terça-feira, 8 de novembro de 2016

Economics and Politics - indigestible mix

Economics and politics – an indigestible mix

"When the State cannot please everyone, it will choose whoever it will serve better." Anthony de Jasay, the State [1985]

During the discussions of the French and American Constitutions, the prevalent topic was the separation of religion and State – incidentally, that had been the recurring topic for 3 centuries, when nobility and priesthood had privileges unacceptable to the emerging bourgeoisie: The privileged classes were tax exempt and had a series of perks: right to levy certain taxes, Honorary privileges, prerogatives, monopoly of judicial court jobs and management positions in the army, Navy and the Administration.
In early 1789 were elected to the French Parliament 935 members, distributed as follows: Clergy (247); Nobility (188) and third estate (500).
In this way, on 17 June 1789 the third estate, claiming that their members represented most of the nation, proclaimed themselves the National Assembly, with no voting by the other classes. This began the French Revolution. (data taken from the texts of brazilian reasercher Ricardo Bergamini )

The first amendment of the American Constitution – 12/15/1791 – defines that Congress cannot legislate on the establishment of religion (establishment clause) or prohibiting the free exercise of religion (religious free exercise clause).

On the subject, State-religion separation formulators (Founding Fathers) of the American Constitution, I suggest reading the book by Alan e. Johnson, The First American Founder: Roger Williams and Freedom of Conscience
 (Pittsburgh, PA: Philosophia Publications, 2015), 279-84, containing a consistent bibliography on this subject that dominated the discussion of the constituents.

These concepts have changed the course of mankind ever since - imagine what it would be like if the world had the assistance of the clergy and the nobility to manage taxes nowadays.

After almost 3 centuries, humanity finds itself facing demands that we place on a new perspective: the separation of politics from economicsblocking the access of politicians and bureaucrats to the resources raised by taxes. Utopia or dream? Imagine the difficulties to separate politics from religion for nearly three centuries and the impact of it on the course of humanity.

This indigestible mixture led to world wars, conflicts, corruption, poverty and inequality, politics for a few and not for the people, or even: power emanates from a few to benefit only the rich. This indigestible mixture also enables the crony economy, where being friendly to the King is more important than being competent. By the way, Adam Smith wrote his master work: "Wealth of Nations" in order to mitigate the effects of the particular crony mercantilism of his time. If written today, the American Constitution rather than starting with "We the people" would start with "We the rich".

For your reflection, please focus on the basics:

• Economics is a science in which all agents are regulated by the inexorable, impersonal and uncontrollable laws of supply and demand, if there is no market manipulation;

• Politics is an art in which the protagonists decide according to the questionable, circumstantial and personalist human will.

These are separate universes, following different rules. Growing market regulation was necessary because opportunities are not offered to all, for nutrition, health and education. These 3 sectors, under the current rules, do not operate by themselves. The government needs to pump resources to keep them operating.

Human intervention in the economic process proved to be ineffective. The recent situation started with British economist John Maynard Keynes in 1936. His general theory, consolidated in the Bretton Woods meeting of 1944, presented a creative plumbing system, operated by the Government, credit, investments, savings, currency exchange and other variables. Keynes built a proposal of human interventions in the economic process – as creative as ineffective – its practical result over time was a combination of stagnation with inflation – an insult to human intelligence. That proposal lacked a basic concept: development only happens with the addition of human productive work, only this generates capital, because capital is nothing but accumulated labor – both sources, labor and capital, are basically the same. It turns out that the current system allows harvesting without planting – it is a baseless impossibility.

We need more Mises/Hayek and less Keynes's recipe, to reach stability and progress.

The history of mankind is the conflict of classes seeking to manage taxes collected from the people.
It is useless to attempt to put in opposite camps and in conflict, the variables of work and capital, because they are cumulative and have complementary interests.

The real and irreconcilable conflict is between the production process (workers and employers) and bureaucrats/politicians – or producers of wealth, on one side, and predators of the wealth generated, on the other. This will be overcome only by the separation between Government and the economy.

Strengthening the aggregate demand through taxes and fees, the Government merely transfers resources from the invariable laws of the market to the questionable field of human will. It creates more jobs in the governmental bureaucracy, subtracting those from the private initiative, thus creating a large parasitic system, fully supported by our taxes. Something like:"everything for the people, but without the people" in an authoritarian pattern.
Those who advocate the maintenance of companies under Government control are not from the right or from the left, they are ideologues of retrocession.

 "All who desires peace and harmony in human relations must always fight against statism."-Ludwig von Mises

"The arrangement of goods and services that the State currently offer can be divided into two subsets: those goods and services that should be eliminated and those that are to be privatized."- Murray n. Rothbard

Political decisions in economic matters are invariably wrong, not slightly wrong, but wrong in their foundations. They cause profound impacts on the lives of people. Politicians imagine they can manage prices as if this were an arbitrary number subject to manipulation by the Government without consequences in economic life. The definition of a minimum wage is an undisputed example of this impossibility. Well-meaning politicians want people to earn more, but the disastrous consequence is the loss of jobs for unskilled workers, exactly those who need them most.
I suggest reading the excellent text by the professor of Economics at George Mason University- Donald J. Boudreaux 
Sometimes, there is no good option " -Posted on 19 November 2015.

We have to bend to the inexorable truth: the economy is ruled by laws that cannot be manipulated. This explains the frustration brought about by dictatorial regimes as well as by populists of all kinds, elected with the proposition of unreachable miracles. They bring trial and frustration. In the search for solutions, an important step is recognizing that the economy does not obey human will

Dictatorships or regimes of force can only be defended by those who would like to be on the side of power; If you're on the other side, you will defend democracy with all conviction.

We are currently seeing, perplexed and helpless, the political world in fraud, abuse, negligence or crimes against the economy, with profound impacts on the lives of millions of innocent victims. 

Experts and intellectuals often and unfairly point a finger to businessmen as those responsible for poverty, frustration and disappointment in the current human condition. This is totally unfair and far from reality. Businessmen operating in the free market make money by satisfying the needs of others, never their own, something that is totally distinct from politicians and bureaucrats who in certain cases, partnership with fraud, cheating and corruption. A CEO or company Executive is appointed by his merits and experience rather than promises and lies, like politicians. Anyway, nothing is more worthy and morally sound than maintaining a standard of living through the options of consumers who, in the last analysis, are crucial for the maintenance of companies operating in the free market – every penny spent in a supermarket means wishes and stimuli to organize the production and distribution of goods and services. Businessmen bring progress and jobs, unlike politicians who choke the people with taxes and paralyze progress. Investors should be received with a red carpet, because they are very important for job generation. The business leadership, integrity and discipline encompass qualities of character that are essential to provide for the needs of the community.

Great short-sightedness still dominates the dull mind of certain intellectuals who imagine that economies have nationalities – businessmen always search investments to make money where this is allowed. Imagine that to determine a nationality to an economy is like assuming that the law of gravity only applies to certain countries!

Only in free markets a real democracy can take place. With government interference, the system evolves to autocracy, where success depends on the virtue of rulers. 

Coercion is not the trademark of the free market, where consumers voluntarily can say yes or no to a supply or exchange of goods and services, with simple rules: not to steal, not to kill and not to cheat, unlike the political world. Humility, honesty and freedom are the only ways to win in the competitive world of the free market, cultivating ethics for human dignity and mutual prosperity.

I suggest reading the excellent text by the Professor of ethics and business leadership at CITADEL, Richard m. Ebeling, dated of 10/27/2016 – "Entrepreneurship, Market Economy and Human Improvements"

Now let's see how we can separate politics from economics.

Human work is a process of transformation of energy, so that you can manifest the human will: nutrition, health and education must be provided in advance and then payment for the job performed by the worker, who needs payment and attention as a vehicle needs fuel and maintenance for travel.

These 3 sectors constitute legitimate Government interference in the economy: Governments around the world, whether socialist or capitalist, need to subsidize in some way their agriculture (nutrition), plus health and education. In other words, these sectors must permit managers to offer equal opportunities in any society. A new Social Pact will be that one where these 3 sectors become a private responsibility in the productive process, purchased under free market prices. The  Government reduces taxation proportionately. With this we have the desired separation between economics and politics. From then on, laisser faire, laissez passer- the free market acting broadly, comprehensively and freely – full productive employment is the guarantor of this Social Pact.

In 1758, Francois Quesnay, one of the leaders of the physiocrats, combining his knowledge of agriculture and medicine, presented to King Louis XV an economic table showing the interdependence and the flow of goods and money through various sectors of the economy: farmers, landowners, industrialists and merchants. His advice to the King of France: there's no need for the Government to regulate prices of goods and services. Competition, by itself, can regulate prices with justice. We only need to follow this wise advice of Quesnay. - Leave human beings free to make their own decisions.

Private initiative is not only more competent to manufacture automobiles or tvs sets, but also to provide health and education. It's politically myopic  to leave these in the hands of the Government, because of the importance of these sectors. The private sector must be the engine for production of these essential services – it is the private productive sector who happens to pay this account,  directly to the hospitals and schools. Some countries are still presenting young pupils with the school content of centuries past.
"Nobody spends other people's money so carefully as he spends his own. If we want efficiency and effectiveness, if the knowledge is put to good use, it needs to be done by the private sector. " -Milton Friedman

With the action of the private sector, students and families should have complete freedom of choice of profession, adding a vital connection to the equation - the manager will only invest in the training of professionals who are interesting for the production process.


I suggest reading the excellent text of Professor Jason Morgan from Mises Institute "How To Make Higher Education Affordable published by The Latest from Mises.org - NOVEMBER 7, 2016


Now, in order to relax after a stressful subject, please watch this masterful presentation celebrating the tenth anniversary of the play "Les Miserables", by Victor Hugo - https://www.youtube.com/watch?v=YnmA-8IMVWw & feature = in-subs _ digest – 
Do You Hear the People Sing- Published on 21 jan 2015


Ronaldo Campos Carneiro – nov/2016

Happy 2017 - comments

De: Wilfrid Wilkinson [mailto:Wilfrid.Wilkinson@rotary.org]
Enviada em: sábado, 5 de novembro de 2016 14:14
Para: Ronaldo Carneiro
Assunto: Re: Happy 2017 Peace, Health and Freedom

Dear Rtn. Ronaldo
Thank you for your early Christmas greetings which are warmly reciprocated. My wish is that Christmas 2016 and the 2017 New Year will bring about some of the needed changes that you have so eloquently identified. I read your thoughtful message and concluded that this world seems doomed to duplicating the errors of its past. However, the first glimmer of hope for a change is recognition of what is wrong with the present.
Your message identified those wrongs of both the past and the present which creates the platform to go forward with an improved and better way of living in this world, which appears to get smaller each year.
Kind Regards

Wilf Wilkinson
PS: Yes, Rotary (still) Shares.

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