Todd Weber's Random Thoughts

December 12, 2010

Private Property = Freedom

Filed under: Uncategorized — Tags: , , , , , , — tkweber @ 8:02 am

“It seems obvious to me now – though I have been slow, I must say, in coming to the conclusion – that the institution of private property is one of the main things that have given man that limited amount of free-and-equalness that Marx hoped to render infinite by abolishing this institution. Strangely enough Marx was the first to see this. He is the one who informed us, looking backwards, that the eveolution of private capitalism with its free market had been a precondition for the evolution of all our democratic freedoms. It never occurred to him, looking forward, that if this was so, these other freedoms might disappear with the abolition of the free market.” (Max Eastman, “Socialism Doesn’t Jibe with Human Nature,” Reader’s Digest, vol. 38, June 1941, p. 47. Quoted in Hayek, “The Road to Serfdom,” p. 136)

“And who would deny that a world in which the wealthy are powerful is still a better world than one in which only the already powerful can acquire wealth?” (Hayek, 136)

November 18, 2010

There is Hope for the Republic!

Filed under: Politics — Tags: , , , , , , — tkweber @ 1:15 pm

There may be hope for the United States after all. Hope, that is, that we can avert the seemingly inevitable plunge into full-blown socialism and its frightening consequences. This hope is the result of the “new media,” the internet, social networking, twitter, and more enabling the free-flow of information and ready access by virtually anyone anywhere. Of course, this can be and is abused, and there is a lot of misinformation and deception floating around; nevertheless, “the truth is out there.”

Among other things, the tremendous opposition to Obama-care, the rise of the Tea Party and the conservative sweep of the 2010 mid-term election, and the growing protest against Ben Bernanke and the Federal Reserve’s Quantitative Easing are all indicative. Just a few years ago, liberal progressives could have pushed their socialist agenda upon us without anyone really noticing. Since there is no objective, critical investigation and reporting from the mainstream media – unless of course it is about the evils of conservatives and their agenda – much of what has been happening in Washington D.C. would pass under the radar of the average American until it is too late. The watchful few who did notice had little, if any, ability to warn and educate significant portions of the populace.

With the advent of cable news, talk radio, internet bloggers, facebook, etcetera, Americans are able to get their hands on more information than ever before and many are waking up to the facts and not liking what they see. It is possible (and I hope it is so) that the more people realize what is happening in the White House and Congress, and the more they learn about the real threats and consequences of what is being pushed upon the nation, they will rise up en masse to turn things around. I am hopeful that the latest election results are the first wave of that turn-around.

Jesus said, “The truth will make you free.” There seems to be something to that.

November 14, 2010

The Good, the Bad and the Ugly

I am so very happy that Washingtonians rejected the initiative to implement a state income tax on November 2nd. Also good was the repeal of a recently enacted tax on bottled water, candy, etc. Disappointing was the failure of initiatives to end the state’s liquor monopoly, which I think was due to fear-based ads that convinced non-thinking lemmings that hard liquor is somehow more dangerous than other alcoholic beverages, and that it is better for the state to have exclusive selling rights. It assaults my libertarian sensibilities.

Even more disappointing was the re-election of Senator Patty Murray. Ugh! No surprise, really, in this very left-leaning state, but so frustrating. My sympathies to Dino Rossi for striking out in his third run for high office (two prior attempts at the governorship). Six more years of Super-Spender-Socker-Mom will do no good for the nation.

On another note, if you like inflation you’ll love the Federal Reserve’s plan to pump $600-billion new dollars into the national economy, which they deceptively call “Quantitative Easing.” This increase of the money supply will de-value the dollar (to which many foreign governments have vehemently objected) and cause the price of everything to go up, up and away. So, if you haven’t noticed increases in the price of groceries and gas so far, start paying attention. As you do, you will see them continue to rise indefinitely, and if the predictions of some inflation experts are correct, it will have drastic effects on our daily lives.  Whatever cash we have will be worth less and less, meaning the products we want to purchase will cost more and more. What we pay $5 dollars for today may cost $10, $15, or more in a very short time. 

For this, we have to thank Ben Bernanke, Chairman of the Federal Reserve, and ultimately President Barak Obama, who determines the nation’s monetary policy. Of course, Obama supports this Qualitative Easing because it moves us further toward his Socialist vision for America by exacerbating the present economic crisis, which he and his Progressive cohorts believe will create the opportunity for them to rush to the rescue with still more Socialist solutions. Remember the words of Obama’s Chief of Staff, Rahm Emmanuel, “Never let a crisis go to waste.”

We can only hope that the recent election of many conservatives to Congress will be the beginning of the end of our nation’s mad dash toward Socialism. I am cautiously and skeptically optimistic.

May 29, 2009

Even the Russians are laughing at us!

Filed under: Politics — Tags: , , , , , , — tkweber @ 1:04 pm

A friend sent me this link to a very interesting and timely article: http://english.pravda.ru/opinion/columnists/107459-american_capitalism-0

Russians are ridiculing America’s mad dash toward the Marxist wasteland from which they recently emerged. If they recognize the overtly socialist agenda of the Obama administration, why can’t the American people?! How stupid can we be? Pull your head out, people! Look around. Turn off American Idol, stop watching John & Kate exploit their eight, and read some world history! What President Obama and Congress are doing to and with this nation has NEVER WORKED ANYWHERE, AT ANY TIME, IN THE HISTORY OF THE WORLD!

March 25, 2009

Why Socialism is Bad for America

Socialism is a socioeconomic philosophy which has failed everywhere it has been tried, yet for decades has been slowly and steadily creeping into American society.  Many contemporary Americans, including some prominent and high-level politicians, hold socialist views and continually press for the implementation of socialist principals and programs in the United States.  Socialism is bad for America because it results in large, intrusive and controlling government that diminishes the role and value of individual citizens; it is largely based on “false compassion” that promotes victimhood and big government solutions; and it offers a false hope of utopian brotherhood and equality, resulting in the loss of freedom and the rise of governmental tyranny.

To begin, we must first define socialism.  The New Encyclopedia Britannica (2007) states: “Socialism refers to both a set of doctrines and the political movements that aspire to put these doctrines into practice…there is no precise canon on which the various adherents of contemporary socialist movements agree…the most that can be said is that socialism is, in the words of Anthony Crosland, a British socialist, ‘a set of values, or aspirations, which socialists wish to see embodied in the organization of society.’” (393)

There is a wide variety of socialists in America today, ranging from the neo-Nazi, anti-Semitic National Socialist Movement on one end of the spectrum to the Socialist Party U.S.A. on the other end.  Other socialist groups include the Democratic Socialists of America, National Alliance, Young Democrat Socialist, and the Democratic Progressive Party (Socialism in America, 3).  While there is a wide range of beliefs and goals among these groups, some elements are common to all of them.

According to British scholar and socialist Alec Nove (1987), “a society may be seen to be a socialist one if the major part of the means of production of goods and services are not in private hands, but are in some sense socially owned and operated by state, socialized, or cooperative enterprises” (Buchanan, 1).  Professor Heinz W. Arndt of Sydney University (Australia), a former socialist, listed the main planks of the socialist platform as: nationalization of industry, central planning and direct controls (Kasper, 1).   

Gerard Radnitzky, Professor Emeritus in Philosophy of Science at the University of Trier, Germany, describes the evolution of modern socialism as a transformation from the 1920s-version of “hard socialism with coercive central planning and state capitalism” to the “milder form of creeping socialism, which comes gradually and softly, masked by the sweet poison of the welfare state” of the 1960s (45-46).  This is the insidious, incremental socialism which intrudes upon us today.

Michael Novak, the George Frederick Jewett Scholar in Religion, Philosophy and Public Policy at the American Enterprise Institute, describes modern socialists, whom he calls “economic reds,” as being different from fundamental socialists in some ways, but characteristically “gripped by three seductive fascinations – the views that 1) government is motherly and warm, 2) a halo attaches to the ‘leveling’ of economic differences, and 3) there exists in corporations and in those who profit from commerce a residual stench of evil.” (1)

Since the history and philosophy of socialism and all its effects and ramifications is far too large a subject for this discussion, we will address only three broad reasons why socialism is bad for America.

First, socialism results in large, intrusive and controlling government that diminishes the role and value of individual citizens.  It is a form of statism, which sees the state as all-powerful, all-wise, and more capable of determining and supplying the needs of its citizens than the citizens themselves.  Socialism empowers government, through its bureaucrats, to act as a great benevolent mother caring for her people by appropriating and redistributing the fruits of the people’s labor, as it sees fit, through high taxation and generous social welfare programs. 

Socialists believe that all the ills and inequities of society can be remedied by government programs that require ever more tax dollars to fund them.  Professor Arndt stated that the belief that government intervention was needed to correct “market failure” and protect the weak resulted in “big government, widespread government failures, excessive bureaucratic regulation of business and the lives of citizens, and a ‘political market’ which dispenses protection, subsidies and welfare expenditures in response to organized lobbying.” He contended that such ambitious spending and redistribution triggered inflation, increased unemployment and enlarged the government. (Kasper, 25)

Ever-increasing levels of taxation, social welfare programs, and restrictions on business result in numerous unsustainable consequences, such as deep national debt, unfunded liabilities, wasted capital and loss of productivity, creativity, innovation and consumer choices. F.A. Hayek, author of The Road to Serfdom (1944), showed that “soft socialism–social democratism-will in the long run produce the same results as hard, fundamentalist socialism, namely the bankruptcy of government and enormous opportunity costs: the prosperity that society misses out on as compared to a genuine free market order.” (Radnitzky, 46)

Radnitzky noted that redistributing wealth from the productive segments of society (industry, commerce, etc.) to the non-productive (the political class, bureaucracy, social welfare recipients, etc.) “reduces the rewards for enterprise and production and cuts innovation and employment.” (46)  Austrian economist Ludwig von Mises explained that the slowing of capital accumulation due to redistribution halts economic improvement, technological progress, and the rise of average standards of living. (63)  In other words, soaking the rich doesn’t only hurt the rich, it hurts everyone.  The best way to raise average standards of living, foster technological innovation, and decrease unemployment is to lower taxes (removing the success penalty), which will allow producers to keep the rewards of their labor and encourage further investment.

Another reason why socialism is bad for America is that socialism is largely based on false compassion, which results in a host of serious, though unintended, consequences. The term “false compassion” is used for two reasons.  First, because socialism takes the care of those in need out of the willing hearts and hands of truly compassionate individuals, and places it in the hands of the impersonal bureaucracy of government, which then takes by force from those who have, via taxation, and redistributes it, often with great inefficiency and waste, to others who have not, the recipients have no connection to the source of such benefits (the taxpayer).  Secondly, this involuntary benevolence often results, not in good will, gratitude, and a sense of community, but rather resentment among those who are taxed, and a sense of entitlement and continuing dependency among those who benefit. This false compassion is seen in the socialist obsession with equality and fairness accompanied by the conviction that capitalism and those who espouse it are inherently unfair, insensitive and cruel.

Joshua Muravchik noted that the French innovation with regard to democracy was to include equality among the mandatory pursuits of government, to which was then added the objective of brotherhood, “so that the enduring slogan of the [French] Revolution became ‘liberty, equality, brotherhood.” (1)

Expressing the same ideal, Theodore White (1953) wrote that, “Socialism is the belief and the hope that by proper use of government power, men can be rescued from their helplessness in the wild cycling cruelty of depression and boom.” (Socialism in America, 1).  According to Novak, this is why modern socialists “strive mightily to instill victimhood in fellow citizens, and to picture them as helplessly in need of government’s assistance.” (2)

Socialists believe that by heavily taxing the rich and productive of society, whom they believe have achieved their wealth and prosperity by exploiting the less fortunate, and redistributing it to the poor and disenfranchised, they will bring about social equality for the betterment of mankind.  This sounds nice in theory, but it doesn’t work in the real world.

Socialists consider inequality in wealth and incomes as injustice; and the greater the disparity, the greater the injustice. Mises observed that this view then justifies the confiscation of wealth from the rich in order to provide for the poor, presumably resulting in a more equitable situation. (1)  However, this always proves to be a slippery slope of never-ending redistribution.  Mises noted:

The history of the taxation of profits, incomes, and estates in all countries clearly shows that once the principle of equalization is adopted, there is no point at which the further progress of the policy of equalization can be checked…As long as any degree of inequality is left, there will always be people whom envy impels to press for a continuation of the equalization policy. (1-2)

In the end, socialist efforts toward economic equalization result in universal poverty, except perhaps among the ruling class. Rather than achieving a higher quality of life for all, the forces of socialism invariably push everyone down to equal impoverishment and misery. This has been demonstrated everywhere that all-out socialism has been practiced, most notably in the former Soviet Union, North Korea, and China, among many others.  Muravchik astutely observed, “There is no escape from inequality, except through uniform poverty.” (5) 

The final reason we will note as to why socialism is bad for America is that it offers false and empty hope in an idealistic fantasy that has never succeeded in practice, and which has repeatedly resulted in tyranny and terrible human suffering.  Those who would implement socialist or quasi-socialist policies in the United States of America are either unaware of the bleak history of socialism and have not considered the long-term consequences of their aims, or they are so enamored of their ideology that they don’t care.  Ludwig von Mises wrote that politicians who recommend socialist policies while claiming that they want to preserve the market economy and economic freedom are “either hypocrites who want to bring about socialism by deceiving the people about their real intentions, or they are ignoramuses who do not know what they are talking about.” (63)

Clive Hamilton, author of Growth Fetish and Affluenza, and executive director of the Australia Institute, a green socialist think tank, admitted, “It was not socialism that broke down the barriers of poverty and class, it was capitalism.” (Saunders, 6)

According to Muravchik, socialism has “proved to be mankind’s greatest mistake since the serpent beguiled Eve.” (5)  “After World War Two, new varieties of socialism were created in…Africa, Arabia and elsewhere,” including Cuba and Vietnam which adopted more standard Communist systems. By the late 1970s, socialism had come to dominate over sixty percent of the world. (3) Recounting the history of scores of socialist experiments, he reports that all of them have failed, utterly and disastrously. (2) 

Many countries that have tried socialism and found that it didn’t work are turning toward capitalism, to one degree or another, even as the United States seems intent on pursuing socialism.  China, Britain, France and Tanzania are a few such examples.

In 1978, China’s Deng Xiaoping announced a “second revolution,” which was to move away from hard communism toward “socialism with Chinese characteristics.” Many of the ensuing changes “bore greater resemblance to capitalism.” (Muravchik, 4)

Within a year of China’s move away from communism, Britain’s Margaret Thatcher “set out to ‘kill’ socialism, which she believed was the true cause of the so-called ‘British disease’ that others saw as a mysterious and irremediable decline of national culture.” (ibid)

A year after France’s Socialist Party, led by Francois Mitterand, took power (1981) and began to “implement measures creating new public sector jobs, nationalizing industries, and mandating increases in wages, pensions, and welfare…the economy was in such a tailspin that Mitterand ordered an abrupt reversal.” (ibid)

Tanzania’s Julius Nyerere, “once the avatar of African socialism, confessed: ‘If I call back the British to look at their old plantations, they will laugh at us because we ruined them.” (ibid)

Besides the economic costs and consequences of socialism, there is also the inevitable loss of freedom and the concurrent rise of governmental tyranny which are its natural products.  Muravchik noted that “the totalitarian impulse” in socialism is not an aberration, but has been present from the earliest days of socialist philosophy. (ibid)

While the term “fascist” is regularly used by liberals as a derisive epithet against conservatives, it is actually a beast which arises from the waters of socialism. In Liberal Fascism, Jonah Goldberg argues that “In reality, international fascism drew from the same intellectual wellsprings as American Progressivism.” (Hayward, 1)  According to Goldberg, fascism should be understood as supercharged nationalistic statism. He noted the bold incursion of fascism under President Woodrow Wilson who “disparaged ‘individualism’ and the market economy, and advocated ever more powerful government and economic planning.” (ibid 2)  This path was trod further by Hoover and then by Franklin D. Roosevelt and company who authored the New Deal and:

understood their project as wholly congruent with what they saw approvingly in Italy and Germany. Waldo Frank declared in 1934 that Roosevelt’s National Recovery Administration “is the beginning of American Fascism” and the Nazis expressed their admiration and enthusiasm for FDR’s program…The New York Times reported in 1933: “There is at least one official voice in Europe that expresses understanding of the method and motives of President Roosevelt. This voice is that of Germany, as represented by Chancellor Adolf Hitler.” (ibid) 

Goldberg also noted that the liberal penchant for regulating people’s lives for their own good (smoking bans, healthy eating mantras, etc.) or “for the children” represents “the still-vibrant residue of the last wave of fascist enthusiasm.” (ibid) He documents in copious detail many disturbing parallels between European fascism and modern liberalism, which is consonant with socialism.

Thus, socialism poses not only a threat to the economic principles and practices which have led America to a level of prosperity and power unprecedented in human history, it also threatens the very freedom that is both the incubator and protector of that prosperity.

In conclusion, I have shown that while socialism seems to have run its course in virtually every other nation in which it has been tried, it still represents a clear and present danger to life, liberty and the pursuit of happiness in America.  Socialism is bad for America because it leads to large, intrusive and controlling government that diminishes the role and value of individual citizens; it is largely based on false compassion that promotes victimhood and big government; and it offers false hope of utopian brotherhood and equality, resulting in the loss of freedom and the rise of governmental tyranny.

 

References

Buchanan, James. Socialism is Dead But Leviathan Lives On. (1990, March 27). Center for Independent Studies. Retrieved February 9, 2009, from http://www.cis.org.au.

Flynn, Daniel. (2008). A Conservative History of the American Left. New York: Crown Forum.

Goldberg, Jonah. (2007). Liberal Fascism. New York: Doubleday.

Hayward, Steven. Who’s Fascist Now? (2008, Jan. 22). American Enterprise Institute for Public Policy Research. Retrieved February 9, 2009, from http://www.aei.org.

Kasper, Wolfgang. The Art of the Economy: Stability Growth and Philosophy. Interview with Heinz W. Arndt. (2000, Spring) Policy. Center for Independent Studies. Retrieved February 9, 2009, from http://www.cis.org.au.

Mises, Ludwig von. Inequality of Wealth and Incomes. (2000, Spring) Policy. Center for Independent Studies. Retrieved February, 9, 2009, from http://www.cis.org.au.

Muravchik, Joshua. The Rise and Fall of Socialism. (2000, Jan. 1) American Enterprise Institute for Public Policy Research. Retrieved February 9, 2009, from http://www.aei.org.

New Encyclopedia Britannica, Macropaedia, The. 15th Edition, Volume 27. (2007) Chicago.

Novak, Michael. Economic Reds: A Diagnosis. (2007, June 25) American Enterprise Institute for Public Policy Research. Retrieved February 9, 2009, from http://www.aei.org.

Radnitzky, Gerard. Ludwig von Mises on His 120th Birthday.  (2001, Spring) Policy. Center for Independent Studies. Retrieved February 9, 2009, from http://www.cis.org.au.

Socialism in America. Retrieved February 5, 2009, from http://www.u-s-history.com.

Saunders, Paul. Why Capitalism is Good for the Soul. (2007, Summer) Policy. Center for Independent Studies. Retrieved February 9, 2009, from http://www.cis.org.au.

Waldron, Arthur. China’s Disguised Failure. (2002, July 1) American Enterprise Institute for Public Policy Research. Retrieved February 9, 2009, from http://www.aei.org.

 

 

© copyright Todd K. Weber, 2009. No part of this may be used or reproduced without permission from the author.

February 4, 2009

Obama limits executive pay, but socialism still on the way

Filed under: Politics — Tags: , , , , , — tkweber @ 11:10 am

I applaud President Obama’s action limiting to $500,000 the pay of executives of corporations receiving bailout money from the $700 billion Troubled Asset Relief Program (TARP).  I was against the bailout plan, but since it is done, and tax-payer dollars were used to keep these failing businesses afloat, then the government should have a say in how the money is spent.  Executives should not be rewarded for failure at public expense.

However, I’m still concerned about the government being so deeply involved in private business and the market.  Despite all the reassurances from the administration, I’m concerned that our nation continues to be led further into socialism.  If the new $850 billion Economic Stimulus Package, recently passed by the House and presently before the Senate, becomes law, it will be a gigantic leap in that direction.  Many are calling it the new New Deal, a repeat of FDR’s New Deal of the 1930s. What most fail to realize is that the old New Deal made the Great Depression much worse and of longer duration than it would have been if the government had kept it’s “benevolent hand” to itself.  I fear that the path being chosen by the Obama administration, like that of FDR, will make the present economic troubles much worse and last much longer.  What’s more, I fear that the only likely solution to such a situation may be the same as it was for FDR: another world war. 

Read about Obama’s recent action here: http://www.msnbc.msn.com/id/29003620 

I highly recommend this excellent book: The Forgotten Man, A New History of the Great Depression, by Amity Shlaes, New York: Harper Perennial (2007)

October 10, 2008

The Market’s not the Problem, Socialism’s not the Answer

Filed under: Politics — Tags: , , , , — tkweber @ 8:41 am

The media, along with our now openly socialist President, continues to trumpet that “the free market is broken and government has to fix it.”  Don’t believe a word of it, and don’t give up on free market capitalism.  The free market isn’t broken.  The problem is that the market hasn’t been free for many years.  Ever-increasing government interference has so corrupted the market that it fails to work as it should.  

Ridiculous Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac skew the market and interfere with the forces of supply and demand, besides wasting billions of tax dollars.  What is the US Government doing in the housing market, anyway?  What part of the Constitution authorizes Congress to guarantee home mortgages?  It doesn’t.  How can the market function properly when government interferes with the forces of supply and demand by bailing out failing businesses?  

And that’s the problem.  The current financial crisis didn’t begin two weeks or a month or six months ago.  This problem started with Franklin D. Roosevelt’s New Deal which thrust massive socialist government policies and programs upon the American people, and which have continued to snow-ball into the massive avalanche of consequences that now threatens to sweep us all away.  Once people, especially politicians (on both sides of the aisle), got a taste for the free-flowing milk of ever-increasing tax dollars from the bulging breast of big government, we have added program upon program, regulation upon regulation and tax upon tax until our system of government and commerce now has almost no resemblance to its former, purer self.

So when politicians and media pundits proclaim that free market capitalism and American democracy is broken and should be set aside for something better (read: socialism/communism), don’t believe it.  Rather than discard the principles and practices which have resulted in the most successful, free, prosperous and beneficent nation in the history of the world, let’s get back to basics.  Let’s return to foundational principles.  Let’s resurrect the Constitution of the United States of America, and hack away all of the excess, unecessary, expensive, intrusive, overreaching, tax-guzzling and power-grabbing departments, programs, regulations, and bureaucracies of our grotesquely obese government. 

Socialism is NOT the answer to our problems.  Returning to government based on the Constitution is the answer.  Taking personal responsiblity for ourselves, rather than depending on government to solve our problems, clean up our messes and ensure our prosperity, is the answer. 

If socialism is your thing, that’s fine: move to France (at least they have nuclear power).  Leave my country alone!

June 23, 2008

Compulsory Compassion

Filed under: Politics — Tags: , , , , , , , , — tkweber @ 10:26 pm

Is compassion really compassion if one is forced to do it?  Liberals want America to be more compassionate by providing all sorts of tax-funded hand-outs (welfare, nationalized healthcare, social security, etc.).  It’s standard practice for liberals to bash conservatives as cold, heartless, mean people who want take everything for themselves and leave nothing for the so-called less fortunate; however, it’s an empty argument.  The issue really isn’t about compassion at all.  It’s about Marxist wealth redistribution laying a pathway to full-on communism (like that’s been real successful).  It is taking by force from the haves and giving by farce to the have-nots.

 

If person A sees person B in need, and person A decides not help person B, that may be a lack of compassion (of course, there may be other reasons).  However, if person A is forced to help by the government taking what belongs to him by taxing his productivity and giving his money to person B, does this make person A more compassionate?  No.  It just makes him poorer, and may eventually diminish his desire or ability to produce.  Does this demonstrate the government’s compassion?  No.  First, it devalues the virtues of independence, initiative, industry, creativity and thrift, upon which success and prosperity are built.  Second, it penalizes one person in order to help another.  In other words, why is person B worthy of compassion, but not person A?  Does person A have to fend for himself in the cold cruel world simply because he is willing and able to do so, while person B gets a free pass to live off the efforts of others?

 

I believe in compassion, and I am a compassionate person who has helped many people in need, and will continue to do so.  However, compassion is only compassion when one chooses to give it of his/her own free will.  One may be forced into compliance, but not into compassion.  Real voluntary compassion results in gratification and peace for both the giver and receiver.  Attempts to mandate compassion through taxation and redistribution result in anger and resentment among those who “give,” and dependence and perceived entitlement among those who receive. 

 

If you feel there is a lack of compassion in society or the world, then do what you can to change it by being personally compassionate and convincing others to join you.  Don’t force others to participate in fake philanthropy by passing laws and raising taxes so that you can feel like you’re making a difference.  

 

May 20, 2008

Investment Industry’s Suicidal Self-Interest

The May 2008 issue of Money magazine contained a one-page interview with New School university economist, Teresa Ghilarducci, titled: The Plan to Save Early Retirement, in which the economist contends that the U.S. government should scrap 401(k)s and IRAs and replace them with a government funded, mandatory, universal savings plan.  Under her plan, the government would contribute $600 a year and require people to deposit 5% of salary to their “guaranteed retirement account.”

 

What is her reasoning for this?  People are living longer and saving less, she says, and “a rich nation ought to be able to ensure a secure old age.”  How would this system work?  The government would have to “negotiate with the money-management industry.”  I was more than a little miffed by the socialist overtones of the article, so I emailed a letter-to-the-editor.  It didn’t get printed in the June issue.

 

In the June 2008 issue of Kiplinger’s Personal Finance (I subscribe to both magazines), a similar one-page interview appears titled, Savings Accounts From Day One, featuring Professor Michael Sherraden, director of the Center for Social Development at Washington University in St. Louis.  Professor Sherradan argues for “a lifelong system of accounts for everybody to save for important life goals – post-secondary education, homeownership, additional job training…retirement security.”  He points to “One bill in Congress [that] calls for $500 for all children and an additional $500 for the poorest.”  Who would manage such a plan?  “The major asset managers.  Good plan features would be simple investment options and low costs.”   

 

Then, it all became clear.  Two investment magazines run nearly identical articles in successive months promoting a government mandated, government funded, investment system for every citizen (and presumably non-citizens, too) operated by the investment management industry, for fees, of course.  I sent a letter to the editors of Kiplinger’s, too; but I don’t expect it to be printed there, either.

 

There is nothing “new school” about Ms. Ghilarducci’s plan to save early retirement.  It’s just more European-style, nanny-state, big-government.  Professor Sherraden should re-name his department at Washington University: The Center for Socialist Development.

 

Why do people who are supposed to be so much smarter than the average bear continue to look to Europe as the shining example of modern civilization?  Do they not see that Europe is crumbling under the weight of big-government socialism?  They have an aging population that is entirely dependent upon government welfare, which is entirely dependent upon high levels of taxation, which is entirely dependent upon taxable wage-earners – a pool that is rapidly shrinking due to Europe’s unsustainably low birth rate.  When there are no more people to tax, there will be no more government-supplied benefits, and then what?  It is a wholly unsustainable system.

 

Here in the United States, we have the likes of Barack Obama, Hillary Clinton, and the entire Democrat party who want to implement similar European-style socialism, and the financial services industry is cheering them on.  Why?  Follow the money.

 

The financial services industry is apparently licking its chops at the prospect of three-hundred-million-plus mandated retirement accounts from which they will collect management fees.  And, don’t think for a minute that such fees would be along the lines of the 1%-or-less that Vanguard charges on many of its accounts.  As with all government programs, it may start out small, but the case would soon, and continually, be made for higher and higher fees as the burden of managing such a monstrosity would put a tremendous strain on the ranks of selfless, public-serving asset managers.  Yeah, right.

 

Of course, we would then see an explosion of asset management professionals emerging from universities to get their piece of the action, just as the number of lawyers has increased like a population of rabbits to take advantage of the increasingly litigious nature of our society in the last thirty years.  At the same time, the lobbying efforts of this increasingly powerful sector would result in ever-higher government “contributions” to the mandated retirement accounts, as well as the fees paid to asset managers, which in turn would result in ever-higher taxes (enforced “contributions” to the government).  This, of course, will result in diminished economic investment and growth nationwide, less technological innovation, fewer jobs, more unemployment, a greater burden on the already terminal social security system, and so forth.  It would take only a few years, perhaps a decade or two, for the U.S. to end up in the same sorry condition as the nations of Europe.  Indeed, we are already, in many ways, headed in that direction.

 

This is the certain result of the investment industry’s apparent suicidal self-interest.  By promoting such a socialistic, mandated, tax-funded, universal retirement plan by which they hope to enrich themselves, they are also building the gallows on which they – and us all – will hang.  No doubt, they would be hugely enriched by such a plan – perhaps an entire generation of money-managers.  But, eventually the well will run dry, and the richest, most prosperous and free nation in human history will join the rest of the has-beens.  Prosperity will turn to poverty, not only monetary, but also in terms of will, creativity, liberty and spirit.  

 

Rather than supporting a plan for financial and societal suicide, it would serve the financial services industry and the entire nation much better to promote the virtues of self-reliance, personal responsibility, self-discipline, delayed gratification and thrift.  The investment industry ought to be pressing for parents and schools to teach basic financial management to children to encourage saving and investing on their own for a lifetime of financial security and prosperity, from which the industry and society would benefit not just for a generation, but forever.

 

Let’s stop listening to elitist academics who believe they have the answers for all of us knuckle-dragging ignoramuses who can’t think or act for ourselves – we who have built the greatest nation on earth.

 

Todd Weber

 May 20, 2008

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