317 million a year in sales tax revenue. But does anyone believe that? When Rhode Island passed such a law, it collected only negligible receipts.

In any case, sure enough, the day after Brown signed the law into effect, Amazon notified its 25,000 affiliates in California — small businesses, typically sole proprietorships that sell specialty items in part through Amazon — that it is ceasing all business with them. Another one of those small businesses is Ken Rockwell a photographic expert in the area of cameras and lenses who make some income from his national sponsors such as Adorama and B&H. Ken will no longer be able to derive income by showing links to hos sponsors on his website.

Many people stand to lose jobs because of this idiotic move, but (to use Bastiat's phrase) they will be unseen. The guy who has been selling, say, obscure DVDs for a few extra grand a year will either have to move or cut back his own purchases from local retailers. Either way, the state loses jobs. Oh, and that guy will now no longer be paying as much income tax to the state. If he moves, he'll be paying none at all.

Some internet commentators have suggested that the reason why the dumb Dems passed this screwy law was to reward big donors such as Wal-Mart and other big-box retailers. And in truth, there is no doubt that such big-box retailers have supported internet sales taxes as a way to eliminate a perceived competitive advantage the internet companies have. But this raises two further thoughts.

First, it is nothing short of hilariously hypocritical to hear a huge company like Wal-Mart complain about facing unfair competition from the vastly smaller internet companies. After all, that is precisely the complaint competitors of Wal-Mart have made against Wal-Mart for decades. Looks like turnabout isn't fair play after all! In fact, it is positively grotesque to see the mega-billionaire Walton family trying to destroy the meager incomes of some hapless sole proprietors who are only trying to sell a few items via the web.

Second, if it is Wal-Mart’s plan to "equalize the playing field" by pushing state after state to force the internet companies to collect sales taxes, then Wal-Mart is doomed to failure. Trying to force internet retailers to collect sales taxes will only drive them offshore, maybe to Mexico, resulting in lost jobs nationwide, and presumably lower sales in the very big-box stores that pushed for those internet sales taxes.

If this analysis of the reason California passed this legislation than it a perfect example of one group exacting legal plunder from another group. It also plunder extracted by the government to gain revenue for its reckless fiscal policies.

You can download a free PDF version of Bastiat’s The Law by clicking here. It is well worth your time to read it. I think you will be enlightened and gain a better understanding of what is happening in our Republic today.

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